Technical Analysts Say Gold is At a Bargain

Steve McDonald
by Steve McDonald, Bond Strategist, The Oxford Club

Technical Analysts Say Gold is At a Bargain

by Steve McDonald, Contributing Editor, Investment U

Tuesday, October 4, 2011

Gold is at a bargain - at least that's what technical analysts are saying.

The techies described the recent 20-percent dip in gold prices as a bump in an otherwise long bull road for gold… and the charts support this claim.

The chart below is for the SPDR Gold Trust (NYSE: GLD). It shows a very strong upward trend for gold, and the recent sell-off just touched its upward trend line and bounced right off it.

SPDR Gold Trust Chart - Technical Analysis Gold

According to Michael Kahn of Barron's, the sell-off is exactly what you would expect from the "parabolic" rise gold has had since last July. This isn't the end of the run, but a short rest.

Kahn described the recent dip in gold as allowing the metal to get back to a more sustainable rate of change.

He also thinks gold is in better shape than silver, and both are in better shape than the respective miners.

Two factors don't seem to be going away:

  • Investors lack of confidence in the U.S. government and the Fed's ability to do what's necessary to get the economy going again.

  • A worldwide lack of confidence in paper money as political promises in the EU and at home don't turn into actions.

For gold, this is a buying opportunity.

Good investing,

Steve McDonald

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