Greg Guenthner

I was expecting a relatively quiet morning.

I was wrong.

As I was compiling my notes earlier today, gold futures started to tumble. They had been slowly drifting lower overnight, giving back about $10 by 5 a.m. But it was the action at $1,450 that bothered me. After it crossed below this level, the floodgates opened—sending gold futures sharply lower. By 7:30 a.m., gold had coughed up $40, hitting a low of $1,427.

Push to the Brink

I know it might not feel like much—especially with the April crash still fresh in your mind. But this move lower puts gold below critical short-term support.
Since mid-week, price has fallen from the high $1470s to the $1,420s. These are levels we haven’t seen since April 25.That’s when gold began trading in a nice, orderly horizontal channel.

Just a couple of hours ago, it broke through its price floor on strong volume. Not a good sign if you’re a gold bull…

Here are two important takeaways from all of this:

First, it’s important to note that the consensus opinion amongst the chart watchers has been that gold would probably have a fairly mundane summer. I’ve generally agreed with this position. Aside from a little volatility here and there, I was expecting gold to wander sideways for some time after its massive drop. Clearly, it has other plans. You have to adjust your thinking here and prepare for the possibility of another leg lower.

Next, the recent action in gold is a great lesson on dip buying—or buying any asset just after it takes a nasty fall. “Buy when there’s blood in the streets” is one of the most misunderstood investment axioms ever. Every asset needs time to recover after a crash. I’m talking about a significant amount of time—not just a few days or weeks.

At this point, too many investors are convinced gold can move higher from here. You’ll want to buy when everyone agrees that gold is cooked. To paraphrase the great technician Walter Deemer:

When it’s time to buy, you won’t want to…

You May Also Like:


Getting Gold Wrong

Greg Guenthner

More new highs for the Dow and S&P. Investors still hate stocks. But stocks don’t care… Gold is a different story. After a decent start to the week, gold took it on the chin yesterday. It coughed up $35, coming to rest near $1,555. If you’ve paid close attention, this puts the yellow metal in […]

Greg Guenthner

Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

Recent Articles

5 Big Tax Changes in 2015

Sandy Botkin

The clock is ticking down to April 15th. TaxBot founder, Sandy Botkin, outlines the five big tax changes for 2015 you need know before you file...


Ignore the Crash Callers and Buy This ETF

Greg Guenthner

Look, we're not contrarian just for the sake of being contrarian. Only idiots are. And yes, the market will eventually drop. But the charts will tell us when it's time to sell. And right now, they're screaming "BUY". There's simply no other way to put it.


Tesla’s Great Deformation

David Stockman

The trouble with money printing, explains David Stockman, is that it's responsible for Tesla. Armed with earnings figures, he shreds the company’s visage to pieces...


China’s Love for Gold: You Ain’t Seen Nothing Yet

Frank Holmes

This year, we expect China to reveal just how much gold it owns. Today, our friend, Frank Holmes, gives his insight on how China could buy even more gold in the near future. And we’ve got every reason to believe it could upset the gold markets any day now, with great results for gold investors…