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Gold to Retest Highs?

October 26, 2011 9:53 am View Comments

If there is anything I’ve learned over the years of trading/investing, it is to fade the crowd. When gold was rallying to all-time highs, I was warning of a monster correction. This wasn’t a “rational” call since the debt crisis in Europe was intensifying, but then again, markets are not rational. You must feel out markets and go with your instinct

You must constantly adjust your forecasts to account for price action as a function of time. While I expected a correction to the $1400′s, the price action since then just hasn’t justified such a call, which is why I have been buying. Don’t get stuck with one view of where a market is headed if the price action is telling you something totally different. This is the trap people fall into all the time.

People are way too bearish on gold in the short-term, which suggests to me we will see a strong move in the opposite direction. For now, I think we are setting up for a retest of highs, but first I want to see gold push past $1730. A convincing bounce off of $1600 was the first sign we were in store for a sustainable rally. A move past $1730 and then $1750 will be the next sign. I’m not sure people will catch on to the rally until it’s too late.

I have been steadily adding to my gold positions throughout this correction. If there is one thing I’ve been consistent about the past couple of months, it’s that gold stocks are a steal. You must be patient in waiting for a rally to materialize; the biggest moves always happen a very short period of time. A big move may be coming, and you can be sure I want to be positioned for it.