Dear Member,
Just a quick update here. Wow. Last week’s action in gold was simply amazing. And right on cue too!
Plunging in its worst month and quarter in history, gold swooned to major support at the $1,178 level on Friday, nearly stopping us out of my recommended position in the PowerShares DB Gold Double Long ETN (DGP).
In fact, DGP traded within $0.40 cents of my recommended stop at $24.36. But then gold exploded to the upside, rallying more than $50 by Friday afternoon’s close.
And today, gold is up again, more than $14, trading at a new post-crash high of $1,237.
As a result, the recommended position in DGP is now in positive territory. My target for this rally in gold is the $1,250 to $1,260 level, where major resistance will be found. That’s where I will be looking to take profits.
Now, the question on everyone’s mind is most assuredly: “Has gold bottomed?”
Quite frankly, it’s too early to say. But here’s what I am looking at: If gold has bottomed, then we will need to see the yellow metal start electing some buy signals on my system.
The first such buy signal would be a close above the top end of the resistance level at $1,260, followed by a close above $1,289.
If we see that happen, then there is indeed a very good chance that gold has bottomed.
If not, then there is a high likelihood that gold will retest support levels, and possibly even make one more new record low for this correction.
So, here’s how I intend to play it. As previously mentioned, if we see a rally to the $1,250 to $1,260 level, I will probably recommend you grab profits on DGP.
Then, if gold does close above the $1,260 level, I will likely reinitiate a long position.
If gold fails at the $1,260 level, I will recommend you grab profits, but then move back to the short side, looking for yet another decline.
So stay tuned. The action is going to be picking up soon. Silver and platinum will largely follow gold, so be ready for trades in those metals as well!
Best wishes,
Larry
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