Well those poor ( long ) Gold traders last week learnt a hard lesson and it can be seen quite easily on the charts that a lot of stop losses were hit. Both Gold and Silver took a tumble below important areas where many millions of stops would of been.. I am sure billions were lost in its move however i am also sure millions were made as well.. So let’s look at this, who is selling Gold and why..?
Here are some possible theories that i have been sharing with my readers for a while..
The banks a few months back promoted gold heavily, this is first caution to be aware of as we all know when banks spend money to promote something it is often a perfect pump and then dump tactic.. Many also knew many of the big banks had longs active around the 1770 zone.. It is interesting that as soon as it got past there trades the market tumbled is it not..
This is how i see it, the banks played the same old game and i am sure they will do the same with GBPUSD this year.. If you are short this pair you should be very careful, lock in your stops. This pair has also been promoted as going much further by banks and often that is when they will buy big. I would not be surprised if this pair went back to more than 1.60.. Remember even at that price it is undervalued..
Okay so back to my point on gold and silver. The banks sold it off heavily after promoting. Net long almost 80% of traders were long this pair and exposed so do the math, who was short the rest..?
This is the number one reason one should never ever listen to media when it comes to promoting a trade especially from bank investors.. They want retail traders to lose remember, retail traders loss is there gain.
Okay so where is gold going, my view is above in the image. These structures being possible potential buy zones.. Click image for larger view.. Can you see where stop losses were hit in recent move..? ( Bam.. )
How Far Can Gold Drop?
The way I see it gold could drop as far as the 1063 to 1000 handle, QE is being hyped as being over by the end of the year, however we need to be careful. This could easily be a false dream. US debt is still at extreme unstable levels. Without QE it means they will have to start really paying there debts back properly.
Can the US really go without QE? Or as another question, can the US really stop spending so much on Military? If you are wondering why I mentioned the Military, it is because that is major aspect of spending in the US at the moment with little return. It has been suggested multiple times that cutting spending there, the massive savings could help start pay back the massive debt. At least a start anyways.
Oil is nearly gone and depleted so the war in Iraq and middle east is not needed no more. Remove QE, bring back the troops… Possible? No need to protect the Oil when there is none, so is it possible they can cut back now.?
Many questions.. I will let you decide there..