Gold Investing: The Bull Run Isn't Over...

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Since that harrowing plunge, gold’s been bouncing between $1,500 and $1,550…

I’m sure the past few weeks have been frustrating for you gold bulls.  But the recent pullback from all time highs is a much-needed rest.  The gold market needed time to consolidate the amazing gains from late January through April.

Of course, the gold haters say the slow down is actually a market top.  These ill-fated bears say it’s all over for the gold market. According to them, it’s nothing but pain for gold investors from here on out.

Gimme a break…

I wish I had a nickel for every time CNBC marched out a gold bear to call a top in gold.  I remember them saying gold was topping out at $900… $1,000… $1,100… $1,200… $1,300… you get the picture.

Clearly, the gold bears have been on the wrong side of this epic run.  And the funny thing is, with gold trading over $1,500… they’re once again calling a top.

It’s hilarious…

Each time a gold bear calls a top… they get steamrolled by rising prices.  Why can’t they admit defeat, buy some gold, and make money?  I guess their egos are more important than making a profit.

Since the gold bears have such a propensity for losing money, I’m going to give them a little help.  The gold market is forming an interesting technical pattern… one that suggests a big market move is coming.

Take a look…


As you can see, the SPDR Gold Trust ETF (GLD) is forming a “triangle” pattern.  GLD is a highly liquid and convenient way to invest in gold.

Triangle patterns often suggest a big price move is right around the corner.  See how the rising green trend line is about to meet the down trending red line?  As these important support and resistance lines move closer together, the gold market consolidates.

And the tighter the consolidation, the higher the likelihood of a big market move…

What’s more, you’ll notice the low ADX reading of 14 (blue circle).  A reading below 15 signifies the market is trendless.  And that’s exactly when you should be sitting up in your chair, ready to take action.

Fundamentals support another leg higher for gold...

Bank of America/ Merrill Lynch analysts are calling for $1,650 gold by autumn.  Strong Asian demand is pushing the gold market into an ever-tighter situation.

Is a $100 run higher for gold prices possible in such a short time?

I sure think it is…

Maybe you remember the last time I showed you this exact same technical setup…

Silver was trading at $18 in August 2010 when I pointed out a triangle pattern in that market.  Lo and behold, silver surged to near 30-year highs in the following months.

And now, even though silver is down 25% from the late April highs, it’s still up 100% from that promising buying opportunity.

Now don’t get me wrong, I’m not trying to pat myself on the back. I just want to make sure you’re aware of the profit potential of triangle patterns.

It may be tempting to “load the boat” on gold- don’t do that.

The market has a funny way of wiping out greedy investors.  Even the best technical setups can do the exact opposite of what you think.

In fact, gold is moving down quickly today…

We may see more gold market weakness before prices eventually move higher.  If you buy gold here, make sure you have a stop loss.  You’ll have to control losses if the market moves lower.  I would use $145.50 as my line in the sand.

But in the long run, gold’s moving higher… not lower.

The recent two-month consolidation is merely a breather in a long-term bull market.  And even if gold falls a bit from here, use the weakness as a buying opportunity.  Given the strong global demand for the shiny yellow metal, the bull run in gold isn’t over.

The Financial Select Sector SPDR (XLF) was one of the most actively traded ETFs yesterday. XLF is composed of the large banks like JP Morgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C). Uncertainty in the banking sector has investors in a tizzy.

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