Gold Retakes 1300 Amid Rising Uncertainty

| March 14, 2019

Image by Unsplash

As you know, gold dropped down through 1300 two weeks ago.  That gave gold bulls a mild heart attack because the story for gold rising includes a little bit about “rising.”  Not “falling.”  A touch of a difference there. And 1300 is a key pivot point for gold; it can’t go up without staying above 1300 (just to drive the point home).

But the world is an ephemeral place, where most things don’t last forever.  Sure enough, gold rose back up through 1300 in late afternoon New York trading as the US Dollar faded, and it’s up to 1305 after overnight international trading.

GLD Chart

Some of this is doubtless due to a slight drop in the USD following various national news items.  But international uncertainty like Brexit news and China actually reporting adding to their gold reserves again in February doubtless helped drive up interest in gold too.  As long-time readers know, China does not often report additions to their gold reserves, although “following the money” leads one to believe they do it often and have a lot more in their stockpile than they admit.

Two interesting facts caught your Gold Enthusiast’s eye.  The first is that gold has risen about 4% in the past three months while the US Dollar has only dropped about 0.5%.  That seems to hint that gold is gaining in perceived value in trader and investor eyes, as it should only have gained 0.5% if it was locked in an unleveraged inverse relationship with local currency, which is the common pure-economic-price view.

Second is that whenever we see a day like yesterday, gold rises a touch more than the Dollar falls.  Yet on other days, it’s pretty much a 1:-1 relationship.  Something to think about… and pay attention to.

On balance, the basic story for economic growth remains decent – there are a large number of countries trying to raise their standard of living, which means decent sales for producers.  And of course, there’s ever-increasing world population – more people means more demand.  More generally means more.

But at the same time, there is still a dark economic cloud overhead, spelled d-e-b-t.  Will Modern Monetary Theory (MMT) survive its first real test?  Can countries just print money to get themselves out of trouble, like the US did through the Fed’s QE programs?  Or will Austrian economic theory prevail, and we’ll see at least a mild depression in the next few years as dollar hangover sets in?

Whichever way it goes, let’s try to trade smart through it and end up ahead in either case.


The Gold Enthusiast

DISCLAIMER: The author holds no positions in any mentioned securities.  He is long the gold mining sector with small, non-market-moving positions in NUGT, JNUG, a few junior mining stocks, and some covered calls in NUGT, and may trade any of these in the next 48 hours.

Note: This article originally appeared at The Gold Enthusiast.


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About the Author ()

Mike Hammer has had a wide-ranging career, with trading and investing as a continuing theme. Mike graduated from UC Berkeley with a business degree, then worked with Macy's in their operations arm. He left Macy's and spent a summer trading his own account, which taught him a lot about trading in general and markets in particular. Trading through the Black Monday and the Crash of 1987 showed him how most people are unprepared for upheavals in their trading. He then joined Waddell & Reed as a financial advisor, helping regular people understand their finances and meet their life goals. Then came the usual story - Mike met and married the lady of his dreams. They moved to upstate New York, where Mike worked first for a small manufacturing consulting company, then Cornell University. While loving the work and the higher-education atmosphere, Mike missed the world of finance. Eventually, he signed up for stock trading coaching with the Adam Mesh Trading Group, to learn from people who understood modern markets. Within a year, Adam asked Mike to become a stock trading coach. Since then, Mike has trained over 200 individuals, spoke at several national conventions, and is a frequent contributor to conference calls across the Adam Mesh community. Mike writes The Gold Enthusiast daily newsletter, runs the Golden Hammer trading service, and participates in the Mesh Private Portfolio. He also keeps a position in international education which keep him in touch with "the student mindset". Mike closely follows the gold, energy, and financial sectors. His motto is "Plan your trade, then trade your plan!"