Gold/Different Buy Points In a Market Bottom Revisited

Trader Scott’s Market Blog

January 16, 2017

The previous post about the different points to buy in a major market bottom (this example is in and around the 1999 gold bottom), shows there is no perfect spot to enter. But there can be numerous really good points. In the expanded chart of gold, all of the volatility around a major bottom (the same with any market) can be seen. But waiting for some initial/preliminary sign (ending action), preferably signs, is very beneficial to help with timing at least somewhat. The main thing to notice from the chart is the patience required to sit and wait for the market to start giving off preliminary signals. This is when to be extremely attentive regarding the potential end of the downtrend. Doing this will help to stop the normal human desire to guess/predict where the bottom will be. The other thing to notice is the patience required to sit thru all of the weirdness involved in/during major bottoms. When the preliminary signals start, avoid guessing and just use the weakness to buy. Yes it can honed even more, but we’re talking about the big picture – this chart gives a more detailed view of that time period. And my belief in this current time period around 2015 was, from the December 2015 post, the best time in several years to buy gold, especially miners, on a secular basis. And late 2016 would see a secondary test/retest of the December 2015 lows at a much higher price, with the first big rally coming out of December. We really needed the good rally out of December to “confirm” the continuation of this setup. This rally in gold has shut up the gold permabears. But they’ll be back again, as there will be more volatility. And they’ll also be wrong again. I’ve stated this numerous times, but this whole thing in gold is a major accumulation area which started in April-July 2013. This is akin to the big accumulation period around the 1999 period. This thing in gold is winding down, but there will still be volatility – these are buying opportunities. The second half of 2017 is when we can start seeing the beginnings of a less impeded rally in PMs, as we should start to see the major topping process to begin in the US$. That topping process could go on a long time, but it should be enough to take some pressure off of gold. Two years ago, my belief was the huge resistance area in gold would prove to be $1350. It was one reason for my concern about gold in early November. After the rally had started from the December 2015 lows, the $1350 area did become a big barrier. But the next time around, we’ve had that struggle there already. There will be another struggle, but it won’t be as tough. As for GDX, the big barrier will continue to be $32, as can be seen in the chart, along with my buy zones which have been marked off for several months. Several posts laid out my approach to this big retest in gold in late 2016, which would be focused on the miners and silver, not gold. The reason is because of the extreme likelihood of a major secular low in inflation in early 2016. And silver would be a big beneficiary of that later in 2017, relative to gold. Which is why I used trading below $15.75 last month to buy silver, but bought no gold. So this thing in PMs is winding down, but I do not at all believe we have seen the major top in the US$. How will gold react to the next rally in the $ – it’s still going to be a problem for gold. Shorter term, the reaction in the $ is needed to set itself up to eventually break thru 104, but the reaction in the $ is helping PMs. There were alot of brand new “Trump Dollar” bulls who climbed onto the same side of the boat into the 14 year highs. Yet even when the $ index went to another new high on January 3rd, consider gold’s relative strength. Lastly, $1191 in gold has been an important area in my approach, both on the downside and on the upside. Last Friday’s close in gold above $1191 was solid, but it does not mean gold is going to the moon. Rather, it is a “confidence” builder that the next selloff in gold will retest above last month’s low. It’s been a good rally in gold and silver so far. I’m more attentive to PMs having a violent price surge to then lighten up positions.