Take a look at the monthly chart of gold
History suggests that gold futures have a strong tendency to find a seasonal low at some point in July. While the lows are typically made in the latter half of the month, seasonal tendencies aren’t always perfectly timed. Sometimes the moves are early, and sometimes they are late; as a result, it is always a good idea to prepare for them well in advance and try to use the chart for guidance on entry.
Excessive volatility in recent months has rendered the daily chart of gold nearly useless in regard to technical analysis. Accordingly, we’ve been probing the monthly chart for ideas. According to the RSI (Relative Strength Index), a slow triggered but relatively reliable technical indicator, the current sell-off has left gold prices at the most stretched level since 1999. Similarly, the William’s % R indicator has recently dipped below 30 for the third time in 13 years. In each of the previous occasions, gold prices recovered to post substantially new highs. Consequently, we suspect that once the panic finally subsides and the dust settles, we could see a sharp rebound in prices as investors clamor to get back into gold.
Determining when and where to buy gold, or any other asset, is always a challenge. We suspect that the lows are closer than most think, so it makes sense to be a “nibbler” on dips to or below $1,200 in this market. However, any bulls should be aware of a possible slide to notable support levels on the monthly chart. For instance, the 62% Fibonacci retracement of the 2008 to 2011 rally is $1,150; meanwhile trend-line support comes in near $1,130. Should these prices be seen, we feel like these would be reasonable levels for traders to consider getting a little more aggressive.
Don't forget, this is an unforgiving market, it is not for everybody...For those that can't resist, e-micros (MGCQ13) are likely the best way for most retail traders to participate in this market
