Tuesday, August 26, 2014

Scary Day in Gold But.......

Yesterday was an unnerving day for gold investors like myself. Yesterday, albeit the Monday in the week heading into the Labor Day holiday, usually a light trading week where traders can push investments all over the place, was almost the fifth day in a row of losses. Not that we should not expect multiple days of losses, as I stated in a previous post that I would not be surprised that the metals and/or equities don't make a run at the June 13th price point. But still, losses are losses and never sit well.

Light market dynamics heading in to a holiday aside, this will be an important trading week in the gold complex. Despite the five day sell-off, the gold equities refuse to bust the floor established on June 13.....

As I have shown and demonstrated many times, the gold equities tend to lead the price of the yellow metal both on the upside and the downside. We see the above price dynamics as the yellow metal (GLD) has closed the gap of June 19th, a critical price point.

And turning to one of the best proxies for the outlook of precious metals complex, RGLD also sold off hard in yesterday's trading. That said, the stock rejected the lows and a apparent critical price floor around $73.50, as investors' demands for shares pulled the stock back from the abyss.

This trading dynamic suggests that the long gold/gold equity trade may not be over just yet. That said, we will have to see some sign of strength in trading soon with some follow through. And as a side note, gold and the precious metal equities are trading up in early morning trading.

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