Gold: Load Up On Any Weakness

Print This Post | Topic: Gold — November 11th, 2009

Gold has been on a terrific run of late, breaking above $1100/ounce in what many gold bugs would say is a move that is well overdue.

For those of us who are long gold, the last few weeks have done wonders for our portfolios and gold positions. However there are those who may still be on the sidelines, who have been eagerly awaiting an optimum buying opportunity, or those who have only recently been made aware of the gold story and now wonder if perhaps it is too late to jump aboard this gold bull market.

The simply answer is – No! It is most definitely not too late to get long on gold and make some serious profits. The fact that the DOW is putting on a couple of hundred points is all over the front page of mainstream financial websites, and gold being at an all time high barely makes the top five stories of the day, tells us that the herd has yet to even recognise this gold bull market, which means there is still plenty of upside still to come.

As to when to purchase your gold positions, we would say that buying on any weakness is a good idea. Currently gold is overbought with the Relative Strength Index over 70, but buying when the RSI is 50 or close to 50 appears to be a good strategy for those looking to build long positions on gold.

Whilst ideally we like to buy with the RSI below 30, since gold is in a major rally right now buying at those levels is somewhat unrealistic for the short term, since gold’s RSI rarely drifts below 50 during these rallies.

So to those still looking to buy a position or to add to their holdings, we think the best idea is the to be patient, watch the RSI like a hawk and pick up positions when the RSI drifts near 50. But the most important thing is to make sure you have a long position in gold, as the most impressive gains are yet to come.