The Tricky World of Trading Gold

The past year has been a tough and confusing time for gold investors.

After a promising start to 2022, gold stocks rolled over and headed down.

From its April 2022 high to its November low, gold giant Barrick Gold (GOLD) took a massive hit. It lost 50% of its value.

Then GOLD rallied into the start of 2023 before reversing again in early February. This time, GOLD dropped 24%. Then it rose again from March into April.

However, recently GOLD has come under pressure. So today we’ll check out what’s coming next…

Identify Repeating Patterns

In GOLD’s chart below, you can see the huge reversal that happened in April 2022.

The GOLD stock price and Relative Strength Index (RSI) headed in different directions, as shown by the diverging orange lines at ‘A’…

Barrick Gold (GOLD)

Source: eSignal

When momentum is declining, eventually that will drag the stock price lower too. There is not enough buyer demand to keep propelling the stock higher.

GOLD’s big downtrend from April developed along two other bearish signals…

1. The RSI broke into the lower half of its band (below the green line) and stayed there.

2. The 10-day moving average (MA, red line) crossed below the longer-term 50-day MA (blue line), with both MAs then tracking down.

However, after bottoming out in November, these bearish signals flipped back the other way.

This time, the RSI broke back into its upper range and the 10-day MA crossed back above the 50-day MA. That saw GOLD rally into the start of 2023.

From there, the ‘A’ pattern repeated and saw GOLD top out and reverse in early February at ‘B.’

Take another look at the chart…

Barrick Gold (GOLD)

Source: eSignal

I write about these reversal patterns (both diverging and converging) a lot. But there’s a simple reason for that…

As this chart shows, identifying a reversal can save us from buying a stock just before it rolls over – like at ‘B.’

And similarly, it helps us avoid shorting a stock (or buying a put option) just as a stock price bounces – like at ‘C.’

Now, what we’re trying to identify is whether this reversal pattern will repeat again at ‘D.’ So, what can we expect from here?

Don’t Preempt a Move

The RSI (lower orange line) has started trending down at ‘D.’ This is what saw GOLD top out at its recent short-term high on April 13 at $20.28.

However, if we compare the emerging reversal at ‘D’ to ‘B’ and ‘A,’ you’ll notice some differences…

In previous reversals, the down move gained traction when the RSI fell into the lower part of its range. Those moves were then confirmed by the 10-day MA crossing below the 50-day MA.

As of now, neither of these bearish signals have locked in yet. So we need to be careful about getting in too soon with any short position.

Because if the RSI bounces off support (green line)… that could set GOLD up for another move higher.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict

P.S. If you attended my Currencies in Crisis summit last night, thank you. I hope you learned something about the fascinating world of forex trading – and why it’s suddenly seeing new activity.

After trading this market for over 35 years, I know this space very well. That’s why I’ve been so excited to see retail traders dip their toes into currencies.

But there are a few unique features and pitfalls to this style of trading that you’ll want to be aware of. So I plan to help guide you along the way – and show you how to potentially make thousands a month using forex.

If you weren’t able to tune in, simply go right here to catch the replay.

Reader Mailbag

In today’s mailbag, a member of The S&P Trader thanks Larry for his trading expertise…

Hello, I’m a recent lifetime subscriber and just want to thank Larry for this amazing service. Although I’m still waiting for the higher-level options approval on my account, I want to say that I admire his trading skills.

I don’t know how he does it, but he has an uncanny knack for identifying the lower and upper daily limits with amazing accuracy. I’m learning a great deal just by watching the trades he recommends versus the chart and price action.

Thanks again, I’m so happy to have joined this service.

– Niveen M.

And we hear from a One Ticker Trader member as well…

Good evening guys, thank you for putting up the weekly review of the trades we could have taken last week. This is very helpful to review that we did it correctly, as well as to see if we made money.

I am so excited to work with you on building my retirement account. It really needs your help.

– James M.

Thank you for your thoughtful comments. We look forward to reading them every day at [email protected].