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[mmayr]

I get knocked down, but I get up again

Trader’s Corner

Last month’s blog suggested Gold was forming a new pre-summit base at $1750 – higher than its previous base camp at $1675. Can we be sure of this? Of course not. Gold has a nasty habit of dropping $100 in the blink of an eye, wiping out stop losses and returning to its previous state and price, innocently denying it left an instant trail of destruction behind it. ‘Me, no, it wasn’t me, honest Guv’. Its younger brother, Silver, inherited the more extreme genes and can be twice as destructive. If it came to a choice between fighting the Kray twins or Gold and Silver, I would get a fairer fight with the former.

A test of $1750 or $1675 is therefore not out of the question, but whilst I have been yawning daily with the continual stalling tactics around $1800, I am fully aware we are arriving at one of Gold’s seasonally strong parts of the year and so spring hopes eternal that $1800 will fall again and become the new pre-summit base.

There is no consensus amongst commentators as to which direction Gold will go next. ‘Looks like $1675 will be tested’, ‘Dollar strength could see a Gold flush to $1650’ ‘Big opportunity in Gold stocks’, ‘the COT is at bullish extremes’, ‘the intermediate low is complete’. Could be confusing, but to be honest, this is how I like it – if everyone sat on the same side of the boat, it would tip over and we would all drown. I am thankful for the contrarian views to challenge my own thinking and to keep me level-headed. Unfortunately, however, this situation keeps me suspended, non-committed in my own trading thoughts. Not wanting to go all in and wanting to keep powder dry should further falls ensue means waiting patiently for the right signs.

We have been in a relatively tight range of $1776 – $1834 for July and if we compare this with last year’s range of $1770 – $2075, it looks positively anaemic. Welcome to the world of precious metals, where the bull market will either throw you off the bucking bronco in one violent move or bore you off it with weeks of dullness. Sentiment is low and many bludgeoned precious metal shareholders have thrown in the towel already, looking for greener pastures. Barrick is 30% off its 2020 peaks and 15% off its most recent peak just 2 months ago. Pan American is the same, as is Hecla Mining and most Gold or Silver related shares. Not at all positive, is it? In fact, it’s carnage and if you consider a stock market crash could be round the corner, precious metal shares could dip even further. But hang on a minute, Barrick’s all-in sustaining costs for each ounce of Gold, for example, is around $1000 and with the manipulated paper price at $1800, they are earning shedloads of cash. Slower growth and high inflation mean a very positive stagflation environment for Gold so that is good enough for me. Whilst painful, I am sitting tight and hoping this is merely a retreat and consolidation and sentiment will indeed return and coincide with the seasonally strong period coming up.

Source: https://goldtradingpsycho.wordpress.com/2021/07/30/i-get-knocked-down-but-i-get-up-again/