So Is Now The Time To Sell All Your Gold?

“to answer the question I presented in the title to my article, I will simply say…In fact, now is the time you…” Here’s why…

by Avi Gilburt of Elliott Wave Trader

For those that follow me regularly, you will know that I have been tracking a set-up for the SPDR Gold Trust ETF (NYSEARCA:GLD), which I analyze as a proxy for the gold market. I also believe that gold can outperform the general equity market once we confirm a long-term break out has begun, and I still think we can see it in occur in 2018. This week, I will provide an update to GLD.

While I have gone on record as to why I do not think GLD is a wise long-term investment hold, I still use it to track the market movements. For those that have not seen my webinar about why I don’t think the GLD is a wise long-term investment, feel free to review this link for my webinar on the matter.

Now, to answer the question I presented in the title to my article, I will simply say HECK NO! In fact, now is the time you want to be setting up your long positions, as we have a reasonably low-risk set up presented before us.

Over a week ago, I wrote my most recent public article on GLD, wherein I presented my general perspective, which was outlined in much more detail to our members, with specific charts:

“As long as the GLD remains below 126, I still see the potential for it to test the 122/123 region.” 

That support region was my ideal target for us to strike for the 5th wave of the c-wave of a 2nd wave that I believed we needed before the next rally began. But, when the GLD dropped down to around the 400% extension (around 122) in the 3rd wave of its 5th wave last week, it suggested that we will likely break below that 122 support level before this pullback completed. And, that is exactly what occurred overnight on Monday.

Even when the GLD was hovering around the 125 region for several weeks, the apathy and indifference regarding gold within the overall market was quite palpable. Now that we have broken down below the 200DMA in gold, and have struck the lowest levels seen in the last six months, I am actually seeing posts of sincere hatred for the yellow metal. And, as always, such sentiment leads many analysts to again proclaim we are on our way below $1,000 in gold, which they back with many reasons and trend line breaks that support their perspective.

As an aside, those following trend lines in this market have been among the most whipsawed in the complex. This complex loves to break a trend line just before it reverses strongly in the opposite direction so as to shake out investors from the long side and leave the train station with the fewest on board as possible. And, we have seen it more times than I can count. Remember, trend lines and trend channels are the crudest form of linear analysis, which is not always helpful in a market that is clearly non-linear and overly emotional.

Again, I want to reiterate that am clearly not in the bearish camp. While I expected this pullback in the metal, as long as we remain over the 119 level I still believe this market is setting up in a strongly bullish pattern. You see, since the end of January, the GLD has been presenting us with an overlapping wave structure which is typical of a 2nd wave corrective pullback. Currently, we should be coming towards the end of the 5th wave in the c-wave of the a-b-c structure seen in a standard 2nd wave. And, it is quite typical to see sentiment turn deeply negative as that structure completes its downside corrective pattern.

Moreover, as long as the 119 region is held as support, this pattern is pointing us towards the 145 region within a setup that suggests a strong move will likely take hold up towards that region. So, as I noted before, the market is presenting us with a low-risk bullish set up for those interested in the long side in the metals complex.

During 2011-2015, I was taken to task by many who would read my articles as being too bearish. Yet, when we look back, it seems I was appropriately bearish. The members of my service then know just how uber-bullish I turned on this complex back towards the last part of 2015. In fact, we rolled out our EWT Miners Portfolio in September of 2015 because of the impending major bottom we correctly expected in the complex.

Then, on December 30th, I issued a public advisory regarding my expectations in the complex:

As we move into 2016, I believe there is a greater than 80% probability that we finally see a long term bottom formed in the metals and miners and the long term bull market resumes. Those that followed our advice in 2011, and moved out of this market for the correction we expected, are now moving back into this market as we approach the long term bottom. In 2011, before gold even topped, we set our ideal target for this correction in the $700-$1,000 region in gold. We are now reaching our ideal target region, and the pattern we have developed over the last 4 years is just about complete. . . For those interested in my advice, I would highly suggest you start moving back into this market with your long term money . . .

And, interestingly, I am now being taken to task by a number of commenters to my public articles for supposedly being too bullish the complex. Isn’t it funny how sentiment works?

You see, I am neither perma-bull nor perma-bear in my market perspective. Rather, I strive to refrain from bias so that I may follow the objective clues that are presented before me by the market price action. 

So, rather than being indifferent, apathetic or outright bearish due to the seemingly negative recent price action and overly bearish market sentiment being exhibited in the metals complex, I am here to tell those willing to listen that the market is now providing you with a low risk opportunity to climb aboard before a major break out may be seen in the coming months. You would simply be risking $3-4 dollars for the potential of over $20 in gains. Those are the types of risk/reward set ups you should be looking for in any market you follow.

While I will never be able to tell you what a market will do with certainty, I can surely outline a low-risk set up. And, the GLD is presenting one to those willing to rise above the herd’s overly negative sentiment currently being displayed.

See charts illustrating the wave counts on the GLD.

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.