Friday, July 30, 2010

Steve Sjuggerud's Simple Strategy Says Hold Off

Sjuggerud's "Simple Strategy" really is simple. It says to buy gold at the beginning of the month when the price in four major currencies has been up in the previous month. If gold's down in any one of the four currencies, either cash in (for traders) or hold off from buying. The four currencies are the U.S. dollar, the euro, the yen and the British pound.

As for July, it looks like gold will be down in all four currencies. So, the Simple Strategy recommends holding off (or cashing out) at the beginning of August.
This system will be in and out of gold a few times a year. It is a trading system, which shouldn't have much to do with your long-term gold holdings.

On the other hand, if you don't own gold yet, you might want to wait for this system to signal "buy" again... If you do, you'll be buying into what's historically a moneymaking time for gold.

Gold doesn't look great in the short run... Our Simple Strategy says gold could have a rough month in August. The recent gold price trend isn't good.

Big falls in the price of gold are typical in major gold bull markets... A 50% drop is not out of the question.

In my opinion, it's better to wait for gold to bottom and start an uptrend again to buy... Instead of trying to catch a "falling knife," wait for it to hit the ground and settle, then grab it.

In short: Yes, you want to own gold for the long run. But based on the Simple Strategy and the trend, the short run doesn't look promising. Trade accordingly

Of course, mechanical trading systems - like this one - work best when they're not second-guessed. Sjuggerund's Simple Strategy is explained here.

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