SCN Traders' Corner: How Low Can it Go?
Summer is usually a time of sideways consolidation, and sometimes correction for the precious metals markets. It looks as though this summer is no exception. Gold has been correcting since it hit $990 an ounce in mid July. When will it be safe to test the waters again in the precious metals arena you may ask? Looking at the charts below of GLD we see that the first support comes in right around the $90 level which equates roughly to $900 gold) with further support at between $87 and $88. Drilling down further on a weekly chart we see strong support at the $85 level which would translate to $850 Gold. In my opinion the best way to play this would be to buy a small position at $900 and if gold drops to $880 buy more and buy your last tranche at $850.The gold equities normally bottom before the metal so keep your eyes on the darlings of the sector. I track stocks like Goldcorp (GG) and Newmont (NEM) as well as the GDX ETF to look for potential bottoms. My best guess is that we will track sideways to down until at least the middle of August with a potential spike low to wash out all of the weak hands that bought in at $990. After that I am looking for $1150-$1200 gold by year end! Have a great week!
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