Customer Service 1 (888) 261-2693
Advanced Search

Gold's Next Move

By Jeff Clark
Tuesday, September 6, 2011

Two thousand dollars an ounce – here we come.
You can almost hear the gold bugs cheering. Why shouldn't they? The euro is on the brink of dissolving. The dollar is fading from its status as the world's reserve currency. And gold bounced back from its recent correction in record time.
Gold rallied $150 an ounce last week. It tacked on another $16 in yesterday's holiday trading, closing above $1,900 per ounce. Now the shiny, yellow metal looks good for a run at $2,000 sometime later this week.
Take a look...
Gold has put together a short-term series of higher highs and higher lows. The price action is capturing the headlines. And as stocks decline and possibly retest their early-August lows, investors are going to flock toward the one asset that seems to just keep going higher... gold.
Like I said... $2,000, here we come.
Of course, there are risks. The short-term overbought condition that existed just prior to gold's recent $200 correction is prevalent once again. Sentiment is back to being overwhelmingly bullish. And a move to new highs this week will create negative divergence on my favorite momentum indicator – the moving average convergence divergence (MACD).
Negative divergence develops as the price moves higher but the MACD lags behind. It's a warning sign the rally has fading momentum... And it often precedes a reversal.
Two weeks ago, I warned that the price of gold was going parabolic. It was looking a lot like silver's move back in April, and gold was due to correct.
We got that correction. Gold dropped $200 per ounce in just a few days, and investor sentiment rapidly shifted from bullish to bearish. That move shook a lot of weak holders out of the gold market – though it didn't seem to faze many of the diehard gold bugs.
Now, those weak holders are trying to buy back in. As they do, they'll push the price up toward $2,000 – a nice round number and a long-held target for many gold bulls.
So look for higher gold prices this week and maybe next. But keep an eye on that negative divergence. It's providing the first warning sign of a more important intermediate-term correction.
Best regards and good trading,
Jeff Clark

Further Reading:

Steve Sjuggerud was recommending gold back in 2003, when no one was interested. These days, "it feels like we're closer to a top than a bottom in gold," he says. And he's watching for a potential correction.
But here's the thing: "People are watching gold go up, like spectators watching from the sidelines. They are not active participants... yet." In other words, while gold might correct... there's still more upside for gold owners. Get the details – and Steve's favorite ways to hold gold – here: Exactly Where We Are in This Gold Bull Market.

In The Daily Crux
Market Notes
U.S. stocks are beating every other major national index in 2011... the S&P is only down 6%, while others have fallen at least 12%.
Big gold miner index GDX breaks out to a five-year high.
Ag boom is the second-biggest trend... rice and corn are the two best-performing commodities this year, after silver and gold.
More than a dozen oil and gas stocks are up 100% or more over the past 12 months... including Cabot, Precision Drilling, and Rosetta Resources.
Market Watch
Symbol Price
S&P 500 1173.97 -2.5% +7.7%
Oil (USO) 33.64 -2.4% +0.8%
Gold (GLD) 183.24 +3.0% +49.8%
Silver (SLV) 42.18 +4.1% +118.8%
U.S. Dollar 74.49 +0.4% -9.6%
Euro 1.42 -0.4% +10.8%
Volatility (^VIX) 33.92 +6.6% +46.3%
Gold Stocks (^HUI) 618.03 +2.4% +26.6%
10-Year Yield 2.00 -7.0% -24.0%

World ETFs
Symbol Price
S. Africa (EZA) 67.41 -2.0% +13.7%
Canada (EWC) 29.32 -1.8% +11.1%
S. Korea (EWY) 54.65 -2.5% +10.9%
Taiwan (EWT) 13.42 -1.3% +10.6%
USA (SPY) 117.85 -2.6% +9.8%
Singapore (EWS) 12.68 -1.4% +5.0%
Israel (ISL) 15.05 -0.3% +3.0%
Japan (EWJ) 9.60 -1.6% +1.5%
Lat.America (ILF) 45.98 -3.0% -0.3%
Russia (TRF) 17.93 -2.1% -3.5%
China (FXI) 37.12 -2.6% -6.9%
India (IFN) 26.46 -1.0% -12.9%

Sector ETFs
Symbol Price
Oil Service (OIH) 127.70 -3.1% +25.7%
Internet (HHH) 73.00 -2.7% +24.9%
Big Tech (QQQQ) 53.28 -2.4% +18.7%
Retail (PMR) 19.10 -3.3% +17.8%
Consumer Svcs (IYC) 65.93 -2.4% +15.5%
Health Care (IYH) 66.69 -2.2% +13.3%
Basic Mat (IYM) 68.02 -2.2% +12.6%
Big Pharma (PPH) 66.23 -2.0% +12.0%
Utilities (XLU) 33.29 -1.1% +10.3%
Media (PBS) 12.62 -2.9% +10.2%
Telecom (IYZ) 21.67 -2.3% +7.9%
Industrials (IYJ) 58.01 -3.2% +7.6%
Real Estate (IYR) 54.90 -2.4% +7.0%
Semis (PSI) 12.74 -2.8% +6.7%
Water (PHO) 16.24 -3.2% +6.0%
Biotech (PBE) 18.93 -2.1% +3.6%
Transportation (IYT) 80.22 -3.2% +3.4%
Software (PSJ) 21.54 -3.3% +2.2%
Defense (PPA) 16.65 -3.3% +2.1%
Insurance (PIC) 14.55 +0.0% +0.6%
Construction (PKB) 10.65 -3.7% -3.1%
Financials (IYF) 46.94 -3.7% -7.2%
Nanotech (PXN) 6.97 -3.2% -14.7%
Alt. Energy (PBW) 6.79 -3.8% -24.6%

Recent Articles