From the Desk of Ian Culley @IanCulley
Gold’s failed breakout is testing investor resolve.
But let’s consider last week’s action before unearthing our bullion.
Check out the failed breakout with a bearish momentum divergence in the lower pane:
Waning momentum and failed breakouts go hand in hand. Gold futures proved an excellent example of momentum diverging from price, one of the reasons we track RSI readings.
But just because momentum confirmed the failed breakout doesn’t mean we should turn bearish gold and precious metals.
Remember, gold posted a new all-time high last week. New all-time highs are bullish in my book, no matter how you slice them.
Plus, the March breakout remains valid, and the underlying uptrend is intact:
Zoom out on the weekly chart, and last week’s bar becomes a whipsaw (much like last December’s false start).
I get it: No one likes whipsaws.
Unfortunately, they’re an unavoidable part of the game.
When trading commodities, gold remains the best place for your money. The Gold ETF $GLD versus the Commodity ETF $DBC is printing fresh three-year highs:
New relative highs signal strength, not weakness.
Gold was disappointing last week, but painful letdowns come with the territory (just ask a seasoned gold bug).
Instead of worrying, take action by clamping down on risk and protecting open profits.
And if you’re a longer-term investor, let the shiny rocks ride!
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