Gold News

A Truly Lunatic Gold Trading Tip

Like you need any more...

It was OCTOBER 1980, says Jeff Clark, editor of Market Minute, writing in Bill Bonner's Diary of a Rogue.

I was sitting on a public bus with my girlfriend, discussing what sort of engraving I should have on my high school ring.

I mentioned how unfortunate it was that gold prices were so high that I would have to work extra hours at the shoe store to buy the ring.

A stranger in the seat in front of us turned around and uttered this sentence:

"Be careful trading gold during a full moon."

There was a full moon that evening. But, I ignored the stranger's advice and bought the gold ring anyway.

That was my very first gold trade. I bought at the absolute peak of the market. Just after I placed the order for my ring, gold began a 20-year bear market.

Ever since that day, whenever I see a full moon, I'm reminded of the unsolicited advice from that stranger on the bus...

"Be careful trading gold during a full moon."

It may seem absolutely crazy to you, but that advice has saved me from much financial heartache. And, I suspect it will prove valuable right now.

Gold has enjoyed a fabulous rally lately. It was trading near $1400 per ounce on the date of the July full moon (July 16). It traded as high as $1550 just under a month later. That's a "breakout" move. No one can argue with the bullish momentum.

And the longer-term reasons for holding gold are as solid as ever. The entire world is buried under a mountain of debt – much of it at negative interest rates. The potential for a catastrophic financial event is about as high as it has ever been.

So it's no wonder just about everybody seems to be rushing to buy gold right now.

That's also why I've been so conflicted about gold. You see, the financial market rarely rewards the popular trades. And, let's face it, buying gold is a popular trade.

I love the idea of owning gold for the long term. But with the public rushing in to buy at the same time the "smart money" is amassing a large short position [bullion banks have, as insurance, been betting prices might fall, hedging possible losses on their core business of selling gold], the short-term looks sketchy.

So, like I said...I've been conflicted.

That conflict resolved itself on August 14. I looked out my kitchen window to see the biggest, brightest full moon I'd seen in months slowly descending behind the hills to the west.

Now...before you start thinking I'm totally nuts to consider trading anything on the basis of moon phases, you should know that many popular technical analysis theories [where people try to predict future price movements by studying historic patterns on price charts] are based on lunar cycles.

It's true. The formulas behind both the Elliott Wave Theory and the Bradley Pentagonal Time Cycle Theory are derived from lunar cycles. In fact, much of modern-day mathematics can trace its roots to the early astronomy of Galileo.

Of course, that doesn't mean you should look to your horoscope for financial advice.

But strange things do sometimes happen during a full moon. And one of the strangest things I've learned in nearly 40 years of trading is that gold often changes its short-term direction within a day or two of a full moon.

Bullish moves often reverse and turn bearish. And bearish moves often lead to bullish turnarounds.

There's a lot of action going on in the gold market right now. Traders are going to have lots of opportunities to trade the moves. But, before you go chasing after one, maybe take a look up in the sky first.

Bill Bonner has co-authored a number of New York Times Bestsellers including Financial Reckoning Day, Empire of Debt and Mobs, Markets and Messiahs. In his own opinion, Bill's most recent title, A Modest Theory of Civilization: Win-Win or Lose, is his best work yet. Bill also founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group have exposed and predicted some of the world's biggest shifts since that time, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and more recently the election of President Trump.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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