Ready To Buy Gold? Read This First!
Buy Gold Now?
This is a very important week for the gold market. The yellow metal is trading at a technical level so essential, the fate of the gold market rests in the balance.
But before I show what level I’m talking about, let me recap how the yellow metal has traded so far in 2015…
As you may remember, gold faced serious fundamental headwinds late last year.
The US Dollar was roaring higher and US inflation readings were benign. These factors sent gold to new multi-year lows at $1,140 an ounce in November 2014.
But then something interesting happened…
Despite continued strength in the Dollar in the early days of 2015, investors started buying gold at a feverish pace. At the time, I was rather mystified at what these bullish gold investors were basing their decision on.
But a few weeks later it all made sense…
On January 22nd, European Central Bank (ECB) President, Mario Draghi, announced a 60 billion euro a month stimulus plan. After years of avoiding the inflationary monetary policy, the ECB finally had to embrace it to (hopefully) ward off a shaky Euro-zone economy.
In my opinion, well-connected investors caught wind of the plan and started buying up gold ahead of the announcement. The metal jumped to multi-month highs at $1,307 an ounce on January 22nd.
But since that important date, gold has weakened. In fact, the metal is currently trading just shy of $1,250 an ounce.
And that’s why the chart below is so important…
Take a close look and you’ll find gold traded above an important trend line (green line) earlier this year.
No doubt about it, the break of that resistance trend line had gold bugs getting giddy about the bullish potential for the metal in 2015!
But then, last week’s stellar US jobs report took the wind out of their sails…
As you may remember from my Monday article, the most recent US jobs report was one of the best in years.
Thanks to newfound investor optimism towards the US economy, gold collapsed back below $1,250 an ounce.
What’s the big deal about that?
Let me explain…
A Pivotal Level For Gold
As you can see in the chart above, gold is dropping back to the same trend line that had held it from higher prices last year.
If the metal falls below this line in coming days, the odds of a continued early 2015 gold rally will be drastically reduced. After all, the metal will fall back below the same resistance line that had kept it under wraps since early 2014.
On the other hand, if gold can hold above the green line, the odds grow dramatically for a possible run to $1,500 later this year.
No doubt about it, gold traders are watching this level closely!
How To Buy Gold… Or Sell It With Ease
Wondering how to profit from the next big move in the gold market?
In my opinion, the best way to capitalize off rising gold prices is buying bullion. But be warned- there are plenty of pitfalls when it comes to investing in physical gold.
Be sure you read my article on gold scams before you invest a penny in physical metals.
A much easier way to buy gold is through the SPDR Gold Trust (GLD). All you do is log into your brokerage account and buy this widely followed commodity ETF. GLD tracks the price action of gold, and you can buy/sell it just like a stock.
But be careful…
If gold doesn’t hold above the green line in the chart above, you will be better served buying the PowerShares DB Gold Short ETN (DGZ). Since DGZ is an inverse ETF, it will rise as gold falls.
Bottom line…
Gold is trading at a very important inflection point. Which way the metal breaks will likely determine investors’ sentiment towards the metal for some time to come.
Until Next Time,
Justin Bennett
Commodity Trading Research
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.
Category: Gold, Precious Metals
