When the price of gold rose to over $ 2,000 an ounce in early August 2020, my price band indicator gave a clear warning sign, announcing the start of a major correction. I named the signal line of the price range indicator as the ideal price target for this correction, which is currently at $ 1,840.
My price target of the gold correction has now been achieved
On Friday, November 23rd, 2020 the price of gold reached this level. My most important instrument for tactical analysis of the precious metal markets has thus given a new buy signal.
Don’t expect a precision landing on the stock exchange
No stock market indicator is perfect, not even our price range indicator, although it works reliably. So don’t expect a precision landing. Sometimes the signal line just mentioned is just missed, sometimes undercut. That is why, from a practical point of view, we always have to leave some leeway up and down.
At the moment, this means for you that, despite the strong buy signal that has just occurred, the gold price can decline a little further in the short term – but of course not necessarily – before the correction is over. Based on my experience with this indicator, I generally allow up to 5% to fall below the signal line, which I do not expect in the present case for many reasons, in particular for the following reasons.
Dubious monetary and debt policies are the main drivers of the gold price
One of these reasons is the completely dubious monetary and national debt policy. In close collaboration, irresponsible politicians and their central bankers have embarked on a spiral of intervention from which there is no painless escape for the financial markets and the global economy. In this situation, from a politician’s point of view, currency devaluation is the easiest way, as ever larger mountains of debt are piled up and financed with the money printing machine. Because this path is perceived as devastating by the masses very late, usually only when it is long too late.
Good for you, dear gold investor! Because this dubious policy is the real driving force behind the long-term gold bull market in which we find ourselves and which still has a lot of room for improvement. The correction of the past three months has not changed that. But on the contrary! It paved the way for the next big upswing, which my analysis suggests will begin very soon.
At the lower turning points, there is great skepticism
The following chart shows you the course of the gold price in dollars per ounce in the upper part and below the Optix sentiment indicator. As you can see from the black lines drawn, the current situation is similar to what happened a year ago. At that time, too, a protracted correction began in August that did not end until the end of November.
Gold price in $ per ounce (above), sentiment indicator, 2019 to 2020
In the final phase of a correction, the mood of market participants is very depressed.
As you can see from the sentiment indicator in the lower part of the chart, the mood and confidence of the market participants cooled steadily in the course of the correction and reached a new low in its final phase – just as it is now again.
Take advantage of the low prices to buy selected mining stocks
In combination with the buy signal of my price range indicator, the chart technique and the sentiment indicators speak for the imminent start of the next big upward wave in the precious metals sector. As usual, most investors are too insecure after three months of price correction to have the courage to get started.
It is always like this on the stock exchange: It feels completely different whether you read about a probable price decline in the area of the signal line at the beginning of a correction, or whether you actually experience this correction. Therefore, a disciplined approach based on a clearly formulated methodology is essential in order to operate successfully on the stock exchange over the long term. You now know what to do. Roland Leuschel and I will be happy to support you with our crisis-proof investing stock market letter. You can read about which precious metal stocks we recommend to buy in Crisis-Safe Investing – 30 days free now.
I wish you a nice weekend,
Claus Vogt, Editor-in-Chief of Crisis-Safe Investing
P.S .: In addition to the precious metals sector, two other important sectors have recently given buy signals that you should not ignore. Sensible risk diversification is a mainstay of the 5-point strategy of crisis-proof investing.
P.P.S .: If you want to get through this crisis week after week, please ask for the free Claus Vogt market commentary today hereeasily with your email at.
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