Gold sold off hard on the news that a moderate won the first round of elections in France. Good! Now, if it will only sell off deeper, we could get down to the target I told you about two weeks ago in my article, "This Gold Party Ain’t Started Yet."
Here’s a chart of the SPDR Gold Trust (GLD), which tracks gold closely. I would really like to buy if gold pulls back to test the uptrend I’ve marked on the chart.
Let me explain what you’re seeing here.
Gold broke out a couple weeks ago. This turned former overhead resistance into what I’ve marked "1st support." This lines up with the 200-day moving average. And it should be strong support for gold.
If we’re very lucky, gold will break that support and go down to test its uptrend. Why would that be lucky? Because THAT would be a heck of a buying opportunity.
The market won’t really turn bullish on gold again until it pushes up through that green line I put on the chart. Good! That means we can buy the metal on the cheap while others dither and sit on their hands.
Really, it’s no surprise that gold pulled back. The market got too bullish, too soon. Sentiment in Bloomberg’s gold survey hit its highest level since last August.
With so much bullishness, the market was ripe for disappointment.
What happens now? This morning, we already saw buyers come in. So we may not get the pullback I am looking for.
But if, I say "IF" we get a pullback to that uptrend? Then you should buy gold and miners with both hands. Because that will likely mark the beginning of the next Mega Bull trend.
I’ve told you that such a massive rally could take us to my intermediate-term target of $1,540 and higher. Heck, it might not stop until gold hits $2,700!
I’ve told you about the fundamental forces lining up behind gold and miners. Those include declining gold reserves, a lack of spending on new exploration, a top in the U.S. dollar, declining gold grades, peak gold, rising inflation, the ballooning Asian middle class, the cyclical nature of gold. And more.
But I also said there was one ingredient missing: Investor buying.
Well, guess what? That’s changing. And in a big way, too.
I already told you that investors poured $487 million into SPDR Gold Shares on Wednesday.
Now, it turns out that hedge funds are starting to pile on, too. Bloomberg reports that hedge funds increased their wagers on a gold rally to the highest level since November.
Interestingly, gold prices went down last November, too. But gold found a bottom in December, and then it blasted off.
The move in gold from the December low to the recent high was 14.5%. That’s a huge move in futures. And it kicked a lot of mining stocks into overdrive.
Yes, hedge funds were early. But not that early. They could see the big surge coming.
So is this pullback in gold over? We can’t tell yet. But if we’re lucky, gold will zig-zag its way lower.
Again, I would love to see gold keep pulling back. Let it test that uptrend. That would be a great launching point. It could serve as a platform to catapult gold and miners higher.
The fundamentals lining up for precious metals are huge and fierce. In the months ahead, fortunes could be made on the right investments.
And that’s why this could be the most important gold pullback you will ever consider buying.
All the best,