AU rising!

I want to talk about Gold. Gold has been bottoming out in terms of the AU dollar for the last few months. It recently broke out of its trading range and looks set for the next leg up. Here we have a graph of GOLD on the ASX which represents 1/10th of an ounce, over the past 6 years. Overlaying the graph in red is the 50 week moving average, green representing the 100 week moving average and pink representing the 200 week moving average.

Key ideas

• You can see that the price of gold in the 100 week MA has only been penetrated once and subsequently recovered. The strong 200 week MA has never been penetrated.

• Each time the price of gold falls to the green line this is a signal to buy.

• Every time the MACD bottoms this is a signal to buy, the MACD bottoming corresponds with the fall of the price to the 200 week MA

• Most importantly, it clearly shows gold in an uptrend

In my opinion this represents a very low risk opportunity to buy gold.

Over the past several years if you had purchased in November and sold in February you would have at least made a pretty good return with 3 years out of 5 with double digit returns. Note that these do not represent trough-to-peak returns, so returns may vary slightly but the idea remains the same, buy in November sell in February.

Nov 5th 2004 (565) - Feb 11th 2005 (537) (5% loss)
Nov 4th 2005 (627) - Feb 11th 2006 (758) (20% return)
Nov 10th 2006 (821) - Feb 16th 2007 (853) (3% return)
Nov 9th 2007 (899) - Feb 15th 2008 (1000) (11% return)
Nov 7th 2008 (1070) - Feb 13th 2009 (1400) (30% return)