I receive a large number of emails from precious metal investors. These days the most often asked question is how to time backing up the truck and buying gold and silver again. Some of these investors profited handsomely from my calls to allocate 20% of assets to silver at an average price of $17.73 and exiting the position in the zone of $48 to $50. They also remember my calls to aggressively buy gold in the $600s with an average price of $660, and sell half of the gold holdings at $1904 and the other half at $1757.
The problem most metal investors face is that both bullish and bearish opinions are a dime a dozen. It is impractical for most investors to sort through such a large body of diverging opinions, especially when there are good arguments on both the bullish and bearish sides.
I suggest that investors instead of relying on others learn to perform three simple tasks themselves. Even if at first the following tasks seem difficult, with some practice they become easy.
Short-term Technical Analysis
An investor does not need to be an expert to make a basic judgment by looking at a chart. These days it is easy to find charts of gold ETF (GLD) and silver ETF (SLV).
Please click here for a big chart of short-term technical analysis of gold.
Start out by focusing on the price action. Notice the big drop to the line marked support on the bottom right hand side of the price chart. The first bounce from the support is marked as a weak bounce because it came only halfway towards the down sloping trendline. Technically this was a negative development. Then as shown on the chart, gold tested the support successfully and bounced again. This was a positive development. However the subsequent bounce so far has been weaker than the prior bounce. This is a negative development. The sum total of the foregoing observations is that short-term technicals are bearish at this time. They will become more bearish if the support is broken. On the other hand, they will become bullish if the support is successfully tested again and a ‘W’ pattern is formed.
Unless you want to get deeper into technical analysis, the simple price action observations described above provide valuable information. Read more at Kitco
