I believe Gold could go either way. It has certainly been making ground on the back of global uncertainty with all this terrorism business.
And I agree that higher inflation would definitely have a positive impact on the price of gold.
But what about the strength of the American economy? When the American economy booms, the price of gold tends to suffer as people turn away from the yellow metal and into other investment vehicles. Lately US growth has been strong and I'm beginning to think that this is what has been holding gold back lately.
I'm largely undecided although if I was a betting man I'd say it'll see US$410 again before it sees US$350.
I am sorry to say that as a gold punter myself the fact that global chaos equalls gains in the gold sector i find a story in the news on some sort of de stabilising event gives me some sort of morbid satisfaction that the stock i hold will go up at the expense of some poor third world gutter dweller.
Gold might bounce back down a bit after having another run at 440 but once it breaks that it's unlikely that it'll break 400 again. So, in the short term, it may be in a minor retreat but from what I've heard from some forecasters next year will be a watershed. I'm not sure it Gold will continue to be affected by the US economy or the US dollar as much as in the past. Will just have to see where we are at after the US elections and subsequent interest rate moves.
This is why I'm critical about charts. They don't have the ability to take anything but historical data into consideration. If there is a terrorist threat then your chart is not going to act differently. But this will have a significant impact on gold. As it has on oil.
So I believe that charts can only do the trick in a "normal" trading environment. And since we are not exactly living in trouble free times, I doubt that you will be very successful following charts in gold and oil.
Just my idea. I know that there are a lot of members who trade based on charts.
My understanding is that Gold is a great hedge against high volatility (high risk), hence when things are unsettled everyone runs to Gold as it's considered safe- hope I got this right. So terrorist attacks should mean higher Gold prices. Still, I follow the trend (as it's my friend!) so all you can do is time your entry and exists properly. But then that's just my understanding and I do keep revising my outlook. Anyone think different? Comments?
Oil may be a different story but I expect high oil prices to continue for the foreseeable future.
>>This is why I'm critical about charts. They don't have the ability to take anything but historical data into consideration. <<
This is true Stefan, but this is also true of any form of analysis. There is no analysis that can predict the future. We can only make projection/educated guesses.
>>If there is a terrorist threat then your chart is not going to act differently. But this will have a significant impact on gold. As it has on oil.<<
Oil and Gold have given excellent technical signals lately. Some have worked, some haven't...no differnt to normal.
However no analysis will be of much use in a sudden event such as a terrorist attack.
>>So I believe that charts can only do the trick in a "normal" trading environment.<<
Yes I do agree with this. Extreme volatilty is a pig to trade. But once again, this is no different to f/a. The fundy or the techie will need deep pockets indeed to trade these events...unless already on the right side of the movement.
I don't know how a fundy would do it but a techie will ajust trading plan and position size to account for the volatility
>>And since we are not exactly living in trouble free times, I doubt that you will be very successful following charts in gold and oil.<<
My account shows otherwise
As for the tading signal I posted above. Bear in mind that is was t/a which alerted me to a *potential* trading opportunity. It was also t/a which ultimatey discounted the signal as invalid...In other words my sytem worked ecaxtly the way I wanted it to.
The aim is not to be right 100% of the time. The aim is to maximise gain as a % of dollars risked. My expectancy figures have been in excess of 1.5 for a loooong time. So you can decide t/a is not for you, but you cannot legitimately deny that t/a works. That would be like me saying f/a does not work, which is obviously ludicrous.
I'll let you in on a secret. I'm a terrible fundamental analysist. It doesn't work for me. But I cannot deny that it works. Buffet et al would not even bother laughing if I said someting as silly as that.
But try to walk up to the folks at Dunn Capital and tell them t/a doesn't work. They would recommend a nice friendly therapist for you.