I Love Gold!
By David Nelson, CFA
Anyone who has followed me for the last couple of years knows I’m a long term Gold Bear. I think the Bear Market started in 2011 and could last for several more years.
Even Bear Markets have rallies and yesterday’s release of the Fed’s FOMC Minutes may have set up a short term bull trade in (GLD)* SPDR Gold Trust Shares with a risk reward ratio of 5:1.
The two year chart of GLD is pretty ugly. However, we now have a triple bottom in place that spans more than one year.
Purchase GLD right here and start scaling out at the short term resistance of 128. Sell another 1/3 at 132 and be gone by 136.
IMPORTANT – Set your stops for 114 a clear break of the triple bottom.
The trade offers 16% upside vs. 3% downside.
Aside from the technical picture the Fed may just be on your side. We’ve all watched the massive push higher in the U.S. Dollar (DXY). Gold traders know there is a strong inverse correlation with the currency. As I pointed out in today’s post on The Fed’s New Mandate the September minutes showed they are concerned with the rapid appreciation of our currency, a potential threat to corporate profits. As a result the perception now is that the Fed is going to stay loose for longer. This is the only good news gold investors have had in some time.
Remember, this is just a rental. Buy here and sell at 128 or stop out at 114. Good Luck Trading.
*GLD is held by some accounts managed by David Nelson and Belpointe
** The trade and these targets are opinion and not fact. Investors should size their positions accordingly.