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Trust Your Instincts

On December 2nd, I wrote a blog post entitled “Let’s Talk About Gold”.  I had written that their was just to0 much talk about Gold and their were way to0 many analysts putting unrealistic price targets on the price of gold. For example, Peter Schiff, president of Euro Pacific capital claimed by the end of President Obama’s term we may see it at $5000 an ounce! I had made it clear that, Yes, Gold may indeed trade higher,based on that recent market activity tends to overshoot both upside and downside moves, however, at the time it just felt that the pullback was inevitable and I cautioned getting long at those current levels.

That being said, the current correction in Gold and gold related securities began on December 3rd, very lkely catching alot of people off guard as they believed the rally would never end. GLD the Gold ETF made a new high of $119.54 on December 3rd and made lows of $107.14 last week, trading below the 50 EMA.

After the explosive move that Gold made, it should not surprise anyone that a pullback occured and a significant one at that. Only those individuals who did not have a trading plan would have been surprised. Those individuals who let themselves get caught in the hype of it all. This pullback has provided an opportunity to get involved at current levels with minimal downside risk. That is why we always stress to our traders, “Do not chase the move”, but rather “wait for it to come to you”, meaning buy it at a level that you feel comfortable with the downside risk.  This business has always come down to Risk vs. Reward.

We feel that getting long GLD at this $108.36 level presents a great opportunity. We have positioned ourselves to take advantage of the next move, which we believe will be back up. Short term, we may get a little more selling pressure as the economy does show signs of improvement, but after the new year, we believe that we have the best opportunity to make money being Long Gold.

So, the point here is this, Trust your instincts, When it just does not feel right, meaning the stock just seems like it has gone to far, heed on the side of caution and don’t take the trade, wait for the trade to come to you.

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