Showing posts with label Gold and Silver. Show all posts
Showing posts with label Gold and Silver. Show all posts
Friday, January 23, 2015
Monday, January 19, 2015
Friday, August 8, 2014
Is gold on the verge of a breakout rally? (CNBC)
Gold
prices have seen a rebound in recent weeks after hitting a four-month
low in June and technical analysis suggests there is potential for this
rally to develop into a genuine trend breakout.
The key feature of the weekly Comex gold chart is the downtrend line. This starts from the high near $1,799 notched in October 2012. Most recently the line uses the high of $1,392 in March 2014 as a confirming anchor point for the downtrend line. The current breakout above the trend line has the potential to develop into a genuine trend break, and here are three reasons why.
The key feature of the weekly Comex gold chart is the downtrend line. This starts from the high near $1,799 notched in October 2012. Most recently the line uses the high of $1,392 in March 2014 as a confirming anchor point for the downtrend line. The current breakout above the trend line has the potential to develop into a genuine trend break, and here are three reasons why.
Read MoreGold bulls still sidelined, even with higher risks
The breakout target is lowered to near $1580 because there is strong historical support near this level and this will act as a resistance level for any new uptrend.
The second feature is the behavior of the Guppy Multiple Moving Average indicator. The long term group of averages has moved sideways and begun to compress. This shows investors have stopped selling and some investors are becoming buyers.
The third feature is the pattern of test and retest. The first test of the down trend is at point 1. This touched the lower edge of the long term GMMA. The second test touched the upper edge of the long term GMMA. The third rally test may breakout above the upper edge of the long term GMMA. This development signals a high probability of a sustainable uptrend breakout.
Read MoreWhy gold isset for its 7th week of gains
Traders watch for this current rally to move towards $1,380 and then retreat. The retreat will find support near the upper edge of the long term GMMA and then develop a new rebound. This will be confirmation of a new sustainable uptrend.
A move below the downtrend line will confirm that the downtrend is still in place. In this situation the market will retest the support level near $1,180. This is a low probability outcome.
The technical chart behavior suggests gold is developing a new uptrend. Aggressive traders are entering the market as the price moves above the downtrend line. Cautious traders will wait until the price moves above $1380 and the uptrend is confirmed.
Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders – www.guppytraders.com. He is a regular guest on CNBCAsia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.
Monday, June 10, 2013
Thursday's Rally In
Gold And Silver
Temporary Strength Or The End Of Correction?
Temporary Strength Or The End Of Correction?
The only thing that’s free right now is the air that we breathe. Other than that it costs to manufacture every object and commodity in the world. It takes a certain amount of money to extract a barrel of crude in Saudi Arabia, to make a car in Detroit, or produce an iPad in China.
There is also a certain cost to producing an ounce of gold. It doesn’t grow on trees. Tiny nuggets don’t rain down from the sky. It costs to explore. It costs to extract. It costs to finance loans and it costs to pay royalties. There are additional costs such as administration, equipment, environmental remedies and others. These are called the “all-in” costs.
Mines age and get depleted and extracting the gold gets more challenging and costly over time. Average grades of ore have fallen by 30% since 1999, according to GFMS, a consulting group, making it more difficult to extract gold and from ever greater depths. Finding new deposits is becoming harder. If in 2002 gold miners spent $500 million on exploration, by 2008 they were spending $3 billion, but finding much less.
So how much does it cost to make an ounce of gold today?
That is an interesting question because just like a car manufacturer will not sell a car for less than it costs to produce it, neither will mining companies sell gold for less than it takes them to extract it from the ground. And the cost of production is rising due to lower grade ore and the rise in the costs of compliance and remediation. As gold prices soared over the past decade, production costs inched higher including the prices for equipment, materials, labour and energy.
According to a recent Forbes Magazine article both Barrick Gold and Goldcorp, the largest mining companies, project that their all-in cash costs will be between $1,000 and $1,100 an ounce for 2013. In 2012, mining companies reported all-in costs such as: GG $1,082, Barrick Gold, 1,227, Yamana Gold $1,247, IAG $1377, and Agnico-Eagle, $1,343.
