Why Gold’s Pullback Is A Buying Opportunity (GLD)

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September 23, 2017 6:31am NYSE:GLD

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From Mike Burnick: Our Edelson Institute cycles forecasts are right on — again. Earlier this year, they signaled the recent gold surge.


More recently, they nailed the gold price correction underway. And I have every reason to believe that our forecast for the next big surge in gold will also be spot on.

For specific guidance on the strategies that can transform this kind of foresight into significant wealth, please refer to the 48-page transcript of the Institute’s emergency conference. You can read it online or download from this private, subscriber-only web page.

Just look at what’s happened in the last few trading sessions: Gold hit a three-week low after this week’s Fed meeting. And many gold bulls are convinced that this is the buying opportunity they’ve been waiting for all year, but I say: Not just yet.

True, it’s usually a good idea to add to your gold holdings at a discount.  But when it comes to buying commodities, right now patience could be as precious as gold itself. In a moment, I’ll explain why …

But first, the big picture: As you can see in the long-term chart (below), gold decisively broke out of its long-term downtrend recently. A downtrend that had been in place for five long years.

This signals that a new bull market in the yellow metal has arrived at last.

I have no doubt: Gold prices are headed much higher in the years ahead.

We predict a target of $5,000 an ounce. And that may prove to be conservative.

But nothing moves up in a straight line.

The most-active December gold-futures contract traded as high as $1,354-an-ounce (on a daily closing basis). Then it ran smack into overhead resistance that stretches from $1,350 up to $1,375 or so.

And I wasn’t one bit surprised. In fact, our short-term cycle forecast was spot on predicting the correction ahead of time. Only AFTER the correction will we get the next big move higher for precious metals later this year.

Plus, there are two other good reasons why you should keep some powder dry and wait a bit before adding substantially to your gold holdings …

First, gold has advanced about 15% year-to-date, and surged more than 9% just since early July. It needs a pause to refresh.

In fact, after an important breakout like this, markets often come back to retest that breakout, before zooming even higher. For gold, that means you should watch for it to retest the $1,280-to-$1,300 level.

That zone served as resistance for gold multiple times this year. And now that it has broken above this level, it should serve as key support on a pullback. If gold cannot hold that level, then a steeper correction is possible over the next month or so.

But either way, our Edelson Institute cycle forecast indicates gold should put in a bottom by October or November at the latest.

Second, along with gold’s recent breakout, I noticed a spike in bullish sentiment. More than $1.6 billion flowed into gold-backed ETFs as of the end of August, just as the yellow metal was poised for its breakout move.

And speculators in gold futures have a larger net-long position now than at any time since this time last year. Which, by the way, came just before a 14.5% pullback in gold during the fourth quarter of 2016.

In my experience, the best time to buy gold is when nobody wants it, or better yet, investors are unloading it. We’re not there yet.

Upside resistance for gold lies at $1,355, as I noted above, with even more important resistance at $1,366 to $1,375. This is a key level I’ve been watching closely all year.

A monthly close above this pivot point would be bullish, signaling a possible upside target of $1,700 for gold. But for the reasons just mentioned, I would assign a low probability to this outcome.

Bottom line: Sentiment and our cycles research both suggest that now is not the time to get too excited about gold. The good news is: The deeper the correction now, the better the buying opportunity later to add to your gold holdings at more attractive prices!

The SPDR Gold Trust ETF (GLD) closed at $123.24 on Friday, up $0.56 (+0.46%). Year-to-date, GLD has gained 12.43%, versus a 12.62% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 36 ETFs in the Precious Metals ETFs category.


This article is brought to you courtesy of The Edelson Institute.


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