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:


Commodities 2013 Halftime Report: A Time to Mine for Opportunity?

Frank Holmes

It was a challenging first half of the year for most commodities, with only two resources we track on our Periodic Table of Commodities Returns rising in value.

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

In the Year 2024

James Rickards

Panopticon goggles? Severe market panic in 2018? Gold confiscation by 2020? Jim Rickards' shocking thought-piece in the spirit of A Brave New World or 1984. Click to see how markets, economics, your money, gold, privacy, wealth building and more look a decade from now in the year 2024...


Our Ebola Stocks Could Double Overnight

Paul Mampilly

I believe we are in the midst of one of the greatest profit opportunities you’re ever going to see in your lifetime. Stop listening to what the government is telling you. Turn off CNN. Forget what you see on the news. And for God’s sake, forget about the market crashing. Right now, we are in the early innings of the greatest profit opportunities of the 21st century. A biotech boom that’s about to hit epic proportions thanks to Ebola. If I’m right, we are going to see Ebola in New York, Los Angeles, San Francisco and Miami. And when this happens, every single stock that has anything to do with Ebola is going to soar. Let me explain to you how I believe this huge Ebola bubble is going to unfold.


Why We Hold Hard Assets II

Henry Bonner

Right now we’re seeing a surge of strength in the U.S. dollar, as the bottom falls out of our competitors’ currencies, and Jim Grant has the best analysis of what it means for investors. For one, it means the Federal Reserve can’t keep interest rates low forever. And mainstream investors may be very surprised when the Fed gives in…


Housing Bulls Gave Up Here… Big Mistake

Greg Guenthner

Another one of Wall Street’s broken forecasts has plopped a new trade in your lap. If you’re listening to the lunatics on the financial news, you’re hearing that there’s no hope for the markets. Just get rid of your stocks and pound sand. Better safe than sorry—none of these talking heads want to get bullish on anything right now because they’re afraid to look like an idiot if the market keeps dropping. For them, selling stocks now is your only chance to make it to the end of the year without pawning the family cat to buy Christmas presents. Can the market survive? Greg Guenthner explains…


A Quarter-Century’s Conclusion on Our Cancer Woes

Ray Blanco

Breakthrough technologies can hold the most undiscovered money-making potential. What we’ve accomplished in a quarter century with cancer research could make you serious money and save countless lives. Ray Blanco has more on this ground breaking story...