According to the Forbes article, a survey of 60 gold mining companies, apparently less efficient than the giants, resulted in an average production cost of $1,391. That is uncomfortably too close to where the price of gold was at the bottom this year.
Of course, it’s possible that if the price of gold were to drop, mining companies could become more efficient and thus cuts their costs and be more profitable. It makes sense that the inverse may be true as well, that as prices were rising, mining companies expanded and perhaps operated at high capacity the mines that are the most expensive to run.
World gold production is currently around 2,500 metric tons per year. The all-time high was reached in 2001, with 2,600 metric tons of gold production worldwide. It is interesting to note that production in 1900 was around 400 metric tons per year when the price per ounce was about $19 an ounce.
A Financial Times story last month says that earnings data are confirming that the decade-long expansion in the mining services industry is all but over. The reduction in mining investment is severely affecting demand for equipment such as trucks, shovels and underground machinery. Caterpillar, the world’s largest manufacturer of earthmoving equipment, has reported a 45 per cent drop in profits in the first quarter.
Does the cost per ounce of mining an ounce of gold provide a floor for the price? One can argue that theoretically the price could go lower than the cost of manufacture, but it couldn’t stay there for long. Mining companies would have no incentive to extract the gold and it would remain buried underground. They would have to cut capital spending, defer exploration and capital development programs and probably cut dividends. There would be a decline in supply and after a while, when demand would outstrip supply, the price would climb up again.
The abovementioned facts suggest that sooner or later the price of gold (and – with it – the whole precious metals sector as well) will start to rise again, to cope with the rising costs. But these facts alone cannot help us estimate the turning point itself – let us then move on to the technical part of today’s essay to see what immediate future holds for the yellow metal.
The precious metals sector moved higher on Thursday, but the question is if the move was significant enough to change the short-term outlook for gold and silver. It has been – as we wrote in our previous articles – bearish, as far as short and medium term are concerned. Let's examine the situation.
1. There was a breakout above the declining resistance line in gold and silver – however, it was invalidated on Friday.
2. The volume in GDX was significant during Thursday’s rally but it was surprisingly small in case of GLD ETF. It was average in case of the SLV ETF. Therefore, the breakout (even though it was not invalidated on Friday in case of the mining stocks) is not that reliable in our view.
3. The USD Index declined quite significantly on Thursday and yet we saw a rather average move higher in gold, so we decided to analyze the relative performance (USD - precious metals) more thoroughly. USD closed approximately at the 83 level, something it had previously done on May 10. On May 10 gold, silver and the HUI Index closed at: $1,448, $23.88 and 280, respectively. This means that mining stocks are where they were back then and gold and silver are considerably lower now. This does not bode well for the precious metals in the short and medium term.
4. We have previously mentioned the reverse parabola in the GLD to GDX ratio which meant that miners were declining more and more rapidly relative to gold. This parabola was broken on Thursday, which is a bullish sign - not a strong one, but still.
5. The move higher in silver just ahead of the cyclical turning point is actually a bearish phenomenon. If the price is to reverse its direction shortly, then if the most recent move is up, then the reversal should take the market lower. The previous cyclical turning point in silver worked in this way and it worked only too well. Silver's price plunged at the cyclical turning point after moving slightly higher - to the 20-day moving average. The chart below illustrates the situation (charts courtesy by http://stockcharts.com.)
Naturally, silver (and, naturally SLV ETF) moved lower on Friday, which may mean that the next downleg has already started.
Summing up, at this time we still think that the breakout in precious metals is not in - and that lower values of silver will be seen before the next big rally emerges. So far the USD-gold link is a strong indication against going long and we don't think that the odds for the decline have really changed. Not only have we seen a long-term breakout in the USD Index, but we also see that gold and silver are responding more significantly to dollar's rallies than to its declines.
********
To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.
Thank you for reading. Have a great and profitable week!
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold Investment & Silver Investment Website - Sunshine Profits
Wednesday, June 5, 2013
Thursday's Rally In Gold And Silver Temporary Strength Or The End Of Correction?
