Profit Taking Time

If you followed recent posts, you would know I’ve been bullish on gold as it has turned higher within a new Investor Cycle. Being long here has been great and that three day pause last week, to form a bull flag, has resulted in a quick $47 move. So many people were expecting gold to break-down from that flag, which is partly why the rush to cover and/or buy-in was so aggressive.

Some caution is needed now, I noticed a lot of the typical retail crowd on social media getting in at these levels and I noticed options premiums explode. Gold has become fairly overbought in the short-term and we’re also due a Daily Cycle Low soon enough. Looking at the chart below, this three day move measures the same distance than the corresponding move of the bull flag pole, suggesting that we may have hit an upper limit…for the time being.

For the Investor Cycle holders (longer-term), don’t let the threat of a looming Daily Cycle Low scare you, hold your positions tight, this looks like an Investor Cycle that has potential to surprise many in the coming weeks. The Dollar was down today too (as I expected), and gold acted as a hedge or risk-off asset this time, for a change. That divergence was positive news and it is great to see gold and the miners performing so well on such a negative day for stocks.