Gold’s plunge to a five-month low last week represents a false breakdown that already has begun to reverse and will continue to do so, says J.C. Parets, a market technician and founder of AllStarCharts.com.
Gold hit $1,523.90 an ounce Dec. 29, the lowest level since July 7. With low volume last week, once the precious metal started moving down, it triggered stop-loss orders, especially from retail investors with exchange-traded-funds, Parets tells Yahoo.
“Slowly but surely, while no one was looking, gold has started creeping up,” he says. “We’re back like the breakdown never occurred.”
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Gold recently traded at $1,612, up 6 percent from its Dec. 29 low.
"False moves create fast moves in the opposite direction,” Parets says. “In this case it’s in the direction of the underlying long-term trend." He was referring to the precious metal’s 11-year rally.
|(Associated Press photo)
There’s still time for investors to jump on this week’s rebound, Parets says. “If you’re looking to trade, not as a long-term investor, and you see these false breakdowns, that’s a great entry point.”
Minimize your risk with stop-loss orders and take profits quickly, he recommends.
Other experts are bullish on gold too. "What I am looking for is a gold price of $1,800 an ounce in 2012," Jeffrey Wright, senior research analyst at Global Hunter Securities, tells TheStreet.com.
And gridlock in Washington over the budget could push the precious metal as high as $2,000, he says.
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