Wednesday, January 12, 2011


It's still too soon to jump back into the precious metals sector. Gold is now due for a yearly cycle correction. A correction of that degree  should take gold down to $1300 or lower. Maybe even as low as the $1265 breakout level.

February will mark the one year anniversary of the last yearly cycle low. So we are now deep in the timing band for that correction. 

Gold is now in a down trend so perhaps it is working its way down into that major cycle low now. In order to jump in front of that trend we either need to see something that looks like a major yearly cycle low OR we need to see the down trend reversed.

As of last week gold had formed a weekly swing high.

That swing has to be reversed before gold can continue higher.

Barring a severe correction we would need to see the pattern of lower lows and lower highs reversed in the sector before it is safe to jump back in the pool.

Patience is called for right now. Ideally we would see gold continue down into an obvious yearly cycle low. If that happens we will try to enter as close to the bottom as we can.

Barring that the sector would have to break the pattern of lower lows and lower highs before we reload positions.


  1. So do we keep it on the sideline for now? Hold current physical or sell that too then get back in the game?

  2. I wouldn't sell physical. One buys physical so they can easily ride out corrections, even of the intermediate type.

    The only time one would want to sell physical would be at the top of a C-wave.

    If you have ETF's one should wait for either something that looks like a true intermediate cycle low or if the pattern of lower lows and lower highs is broken.

  3. Seems simple. The DOLLAR is the key. If we knew the dollar was definitely coming DOWN..... we could buy gold, oil, and maybe stocks. It all depends which way the dollar is going..... most of the time.... so, Gary, how do we know which way the dollar goes and how far?
    I'll take a wild guess that precious metals get back up to their resistance and that's when the good old dollars makes a nice rally and spoils everything again.

  4. Gary,

    So with physical you suggest more of a long term play? Perhaps using arbitrage and the gold/silver ratio?

    Re the ETF comment you are assuming one has no current position? That is, you would suggest to get out of an ETF such as GLD right now and wait for a low to get back in?

  5. Noam,
    It's too involved to try and explain what's going on in a post. If you are interested in all the in's and out's of the precious metals market you should probably just get a subscription.

  6. Gary,
    Strange fall in USD index today,but if you remember
    Last year during the summer corection we had the same situation. Dolar was falling down,Euro was going up against Gold and that was the reason for Gold to fall against USD. That's why I believe we will not see anything significant this time on the way down for Gold. Maybe 1299-1320 would be the maximum on the downside.

  7. Gold will corect down when Euro corect down,but the major downtrend in USD index has just began yesterday and we will have a free fall in USD index in my opinion.

  8. Noam-Just set a trailings stop off the 52 week high at a level of degregation you feel is right for you say 15% -25%. If the stop gets hit just bail and conserve for a better buying opportunity.

  9. No offense meant here, but...

    At least Just try a one month $25 you'll ever spend ( and you'll make your $25 back when that IT low hits!).

    Besides, if you're a doctor, surely you know paying for a good education usually begets favorable results :)


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