Gold Trading Explained – Should You Buy Gold Right Now!?

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Gold trading explained by a professional trader!

Should you be buying gold (GLD) right now? With all this crazy market volatility is it a good idea?

If you look at the monthly chart of gold it’s about to complete an inverted head and shoulders pattern. And if it does, we should see prices trend higher.

What’s interesting about a break higher in gold is the effect it’ll have on the US dollar (UUP).

Gold tends to have an inverse correlation with the dollar. If gold is trending higher, then the dollar is trending lower. And vise-versa.

The reason for that is that gold acts like the anti-dollar. It’s a safe haven and inflation hedge. So when the dollar weakens, people start moving their money into gold because it’s seen as a better store of value.

But for some reason, in this relationship between the two, gold actually tends to lead the dollar. So if gold breaks out here, we’ll likely see a leg down in the dollar.

That would kick off a reflexive loop where a weaker dollar encourages even more investors to get into gold. And that’ll fuel the gold rally even more, pushing the dollar down even further. And the cycle would repeat.

There’s a few other factors working for gold here too, including the relative momentum of US equities (SPY) versus emerging markets (EEM). When SPY is stronger than EEM, gold tends to fall. But when EEM is stronger than SPY, gold tends to rise.

Right now EEM is outperforming SPY. And this outperformance between emerging markets and US equities over the last 2-years looks very similar to the 99’-01’ period, which ended up being the start of a major bull market in gold.

If this analog holds, and emerging market stocks continue to outperform the US, then we should see gold start another bull market soon.

One of the vehicles we’re looking at to play this trend is the South South African miner Anglogold Ashanti (AU). The gold ETF GLD is also an option.

Watch the video above for more details!

***All content, opinions, and commentary by Fallible is intended for general information and educational purposes only.

Comments

Fallible says:

Learn more about reflexive loops here: https://youtu.be/X-eUz4v9N3o

Don Irvin says:

Video was good analysis, wish it didn't have the music louder than your voice though.

snptrader2 says:

Gold and commodities in general will not rise until wage growth begins to spurt and the participation rate begins to climb. Neither have happened yet, although the the distant drums are starting to beat with the tariffs that will cause US job growth and the stimulative effects of tax reform and repatriated money.

Shang Yang says:

not gold, but gold miners. Gold only preserve purchase power but like insurance it doesnt yield any value.

Kamran Syed says:

Missed the "Byeee" in this video 😀

Jürg Bühler says:

Yes I think there is a time now for a push higher in Gold and especially in Gold miners that are a good value.. (nice P/Es)..

brandonbeavisinvesting says:

I trade timing the gold market around the election. Got burned and learned my lesson :p

Josh Winter says:

Risk off may be in play if ES sells off which may mean GC and ZB get bids. Nice video AK. We should talk markets on WhatsApp…

Preservation Of Capital says:

Great video

Ryan Young says:

You should do a video breaking down Jamie Dimon's 2018 letter to shareholders. I was watching Bloomberg this morning and they said the last 8 pages were especially insightful.
https://sc.cnbcfm.com/applications/cnbc.com/resources/editorialfiles/2018/04/04/18-0404_AR17_JD-letter%20v3.pdf

Anthony James Tristan says:

I trade JDST and JNUG. Easy money.

CarftCrO0K says:

Loved it – do you ever look at the DXY while analyzing Gold? I found it useful – same goes for the AUD/USD chart

Micheal Lopez says:

Great job!!! Would like you you guys to do a video about the OCT EXCHANGE but I love the content you guys are doing.

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