Gold has sold off strongly, revealing its true character as one of the most volatile of all commodities. Gold's unique status as inflation hedge, protection against uncertainty, and hiding place from fear, make it unique. Apparently, faith in equities has been restored somewhat by the Fed's most recent actions. How interesting that it took three Fed interventions into the financial markets in as many days to accomplish the task. What will happen when the Fed interventions stop?
Note also the powerful selling indicated by the Klinger Volume indicator on this daily chart. There was also a bearish divergence at the most recent high around $1033/ounce. The two primary signals for a short entry have been achieved on this chart:- Price close below the 8-period EMA, and
- The Klinger Volume indicator is red and below its yellow Moving Average
Prices must also confirm the short entry by continuing below the low price of the candle that closed below the EMA. If it doesn't, it will be an opportunity to enter and go long again at a better price point.
I am not short gold. I am also no gold bug. Gold has been in a bull trend too long for me to feel comfortable shorting Midas' friend (and nemesis). The US Dollar has weakened again overnight against most currencies, so I am more likely to look for an opportunity to go long again, especially when the next bad news hits the stock market. Many investors will once again flee to gold.
By the way, Deutsche Bank has some new ETNs that permit traders to go both ultra long and ultra short the price of gold. The ticker symbols are DZZ (short) and DGP (long).
