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Gold Prices Plunge! The Trend Is Not Your Friend: Macke

Breakout

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It's been a while since I've trotted out the Purple Crayon, but desperate times call for desperate measures. If you're one of the many investors who own the barbaric metal we call gold, and you're not feeling just a little hot under the collar, then you're simply not paying attention.

As of this morning gold is dipping below $1,600 an ounce, breaking below its 200-day moving average for the first time since January 2009.

"Plunging" is perhaps a more accurate description of this move. The $1,600 level is insanely widely watched, even by the obsessive compulsive standard of pit traders. $1,600 is the 200-day moving average, trend-line support prior resistance and the Maginot Line for folks who've been buying the dips since August.

Yup, gold devotees are still up for the year. Yes, gold was growing at a greater than 30% clip per year since establishing the uptrend line starting in late 2008.

True believers should still care about the charts for two reasons:

1. If you've been saving up cash to load up on weakness it's about time to get out your wallet

2. Nothing lasts forever, not even gold rallies

I've owned gold, sold gold, traded, mocked, and embraced gold for at least 3 years. The only constant has been that I've been trading gold off the charts, as I do all commodities. Gold may turn out to be the world's single currency but, in the meantime, it's a shiny rock, not much different than palladium. It shall be traded as such. When gold pulled too far above the chart, I erred on the side of selling too soon. When gold hit the uptrend I tried to force myself buy.

I never caught a bottom. I never nailed a top, but I made money. When traders die, Saint Peter only cares about their P&L, not what could have gone better.

Right now the gold chart is breaking. Not a little nicked or dented. We're talking Humpty Dumpty levels of shattering. I'm trading it accordingly, which is to say I've excited both halves of the "long gold in Euro terms" trade. Lost a little, made a little, got out alive.

Watch the video and make of it what you will. I'm not giving advice or telling you what to do; just telling you what I'm doing and how I see it. I'm open to your thoughts, drop us a line on our Facebook page or send me a Tweet @Jeffmacke.