At LOTM, we are not ready to say that GOLD is not in a topping stage; however, we are not going to stand in front of the current rally. We will/have stopped out our short position in Gold by selling the reverse index in GOLD – DZZ. We will review this trade if or when the decline in GOLD resumes.

LOTM Negative on the Price of Gold

Recent events in Egypt, both past and the resolution thereof, have failed to draw money into gold to the point of changing the technical picture for gold.

LOTM continues to believe that gold is in a short term to intermediate term topping pattern. There are two ways to play this opinion. The first would be to sell short GLD, the ETF so popular for owning gold. The second would be to purchase the DZZ – the double short gold ETF. LOTM would suggest buying the DZZ as the preferred way to participate in a decline in the price of Gold. Keep a stop loss at 10% below your entry point. Looking at the chart below, DZZ appears to be in a basing pattern. The price did not break to new lows (gold breaking to higher highs) on the recent unrest in Egypt. If a crisis of this nature failed to stimulate the price of gold, what event will?

The LOTM view is based on technical opinion only. We have no anti-gold view nor do we have a pro-gold view. The charts say gold is having trouble going up and that usually means, in the stock and commodity markets, that the path of least resistance is down. We will reverse our view when gold changes its price pattern in a positive way.