Why the Gold Rally Failed

After watching the gold price fall hard for a week, and with it my precious shares, I finally took the plunge and sold out Tuesday and Wednesday. But with what I know now I would have sold earlier.

I have just had a closer look at the concept of gold seasonal swings, and as it turns out, gold usually has a good rally in January-February that peters out in March. The trigger for this year’s top and falter was testimony of the Fed chair-madam Janet Yellen, which as it turns out caused gold to fall nearly every time in the last 8 months. Have a look at the seasonal averages for gold from 1990 to 2009, covering both a bear and a bull market:

This rally has now turned into a very ugly bear trap and I expect it to grind lower till the middle of the year at least. This gives the bears a strong shot at breaking the $1180 double bottom. But if that low holds, it will be the mother of all buying points as it could be the third time the bears couldn’t break it.

God bless

Kevin

 

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