Risk vs. Reward in Gold Becoming Positive

With much fanfare, Warren Buffett has dumped his GOLD stock

We highlighted the latest installment of the Buffett/Barrick Gold drama yesterday.

Today IBD takes that positive contrary indicator and gives it a little more juice.

Warren Buffett Dumped GOLD Stock Ahead Of Gold-Price Death Cross

Ah, the dreaded Death Cross as explained by IBD…

The GLD gold play appears on the verge of flashing a technically ominous sign known as a death cross. That happens when the 50-day average falls below the 200-day line.

While the Death Cross snippet is a small part of an otherwise decent article, these publications just love putting the words “Death Cross” in their titles. Hmmm, must be good eyeball harvesting material, eh?

So to review once again, a death cross (or golden cross for that matter) is one of the biggest canards in TA. Any TA going on about it in support of either a bearish or bullish viewpoint is exposing to you in real time either naiveté or agenda. Because most of the time, after the signal is generated and reacted to by the lemmings, soon comes a hard reaction in the opposite direction of the cross’s implication.

The gold price has dropped enough to trigger the moving average cross. The media will amp this up to scare people about it and the gold price will either bounce hard or end the correction.

gold price

Frankly, I am starting to feel like I don’t have enough exposure to gold stocks and that is a feeling I like having because the risk vs. reward proposition in the miners and the metal are currently a lot better than the broad inflated global macro amalgam. Risk vs. reward is not a comment on price direction, but it is a comment on downside risk vs. upside potential.

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