Once again Monday Gold pushed higher on the fears of the possibility of Russia invading Ukraine. We put the probabilities of that happening less than 10%. The fears are being stoked by the administration trying to advance their agenda.
We are long Gold and reversed Silver this morning, however that does not change our views that the spike rally is based on fear and short covering. This does not mean that Gold and Silver will not continue to rally, however the speed in which the rally has traveled will slow. It would be no surprise to see a sell off in the next day or two.
Too many watch markets tick by tick or second by second, which is enough to drive anyone crazy. We are long and expect the rally to continue however we know that the start of this rally was purely driven by fear. This is always one of the problems in the trading and investing world: immediate gratification.
Traders and investors must learn the value of delayed gratification knowing that no market goes straight up or down. Understanding that fact will make you a better trader and investor. Markets move for many reasons; the recent move in Gold was based on fear and short covering.
Precious metals should be owned on a physical basis with capital that is not needed tomorrow or anytime soon. Trading should be done with paper knowing that we can trade either side without emotions.
In all markets price action determines what will happen in the next day, week, or months. Keep the two strategies separate, the worst trade anyone can make is turning a trade into an investment hoping for a way out. Traders must learn to take their losses and move on to the next trade.
Patience, discipline, and money management always win the day. Let the map of the markets show you the way.
Todd Horwitz Chief Strategist BubbaTrading.com
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