Gold Prices: On the Mend After Market’s Big Drop

In case you were hiding under a rock, or living an actual life, US equity markets had a bit of a bad day last Friday. The Dow dropped 665 points, or 2.5%, for the biggest drop since Brexit day in 2016.  The S&P 500 and NASDAQ indexes were similarly affected. And so far today’s open looks to be continuing the downward direction. Thankfully, gold prices are doing better right now than the market as a whole. 

Gold dropped just 1.3% as measured by GLD, our unleveraged trading ETF. That wasn’t too surprising as the US Dollar had an up day, though it ended up closing where it opened, giving up intra-day gains but still closing higher than on the previous day. Of course we like it when the market goes down and gold prices go up, but sometimes the urge to sell is just too strong.

Big market drops make everyone nervous.  Will it continue?  Am I about to lose everything?  In most cases the answer is No.  Hopefully you haven’t gone 100% into any one thing, and after initial panic subsides cooler heads tend to step in and start buying at now-lower prices.  To do this you need available cash, of course, which is why some of us were not fully invested and didn’t buy in at the recent peak.

What we’ll want to see today is “slowing downward momentum”, which means its OK if today is another down day, we just don’t want to see another -2.5%.  Maybe -0.5% or closer to flat on the day would be fine, thank you very much.  We’d also like to see “big selling” confined to just a few sectors, instead of seeing red across the board.

Gold prices are slightly up this morning, having bounced off its mid-January support level. If the dollar heads down today we can expect to see investors start buying gold, though don’t expect a big rush in right away.  After taking a loss most people are hesitant to hit the Buy button for anything.  That’s typical human nature, which is often the biggest factor in the market.  Even when many gold stocks are now terrific values.

Signed, The Gold Enthusiast

Disclosure: The author has no positions in any mentioned security.  The author is long NUGT and JNUG, and may day-trade these positions in the next 48 hours.

 Related: Learn What the Monthly Job Report Did for Gold Here

About the author

Mike Hammer

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!"

Leave a Comment