As the legendary trader Jesse Livermore once said, “There is nothing new in wall street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.”
There couldn’t be a more accurate statement as the one above and I believe a set up that I have seen before is taking place in the gold market right now.
I had to dig out my old notes from working at Lind-Waldock and analyze some of the rare developments around 2008-2009 that are quite similar to today. Many will argue that back then it was a financial crisis and what we are facing today is a virus, however I have noticed very similar technical coincidences which could help lead us to try and predict the future price of gold.
The Chart Below is the front month gold futures from mid 2008 on up to the peak in August 2011. Now the three arrows in the bottom right are what I want you to focus on. The first blue UP arrow was the day that Lehman Brothers filed for bankruptcy. On that date, September gold hit a low of $739 and the flight to safety began. At this point, I had thought that the coast was clear and it was smooth sailing to higher gold prices, but what actually happened less than one month later (the Blue DOWN arrow) was that a key reversal occurred with a peak of $936 on October 10th and we closed that day on the low at $859.
This was because margin calls fully hit the equity markets wide spread and traders sold anything of value in their portfolios much like we saw on March 9th 2020 where gold made a recent peak at $1707 and sold off for eight straight days taking it down to $1453 from margin liquidations.
Once that “fire sale” liquidation was over, stabilization began to occur, (the Green UP arrow) when the Federal Reserve stepped in and provided unprecedented levels of liquidity and monetary stimulus as we see today. From that point forward the stage was set for a multi year rally which is what we could see from here
From a trading perspective we have been using multiple strategies to try and take advantage of the expected long term price appreciation in the precious metals markets. We also believe that silver will benefit from this and the Gold/Silver ratio will begin the fall because of an outpacing increase in silver prices. If you are interested in learning more about it please feel free to send us an email or give us a call.
PHILLIP STREIBLE Chief Market Strategist www.bluelinefutures.com Main: 888-441-8555 Direct: 312-858-7303 Fax: 888-370-2221 Blue Line Futures LLC 141 W. Jackson #2845 Chicago IL 60604
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