Sell Gold

 

 I'm a gold bug, sort of! I have put my money into gold/silver more than 10 years ago, when gold was well below $800. And I still have serious money in gold/silver products, which I don't think I will sell anytime soon. So you probably will be surprised to hear what I'm saying now: sell gold!

Of course, I'm not talking about long-term investment with gold but just a short trading trend. It appears gold will be sold off pretty soon. The current level is just not sustainable. 

Here is a good analysis about it that my friend sent me today.

 But first, just share a quick survey about the current buying power of consumers. Sooner or later, this will be reflected in the economy and in the stock market, given 70% of the US economy is consumer driven!

 

 

                                               *********************

                                                         Sell Gold

The next few weeks could be tough on the gold stocks. The Bullish Percent Index for the gold sector (BPGDM) just triggered a sell signal.

Regular readers will recall the BPGDM generated a buy signal two months ago. The Gold Bugs Index (HUI) was trading at 211 back then. It closed at 266 on Tuesday. That’s a 26% gain in two months – which is on par with previous BPGDM buy signals over the past two years.

Now though, it’s time to sell. So, if you didn’t heed my advice two weeks ago when I argued the gold sector was due for a shake-out, you now have a second chance to trim profits in the gold sector.

The BPGDM measures the percentage of gold stocks that are trading in a bullish technical formation. It’s basically a gauge of overbought and oversold conditions.

--

Since it’s measured as a percentage, a bullish percent index can only reach as high as 100% or fall as low as zero.

Typically, a sector is extremely overbought when its bullish percent index rallies above 80%. It’s extremely oversold when it drops below 30%.

Trading signals are generated when the index reaches extreme levels and then reverses.

Take a look at this long-term chart of BPGDM…

The red arrows on the chart point to the previous sell signals over the past two years. Each sell signal occurred at about the same time of the year, and lined up with the seasonally weak period for the gold sector.

Here’s how the Gold Bugs Index (HUI) performed after those two previous signals…

HUI fell 25% in one month following the sell signal in April 2022. It lost nearly 45% of its value by the time the sector bottomed six months later. The gold sector dropped 14% last May following the BPGDM sell signal. HUI would lose 29% by the time it bottomed last October.

This past Tuesday, the BPGDM triggered another sell signal. If this one plays out like the previous two did, then gold stocks could be quite a bit lower in the weeks/months ahead.

Of course, there’s no guarantee that will happen. Financial markets are unpredictable. It’s possible the gold sector could ignore the recent sell signal and just keep powering higher.

But, the odds are against it.

BPGDM sell signals have a pretty good track record. So, if you bought on the buy signal two months ago, then it’s a good idea to take profits on the new sell signal.

J Clark