Gold got killed yesterday on positive news from the East.
Chinese exports increased 9.9% over last year. This beat Bloomberg’s expectation of a 5.5% gain.
And yet in a world of government-manipulated markets, the market didn’t like it…
It means China won’t offer a stimulus, bailout, or QE program — and if they do, it won’t be as much money (or so the thinking goes).
At an International Monetary Fund meeting yesterday, China’s central bank official Yi Gang said bubble risks remain in housing markets in major cities and stimulus will be restricted to an “appropriate” level.
Less inflation means less money printing, and this gives the gold traders an excuse to take some profits.
Here is the one-year chart:
We’ve been making a lot of money in our gold portfolio over the last three months.
It’s only natural gold prices pull back a bit. Trees don’t grow to the sky…
If I were a gambling man — and I am — I’d bet the price of the gold ETF GLD will bounce off the 165 line when it meets the 100-day moving average.
A dip is developing. Get ready to buy it.
The Miners
The gold miners are a bit more interesting…
As you can see by the Direxion Daily Gold Miners Bull 3x Shares ETF (NYSE: NUGT), the gold miners have pulled back to support.
In my trading service Crisis and Opportunity, we caught the vast majority of this uptrend you see in the NUGT chart. My readers made 66% in just a few months. They were also able to sell at the top, based on that doji pattern.
You see, after a big bullish move higher (note the increasing volume from August to mid-September), the buyers and sellers have an epic battle at the top: The greater fools and Johnnies-come-lately buyers gap the shares up. The smart money says this is enough and takes profits.
On candlestick charts, this blood splatter results in a doji symbol shaped like a fat red “+”. The red means the share price ended the day lower than it opened. The fatness of the horizontal bar represents the difference between open and close; the vertical line is the range the stock traded that day.
So a doji cross is a visual representation of buyers and sellers fighting it out. The sellers won.
The next day the stock gapped down. The MACD (bottom indicator) crossed over (bearish) and the volume started to decline.
Doji is a turnaround signal. If you learn one technical signal, learn the doji. It will treat you well.
NUGT is looking like it will bounce here, but I’m not buying it today — and I’ll tell you why…
Gold Strike
In South Africa, gold miners have gone on strike and are refusing to go back to work.
Companies with a heavy presence in South Africa like AngloGold Ashanti (NYSE: AU), Gold Fields (ZA: GFI), and Harmony (NYSE: HMY) are down about 50% from their highs earlier this year.
More Like Dis-harmony
This stock is going to $6.
The thing about the South African strikes is that even if the workers go back to the mines, they will do so at a higher wage that will kick down the margins of the gold miners…
And if the company manages to make more money on higher gold prices, the workers will strike again and demand larger profits.
Don’t get me wrong; there will be a time to buy South African gold miners and make a ton of money on the bounce back. But we are not there yet.
The HMY chart above is a falling knife. If you catch it, you’ll lose a few fingers.
You want to put your money in non-South African gold miners. These are the companies that will make more money because their competitors’ production has stopped…
I’ve found three gold production companies with mines in North America. Learn more about them here.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
