Typically investors reduce gold holdings toward the end of the year, presumably to participate in the well-known Christmas Rally effect. Suki Cooper discussed this in a Bloomberg interview yesterday, it’s well worth 90 seconds to watch. 2019 was no different; investors backed off on gold in December, but gold didn’t drop very much.
What it did do was open up some “demand space” should any random shock hit the market. It did, in the form of the US-Iran confrontation. Predictably gold spiked up on the news, and the spike carried gold up to 1600. But can it stay there?
We’re already seeing warning signs that investors don’t think it will. Both gold and gold miner stocks are dropping in initial US market regular hours – your friendly Gold Enthusiast wanted to see this continuing before releasing this article. So far the indication is that gold won’t hold 1600 intraday in the US. So this might not be time to load up on gold.
Onecontrary indication to all this is BullionVault’s report that their investors are holding gold at record levels. Whether this is just a single-point report – from those who profit from selling gold – we can’t tell yet. Another is a new prediction for resistance at 1650 for gold.
ALWAYS remember that the market always has the last word. If something new comes into the picture that may well be the straw that breaks this bull’s back.
The Gold Enthusiast
DISCLAIMER: No securities were mentioned in this article. The author is long the overall gold sector via positions in NUGT, JNUG, a few junior miners, and covered calls on part of the NUGT and JNUG positions. The author may trade options positions in NUGT and/or JNUG in the next 48 hours if market conditions warrant but has no plans to make any other trades in the gold sector in that timeframe.
The SPDR Gold Shares (GLD) was trading at $148.05 per share on Wednesday morning, up $0.08 (+0.05%). Year-to-date, GLD has gained 19.73%, versus a 21.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Mike Hammer
For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.