Gold: The $1,350 Magic Number

August 12th, 2013
in gold, syndication

Special Report from The Daily Reckoning

by Greg Gunther, Daily Reckoning

There are three facts about gold you need to know right now…


Follow up:

Fact No. 1: Since dipping below $1,200 six weeks ago, gold futures have jumped higher by nearly $130.

Fact No. 2: Beaten down mining stocks have actually outperformed gold over the past six weeks. The widely followed Market Vectors Gold Miners ETF has jumped more than 8% since the end of June.

You might find these first two facts exciting. A potential gold comeback could mean a new trade—or even new life for an old position you had left for dead.

But before you clear out a spot in your portfolio for a brand new gold position, there’s one last fact you must know. Out of everything I’ve already told you today, this piece of information is far and away the most important truth about gold today.

Fact No. 3 is simple. It’s true. And it trumps every other analysis or assumption about gold. The third fact is this: Even as futures perk up this morning, gold remains stuck in a painful downtrend.

Gold, Spot Price

I told you a couple of weeks ago that you should expect choppy action from gold futures as traders try to sort out the possibility of a late summer rebound. That’s exactly what we’ve seen. Gold futures are up another $13 this morning to $1,325 after dropping as low as $1,275 late last week.

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Of course, the big downtrend doesn’t mean higher prices aren’t possible. All trends eventually reverse. But if you’re thinking about playing gold, its larger downtrend must remain the first and last piece of information you consider before pulling the trigger. Ignore it and you could get badly burned.

Keep a close eye on $1,350. A break above this price is a fairly good indication we could see higher prices soon. But failure at $1,350 could cut gold’s late summer comeback short.

You know the drill. Check your emotions at the door before backing up the truck. If you do jump into a new gold position, it’s critical that you keep it on a tight leash. Risk remains elevated. Consider yourself warned…

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