Gold Uptrend Is Over, But Not In Downtrend


(click for larger image)

The uptrend in gold has been broken, but that does not trigger an immediate short sale in anyone’s model. Typically, analysts will refer to a period of “distribution” where buyers and sellers of hedging and investing ilk will manage their positions.

They will look for the price to travel out of the distribution range to signify if a new uptrend results or a change in trend has occurred. Look at the chart below:

(click for larger image)

The two horizontal lines represent where traders will be looking to see if gold can stay above these levels price-wise. If not, it may signify that a downtrend in beginning. These rules are pretty straightforward and are the easiest way to find a change in trend.

What’s most important to a trader though is how they trade the trend. Those collective techniques are as unique as your fingerprints and everyone trades the trend differently. What’s important is you find a way to do it that’s comfortable to you.

When I ask the legendary traders how the played gold in the late 70s, they all took giant chucks of the move. They didn’t buy it once and leave it go, they were constantly buying and selling the contract with a long bias.


Please note: I reserve the right to delete comments that are offensive or off-topic.

  • Peter Rich


    This chart analysis that you provide on different markets is what I love most about your blog.

    Thank you!

  • Anonymous

    Really? I think I focus on gold too much, but I appreciate your feedback.

  • Manuelbravochico

    The only input I have is that there are a few large guys who own disproportionate amount of gold. Paulson,Einhorn,Dan Loeb, collectively could take 100$ off in a day or two. And those are just the ones I know of. That could trigger massive stop loss triggers. I would definetly be a buyer, but the piont is that these guys litterally live within a few square miles of each other. It’s been known for them to talk about markets over a glass of scotch. ie, the Euro last year.

    Takeaway: we going to see a massive selloff off in next 6 months.

  • Douggravesster

    Now that was a useful chart Martin. Well done. I would be very interested in a similar projection for silver.

  • Anonymous


  • Jaytrader

    Another interesting twist is the ratio between gold and silver. It plunged from a high of roughly 71:1 at the beginning of last year to just under 46:1 last week. The monthly chart low was just above 46:1 in 2006 and just above 46:1 in 1998. This is around major Fibonacci .618 support, too. So it’s kind of a make-it-or-break-it point for the ratio. If it bounces it could be because gold plunges…and silver drops even faster! When you get a clear trend change you could simply buy a gold contract and sell a silver contract to play the ratio.

  • Anonymous

    I’ll put something up on the ratio. Crude oil/nat gas has something similar.