Thursday's Rally In
Gold And Silver
Temporary Strength Or The End Of Correction?
Temporary Strength Or The End Of Correction?
The only thing that’s free right now is the air that we breathe. Other than that it costs to manufacture every object and commodity in the world. It takes a certain amount of money to extract a barrel of crude in Saudi Arabia, to make a car in Detroit, or produce an iPad in China.
There is also a certain cost to producing an ounce of gold. It doesn’t grow on trees. Tiny nuggets don’t rain down from the sky. It costs to explore. It costs to extract. It costs to finance loans and it costs to pay royalties. There are additional costs such as administration, equipment, environmental remedies and others. These are called the “all-in” costs.
Mines age and get depleted and extracting the gold gets more challenging and costly over time. Average grades of ore have fallen by 30% since 1999, according to GFMS, a consulting group, making it more difficult to extract gold and from ever greater depths. Finding new deposits is becoming harder. If in 2002 gold miners spent $500 million on exploration, by 2008 they were spending $3 billion, but finding much less.
So how much does it cost to make an ounce of gold today?
That is an interesting question because just like a car manufacturer will not sell a car for less than it costs to produce it, neither will mining companies sell gold for less than it takes them to extract it from the ground. And the cost of production is rising due to lower grade ore and the rise in the costs of compliance and remediation. As gold prices soared over the past decade, production costs inched higher including the prices for equipment, materials, labour and energy.
According to a recent Forbes Magazine article both Barrick Gold and Goldcorp, the largest mining companies, project that their all-in cash costs will be between $1,000 and $1,100 an ounce for 2013. In 2012, mining companies reported all-in costs such as: GG $1,082, Barrick Gold, 1,227, Yamana Gold $1,247, IAG $1377, and Agnico-Eagle, $1,343.
According to the Forbes article, a survey of 60 gold mining companies, apparently less efficient than the giants, resulted in an average production cost of $1,391. That is uncomfortably too close to where the price of gold was at the bottom this year.
Of course, it’s possible that if the price of gold were to drop, mining companies could become more efficient and thus cuts their costs and be more profitable. It makes sense that the inverse may be true as well, that as prices were rising, mining companies expanded and perhaps operated at high capacity the mines that are the most expensive to run.
World gold production is currently around 2,500 metric tons per year. The all-time high was reached in 2001, with 2,600 metric tons of gold production worldwide. It is interesting to note that production in 1900 was around 400 metric tons per year when the price per ounce was about $19 an ounce.
A Financial Times story last month says that earnings data are confirming that the decade-long expansion in the mining services industry is all but over. The reduction in mining investment is severely affecting demand for equipment such as trucks, shovels and underground machinery. Caterpillar, the world’s largest manufacturer of earthmoving equipment, has reported a 45 per cent drop in profits in the first quarter.
Does the cost per ounce of mining an ounce of gold provide a floor for the price? One can argue that theoretically the price could go lower than the cost of manufacture, but it couldn’t stay there for long. Mining companies would have no incentive to extract the gold and it would remain buried underground. They would have to cut capital spending, defer exploration and capital development programs and probably cut dividends. There would be a decline in supply and after a while, when demand would outstrip supply, the price would climb up again.
The abovementioned facts suggest that sooner or later the price of gold (and – with it – the whole precious metals sector as well) will start to rise again, to cope with the rising costs. But these facts alone cannot help us estimate the turning point itself – let us then move on to the technical part of today’s essay to see what immediate future holds for the yellow metal.
The precious metals sector moved higher on Thursday, but the question is if the move was significant enough to change the short-term outlook for gold and silver. It has been – as we wrote in our previous articles – bearish, as far as short and medium term are concerned. Let's examine the situation.
1. There was a breakout above the declining resistance line in gold and silver – however, it was invalidated on Friday.
2. The volume in GDX was significant during Thursday’s rally but it was surprisingly small in case of GLD ETF. It was average in case of the SLV ETF. Therefore, the breakout (even though it was not invalidated on Friday in case of the mining stocks) is not that reliable in our view.
