As we welcome August, we could be on the verge of an august rebound in gold. My contrarian senses were tingling when Vanguard recently renamed its Precious Metals and Mining Fund to the Vanguard Global Capital Cycles Fund. This exemplifies gold as an out of favor investment and is a sign the conditions may be right for forming a significant bottom.
You can see on my daily candlestick chart of $GLD below that gold has trended lower, registering a series of lower highs and lower lows. Note the developing positive divergence between price and technical indicators. This tells us the price is not as weak as it may appear.
The appearance of a positive red candle line at the low sets support and another red candle in yesterday’s session shows buyers may be building strength to break the negative influence of the down trend.
There are many who disavow gold as an investment, but history has shown gold to be a longstanding store of value. And especially in uncertain times, it makes sense to have a small portion of your overall investment portfolio in the yellow metal.
But I don’t write much about investment. When he was invariably asked, my venerable father, Paul Sarnoff, would reply, “The best investment advice is earn money.” As Options Hotline approaches its 30th year of publication, making it one of the longest living newsletters, we continue to focus on sensible speculation. We use the tools of Superleverage, exchange-traded options, to generate great gains from small price moves, with an always known and strictly limited risk.
A reversal in gold at support, with positive divergence indicates to me the Midas metal may be set to shine. We shall see.
Subscribe to Options Hotline to see how we position for for fun and profit, always seeking to stay a step ahead of the crowd.
Good luck in your trading.