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The gold markets fell during the Monday session, but bounced off of the $1750 level in order to form a hammer for the session. During the last seven sessions in a row we have formed either a hammer or a shooting star. This suggests a lot of consolidation at this point in time.
The real question of course is what it ends up meaning. The fact is that the market has rallied very significantly in a very short amount of time. Because of this, gold markets need to take a rest or even have a significant pullback. 11% gains in one month is a bit much to ask of any asset class, and as such we could just simply be seen a lack of wanting interest as the market has moved so quickly.
We are still very bullish of gold though. Because of this, we are going to buy futures contracts on pullbacks, and stay in the GLD ETF going forward. This allows us to take advantage of bullish momentum without exposing ourselves to large amounts of leverage. On the other hand, if we do get a pullback and gold goes "on sale", we are more than willing to buy those leveraged positions via the futures market.
With the quantitative easing that the central banks are all set on, with the possible exception of the Bank of England, there is almost no scenario where we don't envision gold being higher going forward. Because of this, we will not sell gold under any circumstance as long as the Federal Reserve, European Central Bank, and the Bank of Japan keep flooding the market with liquidity. In fact, we think the uncertainty in the Middle East could also make the price of gold rises well in the end. It's pretty rare when you get so many fundamental reasons at the same time pushing a market in one particular direction, and you really should be paying attention to this. Simply put, gold is a buy and a buy only for quite some time. Every time this market falls, we will be buying in one form or another., 2012, Technical Analysis is