After correcting from above $1900 to below $1550, gold prices have undergone the necessary consolidation and now look poised to challenge the old highs.
Examining the chart below it is apparent that the recent decline in gold prices was not the bursting of a bubble, but merely a correction within a larger secular bull market. Although we were not fortunate enough to take a short position prior to the correction, we did signal a bullish options trade on GLD to subscribers on 26 September 2011, the day gold prices bottomed.
We felt that the longer term bullish fundamentals for gold remained intact and on the technical side we have long considered that a Relative Strength Index (RSI) of 30 or below signifies that gold prices are oversold. This signal has worked well for us for a number of years. Therefore when the RSI dipped to 30 (and in fact it went below 30 on an intra-day basis) we issued a trading recommendation to SK OptionTrader subscribers. That options trade is currently showing a 32% profit in 32 days.
To read the article in full, please follow this link: Bullish Momentum Building in Gold and Silver