Summary

  • Gold has seen its most violent correction of the year, dropping $114/oz in 3 trading days.
  • Sentiment on gold has ended the week at 7% bulls, an area where bottoms typically begin to form.
  • Final support for gold remains at $1,200/oz.

This week has been the most volatile week for the year in gold (NYSEARCA:GLD), with the price of gold trading in an 8.5% range over 3 trading days. While most investors in gold were expecting a strong week (myself included), the strength was certainly short lived. Last week, I issued a buy signal based on my sentiment data from the Tuesday close, but the signal came and went in a span of 6 hours.

My buy signal was given at 4:00 PM that suggested a further rally from $1,277/oz, and the metal did exactly this. The price of gold moved sharply higher Tuesday night from $1,277/oz to $1,338/oz. Unfortunately, for myself and most investors, we had no way of capitalizing on this. By the time the market opened on Wednesday morning, gold had already given up 90% of its gains.

While some of my positions did change this week, this did not alter my thesis on gold very much. I am very rigid in my momentum accounts and never ignore my stops on losing trades. Unfortunately, I was stopped out of my gold and Gold Miners Index (NYSEARCA:GDX) trades on Friday afternoon. My GDX trade was exited for a 7% loss, while my gold trade was exited for a 2% loss. As these were 12% portfolio positions and 30% portfolio positions respectively, both trades cost me a cumulative total of less than 2% of my total account.

Source: Seeking Alpha