Golden Opportunity?

Golden Time 1

Recently, prices of Gold has been surging crazily straight up from US 1,238.50 (per oz) on December 12th, 2017 to  USD 1,338 on January 17th, 2018 (Chart A~ Prices of Gold ran up in a month).

Chart A
Chart A ~ Prices of Gold ran up for a month straight

Rhb Gold and General Fund has snatched a profit of 11.5% merely in a month by January 17th 2018. This sudden rise in gold prices may have caught the attention of many investors. These investors probably have been wondering, is this the right time to invest in Gold again? Is the “golden” opportunity has returned once again?

Gold, the precious metal has been historically treated as investment safe haven whenever equity market crashes. Prices of Gold run contrary or opposite to equity market most of the time. However, in recent months, equity markets were bullishly strong in an unusual straight line moving up (Chart B).

Chart B Equity Market was Bullish
Chart B ~ Equity markets have been bullishly strong

Then what made it run up furiously?

Cryptocurrency and Gold Prices

Nonetheless, it is the cryptocurrency’s free fall led by bitcoin. Bitcoin’s price has reached its historical height near USD 20,000 by 16th December 2017. Then the fall began on 17th December until recently. (Chart C ~ Bitcoin’s prices recent free fall)

Char C Fall of Bitcoin
Chart C ~ Free fall of Bitcoin’s prices

Gold investors thought that the Apocalyptic of our current economic world is coming. This cryptocurrencies collapse will sooner or later spear through the general equity market. That’s why prices of gold took off.

There was another contrary argument that it was because gold players went into cryptocurrencies since they chose to use cryptocurrency as a substitute for gold as a safe haven against stock.  Recently they just rushed back since they discovered that that cryptocurrency wasn’t really safe as it was supposed to be.

This argument may sound as if it is supposed to be. However, it is not conclusive. Because there wasn’t any correlation between the performances for the past 6 months between the 2 financial instruments.  (Please refer to Chart D ~ 6 Months Bitcoin and Chart E ~ 7 Months Gold Chart).

Chart D Bitcoin 6 months
Chart D ~ 6 months bitcoin chart
Chart E Gold 6 months
Chart E ~ 7 months Gold chart

However, it might be true that gold direction has been negatively correlated to Bitcoin or cryptocurrencies lately instead of the stock market. But there is no conclusive deduction as to who are the main players of cryptocurrencies, whether gold players, stock players or rather new public fresh money?

I have also observed that gold prices nowadays do not relate to the movement of stock direction any more than it used to be.  Sometimes, whenever stock market has a sudden spike, gold prices follow the same spike up too. Many theories can be derived from this change of correlation-ship.

For one, it may be due to gold investors think that a sudden spike up in stock may warrant an immediate danger in stock as the tension of pull back or collapse become more imminent and real. For another, the sudden spike in gold price may be caused by non-stock market factor, such as fall of cryptocurrency or federal rate hike etc.

Gold still a Safe Haven for Investors

Whatever the reason it may be, gold is still rendered as a valid investing instrument in today financial market. It has obviously thrown out the substitutionary argument for cryptocurrency as a replacement for gold as safe haven instrument for the general stock market. It now seems to be a safe haven for cryptocurrency players instead.

The question still come back whether gold will continue to move up from now on? Is this the right time to jump into gold now or sooner?

Technically speaking, gold prices has not yet proven its bullishness at this moment even though it has risen quite substantially lately. Because it has not yet over taken its previous peak at September 7th, 2017 (please refer chart E ~ 7 Months Gold Chart). Gold might have bottomed at January 2016 (Refer Chart F ~ 10 Years Gold Chart)

Chart F ~ 10 Years Gold Chart
Chart F ~ 10 Years Gold Chart

and since then it have been moving above that lowest point. It showed a little bullish trending pattern from a 5 year chart (Chart G ~ 5 Years Gold Chart).

5 Years Gold Chart
Chart G ~ 5 Years Gold Chart

However it is still best treated as sideway currently until it breaks above its previous peak. There might be a pull back or short term consolidation before the next run up.  If anyone thought this is a golden opportunity to enter gold might be trapped regrettably. This is what we called “bull trap” technically speaking. If anyone desires to enter gold, perhaps have to wait for a few conditions or signs:

  1. It has to be proven its bullish strength by breaking its previous peak at September 7th 2017.
  2. After its pull back and have its rest at the shallow bottom, not lower bottom then its previous low.
  3. The general stock market euphoria has been building up substantially.
  4. Cryptocurrency market has recovered and attracted much more greedy and mad maniacs. It might rise above its previous historical height. And then, there will be more cheerful celebration, falsified self confidence and sarcastic noises against those bubble predictors.

Currently the mood of the euphoria is kicking in right at the start of 2018. The bull run of stock markets globally have been unusually strong and phenomenally irrational. Almost all global markets have way passed their historical heights. These are a good sign that the Apocalyptic of the global economy is very near, but not now, rather sooner. When is it? No one really knows for sure.

Let’s wait for those signs listed above. Keep watch and invest with alertness and protective strategy!

 

 

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