As $1000 Gold prices come into view, investors are starting to get tired. But make no mistake, $1000 gold is a key psychological level that may be the difference between a grind them out, tire them out bottom/base and a capitulation “V” bottom.
It’s been well documented that the Gold Bugs have taken it on the chin. Sometimes we learn the hard way that what we see over the long-term doesn’t necessarily play out over the short-term. Price is the final arbiter and those with oversized positions in the past few years have taken a hit.
That said, Gold is far from dead. And 2016 may see a meaningful bottom in the yellow metal.
But if investors want in, long-term or short-term, they have to have a plan and understand that the current dynamics. And as we approach the psychological level of $1000 Gold, a bottom seems so close… yet so far away.
That’s because it could come in and around $1000 Gold prices… or it could come with a capitulation move down toward $750.
Let’s start with the daily chart.
As you can see below, Gold have had trouble regaining “lost” levels. When Gold lost $1150 during the July swoon, it could only temporarily regain it in October (before faltering). That prompted me to write “Gold Bulls Let Down Again“.
Gold prices subsequently slipped below the July bottom ($1075) and has had trouble retaking that level. Gold bulls are in a weak position unless Gold prices can retake $1075, followed by $1150.
But sentiment is getting pretty bad. How bad? Â Just take a look at the Gold Bugs Index (HUI). After breaking significant support, the gold bugs index looks poised to retest the lows set 15 years ago.
Sticking with the price action, let’s take a look at a longer-term weekly chart. As you can see, Gold prices have taken out some significant support levels. And the next one up is $1000 Gold.
In December 2013, I wrote the following:
With Gold near 1200, it wouldn’t be out of bounds to see Gold test the $1000 level. A puncture of $1000 would shake out may Gold investors and perhaps offer an excellent buying opportunity. Remember, securities tend to bottom when even the most passionate supporters begin to question/sell.
I feel the same way now that we are here.
The $1000 Gold  price level is psychological for gold bulls and additionally represents the 2008 highs and 2009 breakout level. Should $1000 Gold fail, then look for capitulation. That could take the yellow metal as low as $700-$750 bucks (on the extreme). Note the “buy zone” for the scenario on the chart below.
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