Very Likely Near a Temporary Top due to Margin Equity Covering
Gold of course is long-term exceptionally bullish as I have noted in the past, however, I recommend in this environment people refrain from leveraging Gold and Silver and rather hold straight 1:1 bullion, and only buy leveraged funds off corrections.
While in reality Gold should be near-term parabolic, the reality is, when equities tank violently, Gold falls due to liquidity issues and margin call covering. For this reason, we could be near a temporary top until sometime in April when we could test the 1800s. Regardless what happens in the near-term, I see Gold topping 2000 before the end of 2020, but for the next month or two it will have some violent movements.
Two near-term possibilities to watch for:
1) Re-test of 1695-1700 level and a break-out to roughly 1715-1720ish +/- $10.00 overshoot level before a correction (due to liquidity issues and covering)
2) Re-test of 1695-1700 level and a break-down to the 1620s, 1630s or 1640s with sideways movement for at-least a month (again, due to liquidity issues and covering)
Be careful at this level. As equities appear very close to a bear market, Gold will outperform equities but under-perform compared to what one may think. I suggest protecting yourself by doing what I noted above by only buying 1:1 bullion ETFs and only leveraging when corrections happen.
It is crucial to remember that in bear markets, Gold and Silver actually fall with equities. The difference between this time around vs. other bear markets that saw the metals fall alongside equities is that in this bear market the DXY (USD) will lose value and the Fed will continue cutting rates - and probably cutting rates into negative territory. These actions and results should keep Gold somewhat supported. However, that is not to say that Gold cannot re-test the 1620s-1640s within the next week or two.
- zSplit
Note: If the Fed cuts rates on March 17/18 again this will like re-buoy Gold. Therefore, any drop due to margin call covering in the near-term (from equities tanking) could result in a buying opportunity if the Fed eases once again. In this case this would likely turn a bearish (correction) into a sharp bullish reversal.
While in reality Gold should be near-term parabolic, the reality is, when equities tank violently, Gold falls due to liquidity issues and margin call covering. For this reason, we could be near a temporary top until sometime in April when we could test the 1800s. Regardless what happens in the near-term, I see Gold topping 2000 before the end of 2020, but for the next month or two it will have some violent movements.
Two near-term possibilities to watch for:
1) Re-test of 1695-1700 level and a break-out to roughly 1715-1720ish +/- $10.00 overshoot level before a correction (due to liquidity issues and covering)
2) Re-test of 1695-1700 level and a break-down to the 1620s, 1630s or 1640s with sideways movement for at-least a month (again, due to liquidity issues and covering)
Be careful at this level. As equities appear very close to a bear market, Gold will outperform equities but under-perform compared to what one may think. I suggest protecting yourself by doing what I noted above by only buying 1:1 bullion ETFs and only leveraging when corrections happen.
It is crucial to remember that in bear markets, Gold and Silver actually fall with equities. The difference between this time around vs. other bear markets that saw the metals fall alongside equities is that in this bear market the DXY (USD) will lose value and the Fed will continue cutting rates - and probably cutting rates into negative territory. These actions and results should keep Gold somewhat supported. However, that is not to say that Gold cannot re-test the 1620s-1640s within the next week or two.
- zSplit
Note: If the Fed cuts rates on March 17/18 again this will like re-buoy Gold. Therefore, any drop due to margin call covering in the near-term (from equities tanking) could result in a buying opportunity if the Fed eases once again. In this case this would likely turn a bearish (correction) into a sharp bullish reversal.
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