Gold: Knowing When to Hold, or Fold

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Hello traders

I hope you had a good week!

In last week’s post we looked at some of the key companies reporting earnings, including the likes of Alphabet (GOOG), Microsoft, Amazon and Apple (you may have noted my hesitation to include “Facebook” as the company has since announced its intention to be known as “Meta” going forward with the new ticker MVRS). Whilst there has been a lot to glean from comments and guidance on the earnings calls, the Fed also shared some insights on Wednesday which were interpreted by the market as being less hawkish than expected.

In summary, they indicated that they may not hike as soon as the traders expected, whilst continuing to taper as planned. Against the backdrop of persistent inflationary pressures being reported by so many companies, its clear that policy makers are allowing inflation to run hot (frankly, red hot!). Although this has seen investors rush to sell bonds in favour of owning stocks, we should not get too caught up in the narrative ourselves.

Instead, we should refer to our process in the form of this month’s newly updated Checklist report.

I mentioned that gold was one of the Checklists that has caught my eye this month. For all the concern around inflation, and the prospect of real interest rates remaining negative (if rates down ‘catch up’ as quickly as they might otherwise, with inflation being allowed to ‘run hot’), I’m surprised to see that the score is barely above 0. This tells me that gold isn’t perhaps the obvious trade here, and suggests that the momentum in real interest rates is likely to matter more than the level, as well as the support seen in the US dollar.

Here you can see an hourly chart of gold over the past month, which staged a rally coincident with our Checklist first turning positive. However, things have been a little choppier in November and the two occasions where the RSI was oversold produced the best entries to buy the low end of the range before selling the rallies.

Sometimes in trading knowing when or how not to approach the market can be as valuable as a directional bias. In this case our process has prevented us from getting carried away in the narrative and becoming overly bullish on gold. Whilst there are numerous other setups – including more obvious directional plays – which I shared in this week’s Trading Club video, I must for now reserve those for our paying members.

If you would like to learn more about our methods, and join me for more analysis in real-time, head to and check out MDT course and Trading Club pages where you can preview everything that we cover.

In the meantime, why not head over to our YouTube Channel for our latest FREE videos! As there’s no charge for this content, it would be great if you could support the channel by leaving a comment and subscribing.

Have a great weekend,


Disclaimer: For educational purposes only. Even though we do our best to provide reliable data, you should not trade based on this information.

© Copyright 2021 Lex van Dam Financial Education. Further distribution prohibited.

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