Caution: Gold Price Is Moving Out Of The Channel
Gold price has reached the top on 20 February 2009 with the high of USD1,005.42. In the chart above, you can see it as point B. It certainly has climbed up a long way from point C (12-13 November 2008) at around USD700. The high of USD1,005.42 is still some dollars short to beat the historic high of 17 March 2008 at USD1,032.20. Nevertheless, it has broken the important mark of 4 digits price again.
In the chart above, I measure the line from the peak of point A (15 July 2008) to point C, and found it is roughly the same length with point B to point C. In other words, AC = BC.
What does this tell you? The invisible force of tetrahedron is showing itself again? This is another reason for us to sell at point B. However, I have hold on to my purchase thinking it will go up further. Of course, if I use the buy-and-hold strategy, price will one day go up higher than point B. However, there is no certainty how long we have to hold to see the price goes back up to USD1,000. What if it takes a year? We then will lose a lot of profit opportunities along the whole year.
Now, I have to admit the greed in me has won over the technical analysis. The lesson I have learned is when the indicator shows a selling signal, we should sell. We should not hold on to it because of greed. A day after 20 February 2009, I saw the price on Public Bank Gold Investment Account reaching as high as RM115. Sigh, a lost opportunity.
I was hopeful that the price will make another peak before finally collapsing. However, the expected peak didn't materialise, and I was still hopeful. This expectation was dampened when gold price dropped and broke support line after support line. It broke USD980, USD950, USD940, USD930 and so on. It did show a brief upward move though.
However, at this moment, the price has dropped to below USD900. The gold price has now moved out from the blue-lined uptrend channel. It has reached a low of USD892.40 in today's trading.
I am afraid this may be a signal to sell and cut loss. The next barrier will be at USD880, and then USD850. And so on. If in the morning (9:00am) the gold price has broken USD880, I guess it's time to call for a sell. Since I bought on 30 January 2009 at around USD900 level, any price below USD900 is already a loss for me.
In every trade, we must learn to cut loss and humbly admit defeat.
Nevertheless, I am still thinking about the 13 March 2009 date that I have forecasted to be a peak. It's just a few more days. Perhaps I will wait till 13 March. Who knows, the price might swing back up as it has done so previously. Only time will tell now.
What do you think? Will you keep holding on? Or sell (cut loss) and wait for the next valley? Or hold the current purchase and top up more at the next valley?
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8 comments:
Hi Carson,
Yes, my greed lesson also cost me quite a lot. The stock rose, and gold price drops. The price has come to the support line (890), if it breaks, I’ll cut half of my units. The rest I’ll hold it. There are forecast saying that gold will rise soon in coming days due to the bailout, perhaps it could also be the date you mentioned. As I read some technical analysis indicator, it almost reaches the line and could be bounce back very soon. It seems it was too early for last week to reach the line, so it drops again this week.
CK,
I guess we all learned a lesson here. To buy at the valley and sell at the next peak, and don't wait for the next higher peak.
Take profit (even if it is a small one) when we reached the peak. Breathe in the fresh air and enjoy the view at the peak.
Then, go down to the valley and wash up at the river, and prepare for the next peak.
Although here focus more on technical analysis, but sometimes we might not forget about fundamental analysis too.
Talking about the bailout, where do the money comes from? Printing more paper or selling their gold reserve? Does it mean it has something to do with the drop of price currently? I don't know but if the price doesn't bounce back this week, it might drop much much further.
DOW has rose overnight for 5%, and there is a believe that it will rise till 7500 or even higher. This might be a small bull, or a strong bounce because it bottom to a 12-year low point. Market has oversold which billion of share trade in few session. Compare today to 2 month before, news related to gold price will shot up to 1000 or even higher seems like "disappear", may be if there is someone who are controlling behind?
Or, investor has see the bull in the share market, they sell off gold and move into equity, and believe equity can give more return compare to gold if there is bull running.The theory that i always believe, the sharper it drop, the steeper it rises.
And lately about the bank mark-to-market valution, there are analaysis believe that Dow will skyrocket, but it all depends on March 12.
March 12 and 13 is just 1 day different, let say, if dow market really rally, it is possible that gold price will continue to drop futher.
Who knows?
Thanks Carson for my many months of following and being a fan of your site and interest in gold. I too have bought at a high price thinking and reading off kitco.com that it will pass the USD1K mark and sustain for a little while there.
But having all said and done, Warren Buffet's investing advice, when investing never buy to lose money. Hang on if you can.
did anyone noticed that Public bank had increased the buy/sell spread to almost 7%!!! (previously 4%). gold selling @ RM112.60 whilst buying @ only RM105.06 at 11.20 am today...
well, public bank had now changed it back to 4%..no worries..
nik,
Looks like an error on their site. Price is now back to the 4% spread.
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