Has the Gold Market Topped Out ?

In the post previous to this one I wrote about how I believe the market has triggered an important top and should head down from here.  This also means that we are likely to see a US Dollar rally from the oversold lows.

That is generally not good news for the gold market and I suspect the gold market will take a beating along with the stock market the next month or so.  I have been waiting for the gold market to do a massive breakout above the 1000 level and to be honest so far it has been a little bit disappointing.  The volumes on the advance of the GLD ETF has been nice but not blockbuster and have put some doubt in the sustainability of the rally.

Caution is advised in this market now as it remains unknown how severely they will punish gold along with the rest of the stock market.  It is impossible for me to determine if gold will be able to move UP because the broad market is entering a severe correction.  That would mean that the gold price would need to trader higher even with a rising dollar which it has done sometimes.

In a previous post I wrote that as long as the spot gold price is able to trade and hold above the 988 level then I will remain bullish on the gold price.  I still believe in that statement because as long as the gold price trades above that level, it will be trading above the bearish trendline that has been in force since March of 2008.  But there is nothing wrong with getting out of this market and just standing aside.  That seems to be the prudent thing to do now.

It is going to be a big problem for gold if it breaks under that level and trades back under this channel line.  Why? Because that line defines the breakout area and you just do not want to see price break back under this area that has transformed into support.

The daily MACD is turning down now on the Gold price and is warning of some price decline ahead.  Gold stocks as well look like they are setup for some downside corrective action along with the stock market.

It is frustrating that the gold price did not manage a really blockbuster breakout during this seasonally bullish time frame going into September 25th.  It had a nice move, but much less that I was anticipating.  Now it is going to be key to observe is the gold price can trade higher just from the fear of a declining stock market and ignore a big bounce in the US Dollar.

This is a big gamble and I would rather just let the gold market and the mining stocks sell off with the rest of the stock market and then see where each one stands when all the dust settles.

Posted in Commodity ETF, ETFS, Gold Market

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