I am wondering if the market makers are abandoning gold for now. About a month ago gold was off the bottom of the trigger in the current pattern. It has now broken the pattern. The question is does gold move from a somewhat balanced trade to the sell side and go for a fall to around $1100 or further or is this just a head fake.
If you look right now, gold is traveling on the same dynamic as most industrial metals (copper, aluminum, nickle, lead) except for zinc. Now up until a couple of days ago this is not true. This is therefore a fundamental event that is affecting all metals.
This in opinion should bring caution. Industrial metals have utility and will usually recover to a balanced level. Gold is mostly perceived and is valued by the market mainly the market makers. They set the level. As investors or traders we look for signs that the markets stance will change.
I am personally will not get entangled in the gold trade right now. I think it is dangerous either way. I don't want to play the short side either.
There however is a very interesting play on silver. It has a much higher beta than gold and when it breaks it could be a big break either way. The break could be quite a bit looking at that chart. It will break the same way as gold but it will move on percentage basis much more.
With all this said I think I am going to stay out of the trade right now. I think it is a good time to be in cash.
In the next month or so it should be interesting to see how gold trades.
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