Short Term Traders Buy Gold On Dips While Long Term Investors Sell At Peaks

Just a week or so ago gold prices soared to $1280 an ounce but then reversed and returned to its average trading range this month holding around $1250. The dovish attitude of the Federal Reserve statement and Janet Yellen gave gold a boost. In less than a week many Federal Reserve speakers changed their attitude and became a lot more hawkish. Gold fell to trade near the $1210 price.  Moving into the Easter holidays the precious metal is selling for $1216 and could fall as low as $1200 this week if the US jobs report prints better than expected.

Stephanie Landsman of JPMorgan Chase’s says buy gold, not stocks. One of Wall Street’s most respected forecasters says the stock market’s rally is in trouble, and that investors are likely to do better by betting on gold. JPM’s Marko Kalonovik a widely followed and respected in the hedge fund industry and on Wall Street. He says the Fed’s dovish policy will put pressure on the dollar and push gold higher.

A pillar of support for gold is the global phenomenon of negative interest rates. Gold glows in a negative rate world. Gold is one of the few beneficiaries of negative interest rates and deteriorating risk sentiment. With an increasing number of central banks implementing a negative rates policy, and this reflecting continued economic weakness, we expect gold to be supported by this backdrop. Negative rates are a sign of distress, which may increase flight-to-quality demand for gold. They lower the opportunity cost of owning gold and therefore encourage purchases. If the negative rates are deep enough or persist long enough they may encourage the hoarding of cash and gold. Gold may be a better alternative to cash in some cases as gold does not carry the risk of central bank intervention by a monetary authority wishing to limit its currency’s appreciation.

Since the start of the year the price of gold had rallied 18% With the financial markets plagued with uncertainty stemming from a potential slowdown in Chinese economic growth, central banks intervening in the currency market, weak global growth, geo-political turmoil in the middle east and uncertainty over the timing of the next U.S. interest rate hike, gold has once again become a popular asset class due to its safe haven status. With the recent declines it is a smart time to buy up gold.

If you’re looking to invest for the next 10 years, then there’s no question that the long-term trend for gold is down, while the long-term trend for shares is up. We think that gold will fall in line with other commodities such as oil and iron ore.

Decide which is right for you, long term or short term investing. Short term investors could buy on dips while longer term investors should sell on peaks. Gold traders should prepare themselves for declines above and beyond this week’s almost $50 loss.

That’s because gold market sentiment conditions are unfavorable. Contrarians believe a sustainable rally won’t begin until there is a lot more bearishness than there is today.