Gold, Up or Down?

XAU has broken its 3-year main up trend line; bearish this is. It has also put in a double top and triggered several negative divergence signals at the same time.

Gold bullion is probably going to end up following the path of the XAU. It has broken one of the up trend lines. Lets see what it will do on a pull back to the main up trend line. Gold bullion also set a new high while flashing several negative divergence signals. This means that the outlook for Gold could be bleak for a lot longer then most gold bugs are ready and willing to accept (we are referring to Gold bullion now as Gold stocks have already been smashed to pieces).

Bell weather NEM has also broken its long term 3 year up trend; another bad sign and it now looks like it could correct all the way down to 26 dollars. Watch the 34 dollars if it breaks this point then it's going to trade much lower before bottoming.

Conclusion

The outlook for Gold looks far from great, initially our indicators were suggesting that Gold could put in a possible bottom in April; however the pattern changed and went from issuing a possible buy to flashing a neutral signal. We will continue sitting on the sidelines till a buy signal is flashed we are not going to challenge our indicators they have always kept us on the right side of the market. One should also remember that there are several markets out there besides Gold that one can jump in and out of ( a good example was the energy markets) and lock in some serious profits. So we will keep playing sectors that our indicators flash buys on while we wait for a new huge buy signal on the Gold sector.

Daily trend = down

Weekly trend = down

Monthly trend= just turned down.

We have been sitting on the sidelines since Nov- Dec 2003 when we publicly stated that it made sense to take some money off the table. Everyone should have a core position in Bullion (bullion is not the same as worthless paper stocks) and you can use pullbacks to slowly build a core position in bullion if you don't have one.

One interesting contrarian development is that Gold is now among the 10 worst sectors; gold stocks should start putting in some nice very nice formations and the strong ones will be the first to break out.

All the above charts were supplied courtesy of www.prophetfinance.com

I do not have much patience with a thing of beauty that must be explained to be understood. If it does need additional interpretation by someone other than the creator, then I question whether it has fulfilled its purpose.

Charlie Chaplin

© 2005 Sol Palha

TACTICAL INVESTOR

www.tacticalinvestor.com

[email protected]

28 May 2005