Just a reminder that I’m personally not a fan of investing in gold. I prefer investments that can generate cash flow directly and am less interested in hoping for price movement on assets. Gold doesn’t generate cash flow directly, so I don’t invest in it. It doesn’t mean I don’t pay attention to it or that others may want to trade it.
I’ve been keeping an eye on gold prices and it looks like we are close to a resistant point that gold prices have gotten close to a couple of times over the few couple of years. There may be a chance that it breaks above those resistance levels and moves higher. Again, ANYTHING can happen, but I just wanted to call attention to it for those traders out there.
Just taking a quick, simple look at the price of gold below, you can see that the price is close to hitting its recent resistance point for the fourth time in the last 3+ years. From a pure technical analysis perspective, if gold can break above the recent resistance point, it could rally higher and the previous resistance point becomes support. Then again, it could hit the resistance point and fall back down.
If you want to look at the prior period of a several year chop in gold prices from 2013-2019, once gold broke above the resistance level, it quickly rallied higher. Remember, past performance is not indicative of future performance.
Source: TradingView.com 11/28/23
As mentioned in my post on October 22, 2022 (last year) titled “Gold – Reasons Change”, which stated my distaste for the “yellow rock”, gold investors can often find reasons to invest in gold and push prices higher. At this moment, from a fundamental perspective, gold may be moving higher as interest rates have come down and the U.S. dollar has declined.
Remember, in my post last year, I mentioned that gold is often used as a hedge on the U.S. dollar. So as the dollar has declined, gold has rallied.
In regards to falling interest rates being potentially bullish for gold: Since gold doesn’t generate income directly, when other income-generating investments become more attractive (higher yields), gold is less attractive for some investors. So as bond yields have declined from their highs (less income) and rates may stay range bound or decline as inflation may subside, gold has rallied.
So, again, at this moment, you may have short-term technical reasons for gold to push higher if it gets above resistance levels, AND fundamentals based on lower interest rates and a declining U.S. dollar. Time will tell whether gold can rally from here, just don’t be surprised if it does. If it does rally hard from here, also don’t be surprised if more media attention is focused on the rally, which may then continue to bring more investors in to chase the rally higher as emotions kick in and FOMO (fear of missing out) takes over. This could be a good example of momentum taking over and a lesson to watch and learn.
OOOORRRRR, it may stay in the trading range like it did for 7 years in the 2013-2019 period. If you are an investor/trader in gold, you need to plan for both scenarios BEFORE it happens.
IF gold rallies, just be very careful about chasing gold higher AFTER it moved higher and letting YOUR emotions take over. You don’t want to be the “last” one in and then it reverses, leaving those stranded at the top. If it then reverses, then you sell to cut your losses, then it rallies again, you’ll be an emotional wreck.
Me? I’m not doing anything with gold. Again, I’m personally not a fan.
Pay attention. Stay disciplined.