*A brief explanation as to the fundamental and technical reasons behind my short positions on Spot Gold!*
If you haven’t seen my previous blog post showing my current FX portfolio including spot gold, then I am currently holding multiple short positions on spot gold with the anticipation of it falling lower from the current levels.
You can read this blog post by clicking on the link below.
So why am I shorting gold when it appears to be having the the bullish year of the century? Simple, because greed isn’t always good.
Let’s look at the weekly timeframe chart below to see what gold has achieved over the last 48 months.
As you can see, spot gold has been on a mission to mars with the precious metal climbing from late 2015 lows of $1050 per ounce up to recent highs of $1535. This is a mega move with the value of gold gaining nearly 48%.
I can appreciate that at this point you are probably thinking “why would he sell something so strongly in demand?”. Well, the reason is because of what always happens when an asset or investment becomes so popular like gold has done this year.
The price of US Oil leading in to 2008 was showing growth never before seen and climbed to nearly $150 per barrel before crashing. New investment funds were opening daily to specifically buy and invest in Oil and it was the talk of the town… before it crashed.
The exact same is happening with Gold right now. I have been inundated with messages from people asking how to buy gold, should they buy gold etc. and that is an almost guaranteed sign for me to take profits on my long positions and sell.
Look at this article posted on Bloomberg yesterday (20/08/2019).
The price of gold has broken 6 year highs and the demand for gold based ETF’s is surging. ETF’s are the products that most of the general public use to buy and invest in gold and as expected, once the price of gold has broken 5 and 6 year highs, the general public want to buy in.
The exact same thing happened with Bitcoin last year. Bitcoin went to all time highs of $18,000 per coin and it was not just the talk of the town – it was the hottest topic globally! Everyone wanted to get involved and buy right there and then to profit from the inevitable climb from $18,000 to $100,000 per coin.
What happened next? Of course, the price of bitcoin fell over 80% and the late comers and majority of buyers lost their shirts.
The chart above shows my current short positions on spot gold and I am looking to hold these for the foreseeable future until the price of gold corrects itself. After such a large bullish move I can only see that it will either a) consolidate for a good few weeks until its next moves direction is ready or b) drop down to more reasonable levels around $1400 / $1450 per ounce where it makes more sense to buy.
Remember – It pays to be smart and not always follow the crowd.
As I have said many times before, the fundamental basic rules for profitable trading is to BUY LOW and SELL HIGH. It makes zero sense to buy gold when the price is at 6 year highs.
DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.