It’s the question on top of everyone’s minds: is the gold bull market, which began in October 2023, over?
Few things to note from the chart.
Gold has stayed above the 100-day moving average throughout this bull run. This week’s sell-off is the first real test.
Gold is moving lower while the BB width is moving higher – indicating the sell-off comes with greater volatility.
The primary trend (higher highs and higher lows) has flipped from an uptrend to neutral because we just saw a lower low. A lower high followed by a lower low would change the trend from neutral to down. Being bearish gold here is frontrunning this expected move – I see no reason for that.
The RSI has plunged, indicating we may have seen the worst of this sell-off. That doesn’t mean gold can’t go lower, it just means we aren’t likely to see another period of 6 consecutive down days marked by heavy selling.
Fundamentally, there’s no reason to dislike gold here. Gold has just got caught up in the Trump trade, which has sent the dollar and stocks higher, and gold and oil lower.
Gold has also gotten caught on the wrong side of the major move higher in ‘digital gold’ bitcoin. A lot of gold investors consider bitcoin to be hard money and flip between bitcoin and gold. Gold benefited from the 6-month long consolidation in bitcoin; gold got hurt by the massive breakout and new highs in bitcoin. It is as simple as that.
A big bull run will throw off plenty of technical signals intended to shake out the weak/late longs. If you believe, as I do, that we’re in the early stages of a massive bull run, don’t read too much into the recent price action.
What will change my mind?
Not China declaring no more buying. Not Trump promising to lower the deficit. Not a bitcoin rally.
The price action – and the price action only – will change my mind. This correction does not signal the end of the secular gold bull market.
I’ve owned physical gold since 2014 and I don’t think there will ever be a point in my lifetime when I stop owning physical gold. However, I’m no longer long gold futures and hold no physical gold proxies (GLD, PHYS, etc.) in my trading account.
The trend is now neutral; my positioning is now neutral.
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Good Trading!
Kashyap