Gold

I am tired writing about the Nifty. How long can I keep saying that I am long and will cut and go short at so and so levels or vice versa. How long can I keep writing notes about system trading? How long can I take jibes at strategists even though it is a lot of fun when I do? Instead why not try and talk about an instrument that everybody has started taking seriously. Indians were anyway pretty serious about it from time immemorial but lately I guess the world has also taken to it in a big way. Not surprisingly, it coincided with the time when fears of paper currencies were at their peak. Which is why, if you see the attached chart, you will see the almost parabolic rise in the Gold price till August this year.

Now that Gold had sucked everybody into its fold and converted the last unbeliever and once people had started looking at Gold as a separate investment class along with equity, debt and real estate, it was free to do what every asset does viz cause the maximum pain to maximum people. It was free to fall.

In this painful fall, Gold has broken below the rising trendline supporting it. This trendline which chartists like to dramatically allude to as the neckline (mainly because there is something akin to a shoulder-head-shoulder in the charts when you draw the trendline) has been broken conclusively. Chartists also expect the neckline to be retested (once it has been broken). This too has happened and we now see Gold again resume its fall. This classical retest and resumption of the fall is pretty negative. My calculations suggest that it could fall to as low as 1300 USD.

That was pretty nice. Instead of just saying that I expect Gold to fall to USD 1300 in the coming weeks, I made a nice two para song and dance about it. It helped me pass time, filled up one more day or Market Musings and allowed me to take a break from watching this India Australia match which is slowly but surely slipping away from us. The only hope left is for Ashwin to hit a century (Tendulkar seems to have run out of ideas to convert his 50s into 100s and less said about Dhoni the better) Finally, I am short on the Nifty. In case you do not read my notes regularly and note down every update of my trend change levels let me remind you that I went short when Nifty broke below 4695 yesterday. I will cut my short postions and go long only above 4760.