"Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing. Therefore, just as water retains no constant shape, so in warfare there are no constant conditions."
-
Sun Tzu

Wednesday, June 6, 2012

Time to Buy Gold?

Technically oriented traders might recognize a "declining triangle" topping pattern on the price chart of Gold:


However, a different interpretation is that the metal has simply moved within a broad trading range since last year. What's also interesting is that May price action looks somehow similar to what we had seen in December 2011. Gold had a strong rally to almost $1,800 after that double dip:


Will history repeat itself or at least "rhyme", according to Mark Twain?

Currently it is still possible to setup a trade on the long side with compelling metrics. Assuming you buy Gold at $1,640 with a price target of 1,770 and stop at 1,600 would still result in favorable a 3:1 risk/reward ratio:


Disclosure: Covestor Model Portfolio has no position, but I intend to go long Gold soon.