One of the rules of writing financial columns and staying out of trouble is never diss gold. But it’s not disrespectful to notice reality. Gold is now bearish. So if you bought gold for trading, now is a good time to take your profits and run, says Lynn Carpenter in Investor’s Daily Edge. If you bought gold for its long-term asset value, its protection against inflation and the security it represents, then you are still fine…

In the July 29 Investor’s Daily Edge, I noted that Gold needed to go above $970 if it was to turn bullish. And if it fell through $900, look out below. The next target is $750. We can track gold prices easily using the StreeTracks Gold Trust (GLD). The prices are 1/10th the price of gold. So when GLD is at $90, it represents gold at a price of $900.

Here’s the chart you saw in Investor’s Daily Edge two weeks ago, on July 29, the one Tom disagreed with:

Last week, gold did break that $90 mark. A number of gold watchers had been saying that gold would test its support at $85 ($850) and likely bounce off. I believed differently. That resistance area was very modest and if the metal could break $90, then it should have some momentum. The key was $90 because that was the short-term bull support trend line.

Trend lines like that have psychological weight. They represent the point where people begin buying a stock each time it dips because they think it’s a good price. And a bull support line shows the judgment of buyers who are overall bullish about gold. So, when the metal came down to that support line and found no help, it meant the most optimistic bulls were out of the pasture for now.

As it turned out, when gold broke under $900 last week, it didn’t even pause at $850 on Monday. Here’s the day’s action:

This does not mean you should run out and sell any gold you own. If you bought gold for trading, yes, take your profits and run. This should convince you that the metal is currently bearish, and that doesn’t square with good trading on the long side.

But if you bought gold for its long-term asset value, its protection against inflation and the security it represents, then you are still fine. After all, even at $750, your gold would be worth more than it was a year ago.

Gold has reasons to go higher eventually. But its recent rise was parabolic, always an unstable pattern. Where next? Hold on for Thursday. I am looking at that right now and will let you know.

Source: Gold Takes a Break from the Bulls