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Wednesday, July 18th, 2018 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

Is Gold a Bargain Today?

by Brad Zigler

Real-time Monetary Inflation (last 12 months): 1.5%

Monday, we noted that money managers had pulled in their horns from the gold futures market amid a small speculator buying spree (“Little Guys Buying Gold“).

Overnight, gold prices plunged in reaction to additional explosions at Japanese reactor sites. The sell-off spilled over into the U.S. morning trade. At one point, spot metal was off more than $30/oz. (2.2 percent).

The wobbliness of money managers’ convictions wasn’t the only signal of the gold market’s weakness. There was, too, a spike in the cost of gold puts—the first real spike in weeks—indicating a pickup in hedging activity.

Gold Put Cost Vs. COMEX Spot

Gold Put Cost Vs. COMEX Spot

Then there was a bearish crossover in the MACD indicator.

MACD, or the moving average convergence divergence, one of the most widely used technical indicators, essentially works like noise-cancelling headphones. Watching the MACD oscillations helps a trader better identify trend changes. MACD plots two lines—a slow-moving MACD line and a faster signal line. Traders use the MACD indicator to sell a commodity when the signal line crosses over a downward-coursing MACD line from above. The current MACD crossover recalls that of Oct. 19 last year, which presaged a highly volatile three-month consolidation phase.

It’s no wonder the momentum-loving fund managers lightened their long commitments. Consolidation isn’t a money maker. A trend is—in either direction, up or down.

So, is today a good day to scoop a gold bargain? Maybe. Maybe not.

Better, I think, to wait for the noise to die down and look for a bottoming in the MACD indicator, like the signal that set up February’s $85/oz.rally.

The original article is published at http://seekingalpha.com


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