It's a good time to buy Gold

If you follow markets and trade or invest, this probably won't be the first time in the last few years you've heard someone tell you it's a good time to buy Gold. What you probably would have noticed about a lot of the previous calls, is that they were wrong :). I'm going to try and explain my reaosning in a way that is easily accessible for experienced traders and beginners alike.

I'll start by saying there's no guarantee Gold will go up, and I'll quite happily admit I can't predict the future.

So why am I saying it's a good time to buy Gold?

Simply put, trading and investing is about risk and potential reward, not predicting the future. So I think it's a good time to buy gold because I believe you can do so at this time and take limited risk, with the potential of a greater reward.

Let's start by looking at the big picture. In the chart below, each candle represents a month. 1275.82 is the close price on Friday 6th October, 2017.

So you can see since 2009 (and before) that Gold has been moving upwards . The uncertainty after the financial crisis of 2007/8 led to some very strong years for the Gold price. But the situation stabilised, markets recovered and the period 2012 - 2016 has seen the price of Gold decline, as marked by the two red trend lines.

Since the start of 2016, Gold has started to pick up, and for the adventurous trader and investor, it has provided good returns, with the price rising as marked by the green line.

That green line is important, because it marks a point of failure for the upward trend in Gold. It's quite possible that the world economy will continue to recover, that stock markets will keep rallying, and Gold will resume it's decline and break down through the green line.

But as a trader there is value here, because we are close to the failure point. We can take a small risk, and know when we are wrong quickly, without losing too much. Let's look closer:

You can see we have an obvious zone (purple box) that is knocking the price back, but it also makes a reasonable price target. An aggressive trader might buy on Monday, with a stop loss order just below Friday's low at 1261, targetting that purple box above 1300. That way you're risking around 15 points to make 30.

But really, that's a very near term view. I think Gold keeps coming back to the purple box because it's going to break through, and then possibly go on to make new all time highs. That's the move I'm looking to capture.

So I'll be accumulating Gold from Monday, with a wider stop loss of 1230, and an initial target of 1380. So that's risking around 50 points to gain 100. Crucially though, I'll be looking to take some profit at 1380/1400 (and therefore reduce my risk), but also to let some of the position run on if the price keeps going. So I'll be bringing up my stop loss if the price keeps moving up, locking in the profit, and trying to capture as much of Gold's move as possible, should it happen.

Should we break the green line, I'll be exiting all positions without question. It's OK to be wrong in trading, but it's not OK to lose more money than you have to. Don't lose money because you don't want to admit you got it wrong.

I hope this is useful or at least interesting for some!

I'll also aim to post some more short term trades on US equity indices like S&P 500 and Nasdaq, if there is interest here for trading setups. Any questions please do ask, I'll do my best to answer.

Best of luck!

Bert