Trend Technician

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Gold is either a really good or really bad investment right now, how do you tell which? When it comes to the fundamentals, the same simple questions is driving gold that’s driving all other issues right now: Are we going to have a recovery and inflation, or continued woes and deflation? This question is particularly important for gold which really has no other utility other than as an inflation hedge, or as a safety play during panic.

Because this one question of whether we’re going to have inflation or deflation drives pretty much all markets right now, how do we answer the question? The answer is: we don’t. The outcomes and time-frames are such a matter of conjecture that trying to decipher the truth is a fool’s errand. In times like this our real goal is to divine the psychology of the market. We don’t care so much whether there’s going to be inflation or deflation, as we care what the market thinks is going to happen.

Obviously if we’re trying to measure market sentiment, technical analysis is our friend. Let’s take a look at some video that I find compelling:

Gold Chart Analysis
Gold Chart

While the section about energy fields is interesting, I find the identification of the head and shoulders pattern much more compelling. How easy is that to trade. If it breaks out to the upside around 1k, then you go long with a stop back inside the range. You would expect some significant run with that breakout as well.

To get a detailed snapshot of gold at the given time you can get a free trend analysis here:

Spot Price of Gold

Free Trend Analysis

Just enter your email and name and you’ll get a detailed analysis of gold prices, completely up to date and completely free. I usually build my charts on the spot price of gold, even though I often trade using the ETFs or another vehicle. Whatever derivatives I may use, they will be driven by the spot price so that’s where I start my analysis. These charts can help make sure you don’t miss out on a big swing.


There are 2 comments for this post.

  1. PHEADON ENOTIADES on July 8, 2009 1:11 am

    i just know that gold is going to fly any day now…just a question of when? its gripping stuff cause i am not interseted in any other sector of the market right now, i just want to time my entry into gold as close as possible..

  2. admin on July 8, 2009 9:03 am

    Well fundamentally it rests on if a recovery happens and what it looks like to a large degree. Sadly I don’t have a crystal ball, so I just try to figure out what others are thinking. Always be wary of falling in love with any particular issue though, always helps to remain impartial. I recommend you read this article: Trading Psychology to try to make sure you’re not in love with gold to your own detriment.

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