3. The USD Index declined quite significantly on Thursday and yet we saw a rather average move higher in gold, so we decided to analyze the relative performance (USD - precious metals) more thoroughly. USD closed approximately at the 83 level, something it had previously done on May 10. On May 10 gold, silver and the HUI Index closed at: $1,448, $23.88 and 280, respectively. This means that mining stocks are where they were back then and gold and silver are considerably lower now. This does not bode well for the precious metals in the short and medium term.
4. We have previously mentioned the reverse parabola in the GLD to GDX ratio which meant that miners were declining more and more rapidly relative to gold. This parabola was broken on Thursday, which is a bullish sign - not a strong one, but still.
5. The move higher in silver just ahead of the cyclical turning point is actually a bearish phenomenon. If the price is to reverse its direction shortly, then if the most recent move is up, then the reversal should take the market lower. The previous cyclical turning point in silver worked in this way and it worked only too well. Silver's price plunged at the cyclical turning point after moving slightly higher - to the 20-day moving average. The chart below illustrates the situation (charts courtesy by http://stockcharts.com.)
Naturally, silver (and, naturally SLV ETF) moved lower on Friday, which may mean that the next downleg has already started.
Summing up, at this time we still think that the breakout in precious metals is not in - and that lower values of silver will be seen before the next big rally emerges. So far the USD-gold link is a strong indication against going long and we don't think that the odds for the decline have really changed. Not only have we seen a long-term breakout in the USD Index, but we also see that gold and silver are responding more significantly to dollar's rallies than to its declines.
********
To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.
Thank you for reading. Have a great and profitable week!
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold Investment & Silver Investment Website - Sunshine Profits
Wednesday, May 29, 2013
UNCOMMON COMMON SENSE (Gold)
UNCOMMON COMMON SENSE
For People Who Think
For People Who Think
Aubie Baltin CFA, CTA, CFP, PhD.
May 28, 2013
5 Reasons Gold Will Set an All-Time Record HIGH In 2013
I know of no other major asset that has turned in this kind of performance ever. This is what a stealth bull market looks like, one that I fully expect will keep regain its power now that we know the reasons for its contrived crash in an effort to save the US$ and the vEuro. However I think we still have another 5 years to go before the blow-off top of $6,250 by 2017 (My 2005 projection) will be reached.
Why MY 2005, $6,250/OZ projection for Gold by 2017 Isn't so out of whack
That follows a pattern established from December 2008 to June 2011 as gold soared 70% following the $2.3 trillion created in the first two rounds of quantitative easing. Now that the Fed has made QE3 & 4 an open ended proposition, commodities in general and gold in particular will undoubtedly edge higher. In fact, since Nixon closed the "gold window" in 1971 the purchasing power of the dollar has declined by 86 cents so that now that 1971 $ is only worth 14 cents.
SO WHY SHOULD YOU INVEST IN GOLD?
GOOD LUCK AND GOD BLESS
Please call (561) 840-9767 to subscribe by credit card or mail a check to:
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"The Golden Age Comes To Mankind
Only After They Have Re-Discovered Gold's Value"
5 Reasons Gold Will Set an All-Time Record HIGH In 2013
No two bull markets are ever exactly the same and
gold is no exception. During the last secular gold bull market in
the 1970s, gold rose from $35 in 1968 all the way to $200 by late
1974. Then completely unforeseen the unthinkable happened. Between
late 1974 and mid-1976, gold prices were cut in half, dropping from
about $200 to $100. At the time, many Gold Bugs sold out in fear
& disgust. But then the unimaginable happened again; Gold prices
started to climb and climb, rising from $100 in mid-1976 all the way
to $800 by January 1980. Anyone who bought gold at $35 earned better
than 20 times their investment. But most of that rise occurred in
just the last two months of 1979.
Since 2001, gold has been the single best performing asset for a record 12 straight years. In fact, the average return on gold was just shy of 18%/year.
Since 2001, gold has been the single best performing asset for a record 12 straight years. In fact, the average return on gold was just shy of 18%/year.
I know of no other major asset that has turned in this kind of performance ever. This is what a stealth bull market looks like, one that I fully expect will keep regain its power now that we know the reasons for its contrived crash in an effort to save the US$ and the vEuro. However I think we still have another 5 years to go before the blow-off top of $6,250 by 2017 (My 2005 projection) will be reached.
