Sunday, January 23, 2011

January 2011 Gold pullback

Daily chart of Gold going back to October 2010. You can see Gold has been in a trading range between the lower 1300's and the 1400 level, about $100.
Gold is currently trading under the short term, mid term AND longer term 100 day moving average which is a bearish sign.
Stochastics are in the lower overbought area with the K line under 20.
It is trading along the bottom of the lower bollinger band and is approaching the November break low of 1331, the next support level.
If it should pierce the 1331 level, we may see the October 2010 break low of 1313, then onto the even number of 1300.

Is this something to worry about? If you have physical Gold and have been a long term investor, NO.  Nothing fundamentally has changed, the governments around the world are still 'printing' money and the economic situation worldwide is still unstable. Gold is still the place to be.

Now if your invested in mining stocks, that is another story. When Gold/Silver does correct, the miners will typically go down much more depending upon the company. Explorers and Juniors will tend to break to the downside much more than mid tier and senior miners that are cash flow positive and have earning. That is the bottom line. I suggest as well as many others that people do NOT go on margin to purchase any stocks, especially in Gold and Silver mining because of this volatility.

One of the best ways to invest in a long term bull market is to dollar cost average into it. Every month on a certain day, purchase X amount of dollars into the investment without regards to the price. It can be 5 Silver Eagles, 1 or 5 ounce bars, Gold, Palladium, etc........ It depends upon your financial situation. Some can purchase a few coins of Silver, some may be able to purchase 10 Gold Eagles...   Some may want to purchase 10 shares of a physical backed ETF each month.  Sprott Asset Management is still acquiring the Silver it needs for their newly formed ETF, PSLV.

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