Babak posted about a possible double top forming in Gold (and Oil) in his blog a few days ago. While I agree with his technical analysis on the daily charts, I disagree with his conclusion that Gold has topped out. In my mind, Gold is driven 80% by fundamental reasons instead of technical analysis. If you look at the weekly chart, Gold looks poised to possibly make a run higher after this consolidation.
Anyone can argue over technical analysis but in the end I believe that Gold is driven by fundamental reasons for one critical observation I make. The longer I trade Forex, the more I begin to see Gold as a currency rather than a commodity on the open market. Since all currency prices are driven by fundamental and sentiment forces mainly and based on the macro economic conditions we are experiencing globally, I believe that Gold will indeed move higher from here.
Then again I could be wrong and Babak right. After all, these differences in perception and value is what makes a market. :)
Update October 2019
Just look at where Gold is 12 years later. Almost doubled from where it was when I first wrote about it and opined about some silly double top. All that drama. All that effort and time spent. Note, I didn’t write ‘wasted time’ because blogging about it made me into the writer I am today.
Gold is that weird asset that’s not a tech company and it doesn’t inspire people to change the world. It acts as a hedge for fear and we have a lot of implicit fear right now. The world is starting to tear itself apart as the USA starts to deteriorate. It’s probably wise to have a few gold coins stashed away just in case but I believe Bitcoin is where it’s going to be at going forward.
Update August 2020
The United States is entering a period of social unrest. Black Lives Matter protests are happening around the country and armed citizens are starting to shoot protesters. Meanwhile Trump is sowing more chaos. People are buying Gold, Guns, and soon more Toilet Paper. It’s not a pretty scene right now.
For people that bought American Gold Eagles back in 2019, you’re sitting on some nice price appreciation. Gold is trading around $1,975. That’s great but it’s not easy to carry around a sack of gold coins. This is why I’m still in Bitcoin.
Bitcoin is easy to transfer, just ask the Chinese fleeing Hong Kong again. It’s really hard to declare a sack of gold at the border and end up keeping it.