Gold Prices: Why Isn’t Gold Going Up? Part IV

The #1 question in the mailbox this week is this: What’s happening to gold? You’d think with all the talk about deficits, overspending, terrorism, the politics in Washington, among many other things, that gold prices would go up.  After all, isn’t gold supposed to go up in times of uncertainty?

Well, as always, let’s look at the chart first. Here’s the 3-month chart of GDX, the unleveraged ETF that tracks the senior gold miner stocks. The lines are the same as last time we showed this chart, except for one, which we’ll get to in a moment.

(credit Fidelity.com)

What this chart shows is a clear downward bias at the moment. Higher highs and lower (closing) lows are, after all, the definition of a downtrend.  And volume has been declining this week after a few big days in prior weeks.

The one line that’s been adjusted is the one running horizontally along at 21.50. This was a very-slightly-rising line, but recent gold prices show that it’s better considered as a horizontal support line.  Which means it’s showing the current level of support for GDX.

In the eyes of this Gold Enthusiast, this chart is showing no signs of investor uncertainty. What it illustrates is the effects of folks jumping back into the equity markets, with stocks and the like. That indicates traders and investors didn’t get totally spooked by the recent drop in the market, and that they see continuing good times for equities in the future.

In other words, people might be a bit skittish, but they aren’t downright afraid yet.

There is an old saying that applies in times like this: The market climbs a wall of worry. When people are merely worried as opposed to downright afraid, the market has just the right amount of turbulence to allow it to slowly claw its way up.  And as long as the stock market is going up, people won’t be too afraid. They’ll keep putting their money into stocks.

It’s when the last optimist puts in their last dollar/yen/euro that we need to be concerned. Last night The Donald announced he’ll meet with Kim Jong Un “before May,” which should keep North Korean uncertainty contained at least until then. So unless Europe has a sudden spat of bank failures, we can expect gold prices to be stable at least through the end of March. Sorry folks, but I just don’t see much action from our favorite yellow metal for a while here.

Signed, The Gold Enthusiast

DISCLAIMER:  The author has no positions in any mentioned security.  The author is long NUGT and JNUG, and may add to or sell these positions in the next 48 hours.

 Related: Another EU Member is Hoarding Gold. Here’s What this Means for You. 

About the author

Mike Hammer

Mike Hammer has had a wide-ranging career, with trading and investing as a continuing theme. Mike graduated with a business degree, then worked with Macy's. After Macy's he 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 a well-known financial planning firm 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 he worked first for a small manufacturing consulting company, then a major 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, spoken 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!"

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