Gold Prices Nearing Major Buy Signal

Once or twice a year, we get a significant buying opportunity in gold. The next buy signal is rapidly approaching, and prices could bottom any day. 

In this article, I will lay the groundwork for the next low in gold and touch on the emotional pitfalls we face as investors. Why is it that most traders sell when they should be buying and buy when they should be selling?

The Intermediate Cycle 

Gold goes through the same process (rally-top-decline) approximately every 6-months. With each phase, there are various emotional benchmarks that drive sentiment. Becoming aware of them could make you a better investor.

Emotional Barriers

  • Near the Cycle Top: Retail traders are loaded with out of the money (OTM) call options and are perilously overleveraged. They only read articles that confirm their outlook (confirmation bias). They devise reasons why prices can only go higher (fear of missing out). 
  • Bearish Breakdown: A bearish breakdown or recognition day arrives when critical support is violated, and retail traders rush to the exits to preserve profits or limit a mounting loss. Often extreme selling morphs into a panic.
  • Near the Cycle Bottom: Everyone that was once bullish is now finding reasons why prices will continue to drop. They read bearish-article after bearish-article expecting lower prices. They finally snap and sell at a loss or open new bearish positions. Prices bottom a few days later, and they are caught on the wrong side…once again.

Why does this blatantly obvious pattern repeat? The answer is simple – Humans Nature. Humans are too emotional not to be affected. I got tired of making the same, emotionally driven mistakes, and created the Gold Cycle Indicator. It simplifies the investing process, and when it turns green – I look to buy.

Gold Price Target: I believe gold is dropping into the next intermediate low. Prices should bottom in late September or early October. Our Gold Cycle Indicator is expected to reach the green zone as the cycle bottoms.  

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Disclosure: None.

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