Convergence

March 13, 2014

 

Gold….the  ETF….”GLD”  ended February above it’s 200 day moving average, so I invested 7% of my liquid net worth in  GLD .  This investment is ahead 2.6% in eight trading sessions.

Now, I’m awaiting a confirmation that my decision was correct.   My thought is that the  confirmation will take place when GLD’s 50 day moving average ( trend line) crosses above it’s 200 day moving average ( trend line ).  We are almost there.  GLD’s 200 day moving average is $125.74.  It’s 50 day moving average, $ 123.45, and  climbing toward an intercept.  Should that happen, I’ll invest another 3%  of my liquid net worth, ( my final allocation to this asset ).

Why is GLD  awakening ?  You would think I’d know a little more about gold than I do, given that for 3 years my desk at Citibank, Johannesburg sat and vibrated about 5,000 feet above the floor of a working gold mine…. just across Fox Street from the main entrance to the Johannesburg stock exchange,  where trading  gold shares is very serious business.

But, I would never buy gold based on my analysis of what should happen to it’s price..  No, instead I consider myself  just an old Indian scout following a trail ( trend ).  My version of a broken twig or bent branch is found on a chart in doing trend analysis.  I don’t care whether the Chinese or George Soros is buying gold or why.  All I care about is that its being bought often enough and in sufficient quantity  to move the trend needle into the ” Buy ” zone.

I am a firm believer in using moving averages,  strength relative to the trend of  a relevant benchmark, and volume to  determine the viability of  a trend.

Where does the trail end ?  Gold can be volatile, so  I hope I don’t find the exact top because there could be a sink hole waiting just before trails end !   I’ll probably  exit with not  quite as much profit as possible.   In fact, as soon as I’m ” all in “,  my next move will be to locate the exits and formulate an evacuation plan..

Richard Maurice Gore

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