If you remember the great movie Trading Places, one of the classic lines towards the end of the movie was “sell Wilson sell.” That would be the stance we would be taking on gold now: sell. Every rally has failed and gold is a heavy favorite to go below 1700.

It would be no surprise to see gold and silver continue to fall. Over the next 10 years we expect a big rally in all metals but over the next few weeks this could get very ugly. The price action has been about as bad as it gets, showing no real hope for higher prices.

If you remember that metals trade like any other market, a steep fall would be no surprise. At one time platinum was over 2300, silver was almost 50. Both have lost over 60% of their value. We don’t see gold losing that much but 1600 looks to be in the cards.

Stay away from the pundits and the reasons you conjure up in your mind as to why gold should run. The market and the price action is never wrong; think about that the next time you convince yourself gold is going higher. We are investors in gold but from a traders position they should go lower first.

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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