The big secret behind gold's $100 Collapse
January 26th 2011 17:14
The question many investors are asking themselves today is, just what happened to the price of gold?
Did the world change? Did the problems in Europe go away? Did all the states manage to find funding to cover their deficits?
No, none of that happened, but gold still dropped $100.
It's all about market perception and timing, two things talked about many times before on the Trader's Blog. I don't know about you, but I remember when gold was over $1,400 an ounce and all I could see on TV where ads from gold companies extolling the virtues of buying gold as it is real money. Since the fall, I expect we'll see fewer of these advertisements on TV and in print.
So what did happen to gold?
Well, for starters there were some key technical levels broken. If you're a gold trader, but not a technical trader, you really need to learn how to read charts and see what other traders are doing.
Secondly, there did not appear to be any other news to drive this market higher. When that happens, markets tend to fall under their own weight, and as many retail investors purchased gold, there was nobody on the other side of the market to support gold.
So the question is, is the move over in gold? That's a tricky one. I want to show you in today's video exactly how we're looking at this very emotional market. Every time we have created a video indicating that there would be some pullback in gold, we were bombarded by the gold bugs saying that we're crazy. When you see a market pullback as much as gold has, you have to have some respect for the market itself.
If we look at the price of gold today at approximately $1,330, Gold would have to trade in excess of $2300 to equal the $850 price of Gold 30 years ago, adjusted for inflation. Gold has been a great investment for the last ten years and IMO, it would be trading a heck of a lot higher if the government hadn't been capping the price these last ten years.
Let's get back to gold and what we think will happen. In this short video we analyze the market using our "Trade Triangles," the Williams%R, and the MACD indicator.
As always our videos are free to watch and there are no registration requirements. If you like what you see please comment on our blog and feel free to Tweet or e-mail your friends. I think there's an important takeaway message in this video - what goes up, must come down.
Enjoy the video.
All the best,
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