Greg Guenthner

Gold has dropped like a big, yellow rock for five straight days.

The trouble started when $1,650 started looking vulnerable earlier in the month. The $1,650 area was crucial short-term support. After all, gold had been on the skids since its slow trickle down from $1,800 back in October.

After steadily trending lower, we finally got the big flush yesterday. The bottom completely fell out and gold dropped from $1,608 to a low of $1,554 in less than 24 hours. Early this morning, it has repaired some of the damage. As I type, the spot price is in the neighborhood of $1,570.

So let’s review:

Last week, I warned you that gold was set to drop a $100 to $1,550– check.

I also told you $1,550 could become a stellar buying opportunity.

But it isn’t. Not yet, anyway…

Forget your fundamental arguments. Gold is at the mercy of technicals right now. Sellers want to sell and you can’t stop them from doing so.

And don’t get caught up in any arguments about gold being oversold. Don’t get me wrong– it is. Gold is more oversold now than it has been in years. But that’s never a great reason to buy something. Gold could continue to drop and remain painfully oversold for weeks. Thinking that it couldn’t possibly go any lower is just plain reckless…

There’s absolutely no reason to rush into a gold trade right now. If it begins to show signs that $1,550 really is going to be the price floor, you will have plenty of opportunities to pick it up on the cheap.

Just don’t get caught buying early.

Gold is a falling knife– it could cut deep. Let this rush for the exits pan out before you make any plans to buy.

Greg Guenthner

Greg Guenthner, CMT, is the editor of the Daily Reckoning’s Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

Recent Articles

5 Min. Forecast
How to Profit On the Back of an “Activist Investor”

Dave Gonigam

Since the invention of the "shareholder rights plan" (i.e. the "poison pill"), most companies are relatively immune to hostile takeovers. But according to Dave Gonigam that could all change thanks to one activist investor. And if you're savvy enough, you may just be able to follow his lead for big gains. Read on...


Extra!
Why Americans Shouldn’t Worry About Income Inequality

Jim Mosquera

As the markets have continued to rally over the last several years, more and more people have touted the problem of "income inequality" in the US. But as Jim Mosquera explains, this perceived problem will likely sort itself out with the arrival of one specific market event. Read on...


One ETF to Play Asymmetric Warfare

Addison Wiggin

Almost one year ago, substation telephone cables were maliciously cut in San Jose, CA. In 20 minutes, 17 transformers were knocked out. A year on, similar threats have cropped up. Today, Addison Wiggin explains why these threats are so serious for the safety of the global economy... and shows you one way to play it...


What Small-Caps are Saying About the Current “Bubble”

Greg Guenthner

The big problem with declaring bubbles is that it really does you no good. Unless you're attempting to measure and time market moves, you're also blowing hot air. But if you keep watch for negative divergences, you have a much better shot at figuring out big market moves than the latest bubble-busters. Greg Guenthner explains...


A Simple Strategy for Investing in the US Energy Boom

Byron King

Too often investments are made in a vacuum. But as Byron King demonstrates, the global economic crash... easy money... and technological advancements are all interdependent. In particular, that connection has changed the investment calculus in the resource market. Read on to learn how...


How Gold Will Respond to Declining Discovery

Henry Bonner

Oil isn't the only resource to experience "peaks." Due to a major contraction in gold exploration over the past few years, the mining sector is no longer mining gold at its replacement rate. In other words, the amount of gold above ground is running out. And according to Henry Bonner, it will get worse before it gets better...