As a fellow gold bug and a long-term believer that eventually there will be a day of reckoning and prices will explode to unprecedented levels, I have to say I am very disappointed in the performance during this latest crisis. Maybe it's the short sellers; maybe it's the failing miners selling forward production or just being a victim to margin calls in equities, it appears that gold has already made its top on this cycle.
When monitoring any investment, I always try to keep the strategy simple and identify red flags that would go against my beliefs that a market is going to perform a certain way. Just a few takeaways that I am seeing are that investors are continuing to purchase U.S. equities and accelerate those purchases by dumping safe-haven assets like gold and silver. This is because investors have a fear of missing out on the "big rally." This is neither right nor wrong, it's just that metals are not their primary asset. Something else gold traders seem to be hanging their hats on is that the FED will come in and throw the kitchen sink at supporting this market through economic stimulus. The reality is that since this is an election year, the democrats will not give President Trump one more dollar than he needs because the last thing they want is for him to economically pull through the damage of the coronavirus and have an explosive recovery into the election. The stimulus will be small and targeted specifically to airlines, cruise industry, automobile industry and finally, the energies but that is a result of the Saudi/Russia oil price war.
Now that you are completely mad at me, there is hope. Once this is done, we will go through a period of deflation; this is where people avoid spending, traveling and large social gatherings. After that, we should see a period of hyperinflation as a result of the countless central banks globally slashing interest rates to zero and that's the market you do not want to miss out on.
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Looking at the technical backdrop, there is one major chart pattern that sticks out for me and that's the double top. The market failed last Sunday night at $1704 and has failed to rally under any situation and appears that we must go lower in order to stretch higher.
My downside target is the old resistance which is now new support at $1619. Watch for this level to be achieved and then the possibility of value buying and diversification to come back in on the hopes of an inflationary environment occurs later in the cycle. I am putting together longer dated option strategies to try and take advantage of that later move and aggressive strategies for this short-term correction.