Gold Is No Longer the Forgotten Asset as $3,000 Nears: How to Trade the Rise

Don't look now, but gold is making all-time highs as we speak. SPDR Gold Shares GLD have been on a roll lately and there is no letup in the buying. Each dip has been an opportunity to buy shares. 

The chart below shows a strong pattern of higher highs, higher lows. That is our textbook definition of an uptrend. But why is gold moving so well recently?

One could point to the stickiness of inflation seen over the past six months. Sure, Fed Chair Powell continues to praise monetary policy for driving a stake through the heart of high inflation, but achieving the committee's stated target of 2% is becoming difficult. Further, new policies by the new Trump administration are likely to produce another round of price hikes around the world.  

The U.S. dollar has been strong for the past couple years, advancing due to the strength of the U..S economy, but if it falters then stimulus measures could be considered. That is speculation of course, but how many times has the Fed come to the rescue of the economy when it started to falter? Exactly right...every time!

So, if a fiat currency like the dollar weakens investors turn to hard currency like gold or silver. These precious metals have been in demand by sophisticated investors, central banks around the world and hedge funds, looking for protection against inflation and uncertainty. 

The chart shows amazing strength, dips being bought each time. MACD (moving average, convergence/divergence) is overbought, and money flow is elevated. However, that does not mean to short or sell the ETF, rather to wait for your opportunity. The price action is bullish and confirmed by the ADX in pane 3. When the ADX is above 25 the trend is uber strong.  

Is a large pullback coming? Sure it is, but trying to time that is a fool's game. Better to be like the big institutions and buy the dips.