Interestingly this post segues nicely from the previous one on Daniel Kahneman and the difficulties we have with thinking of the world rationally. Gold is the perfect exemplar of traders who cannot reason. The chart below is a daily chart of gold which shows that in the last month, gold has risen about 9.2%
Its not a bad move but it is certainly not worthy of the frenzied excitement that it has generated. I say it is not worthy of the excitement it is generating simply because it is neither impressive nor exciting. In the same period – silver long regarded as the poor cousin to gold has risen 10% and as you can see from the chart below the absolute star of commodities markets in the past months – in fact for the entire year, cocoa which has risen 62%.
Careers are being made by cocoa traders whilst gold traders are busy making social media posts.
My technical view of gold remains the same and it requires context. The chart below is a monthly gold chart showing that it is still locked in this extended box formation. Until it breaks this, it is still merely fodder for gold bugs, not traders.
Hi Chris,
Thanks for sharing your insights.
I do have a question regarding the chart data presented for gold in Some Gold Observations.
Other data sources show continuous gold price data recently made new ATH’s.
The Gold C CCB data presented shows that new ATH’s are still to be made.
Why is there this difference with the data? May all the hype with gold be due to data sources showing new ATH’s?
C CCB = Closed Continuous Back Adjusted which means the discontinuities from the rolling of futures contracts is removed. It is the preferred source of data for trend following and systems testing.