2013 Gold Price Forecast
Gold began the year at $1,600 an ounce. Should we
get average returns in this calendar year as well, gold will finish
2013 around $1,880. At those levels, gold prices would begin 2014
just shy of the all-time high set last year, right around the $1,900
mark. On the other hand, if we assume an average return again this
year, then gold could reach $2,227 or better in 2013. After all,
none of the fundamentals supporting gold prices have gone away.
Instead, they've only continue to gain strength. Listed below are
the five factors I've identified that will power the Gold Bull
Market upwards for FIVE years or more:
#1 The Feverish Growth of Fiat Money: The
USA, Europe, China and most of the developed world but also
including a few of the Developing nations are printing money much
faster than the amount of new gold being mined or discovered.
Runaway money printing presses are always bullish for gold.
#2 The Feverish Demand For Gold: As central
banks continue to print, individuals are continuing to relentlessly
buy gold, especially in the world's two most populous nations, China
and India but especially after the Cyprus affair, individuals are
stepping up their Gold and Silver purchases all over the world:
which in 2002 accounted for 23% of world gold demand. Today, just
these two nations alone, at 47% of new Gold mined
make up nearly half of all demand. This is just the beginning.
Meanwhile, less
than 2% of all investment funds are invested in gold. Does
that sound like gold is or was in a bubble?
#3 Even Central Banks Have Begun Buying: Central banks, especially RUSSIA and China as well as the developing nations’ Central Banks are buying and hoarding gold at a record pace. After all who wants to hold depreciating US$ that don’t pay any interest? It is my belief that China will drastically expand its gold buying year after year on a cumulative basis in an effort to accumulate enough Gold to back the Yuan by at least 25% to 50% with gold in their effort to replace the US $ as the world’s reserve currency.
#3 Even Central Banks Have Begun Buying: Central banks, especially RUSSIA and China as well as the developing nations’ Central Banks are buying and hoarding gold at a record pace. After all who wants to hold depreciating US$ that don’t pay any interest? It is my belief that China will drastically expand its gold buying year after year on a cumulative basis in an effort to accumulate enough Gold to back the Yuan by at least 25% to 50% with gold in their effort to replace the US $ as the world’s reserve currency.
#4 High Demand Meets Short Supply: The
other side of the equation is supply. The gold mining industry is
struggling to find more gold. The industry as a whole spent a record
$8 billion in 2011 to explore for gold and yet their successes for
gold discoveries are declining drastically. Bloomberg reported that
from 1991 to 1999 there were 40 three million oz. or more of gold
discoveries, yet from 2001 to 2009 there were only ½ that.
#5 My Favorite Reason For $2,400 Gold in 2013:
The vast majority of analysts consistently forecast too low and are
even predicting declining gold prices farther out. But guess what?
They've been consistently wrong for 12 years. Meanwhile, breakeven
costs continue to rise meaning the price floor keeps rising. And
only the richer discoveries can and will be exploited. That's one
reason why I expect gold prices to set a new all-time record price
high in 2013, of $2,400. Let’s not forget the new fact that more and
more developing countries, in their desperate search for more money
are looking to steal it from producing and or newly discovered mines
in their countries, by reneging on contracts not to mention labor
strikes, all of which serves to reduce supply.
Why MY 2005, $6,250/OZ projection for Gold by 2017 Isn't so out of whack
To start with, let's take the 1980 peak price of
gold of $850 - and adjust it for inflation. That would take the
price of gold to $2,400 in present-day terms. (That is using the
Government understated inflation rates). Now, let's take the 2,400%
gain that gold experienced during the 1970s and translate it into
present-day terms. From the 2001 low of $260.50 an ounce, a 2,400%
gain would take the yellow metal all the way up to $6,252 an ounce
which makes my 2005, $6,250 rounded projection price by 2017 seem a
lot more reasonable today than it was when I first made it in 2005.
But these are
not just random price projections. They are both well reasoned and
well thought out. If we look at what the fundamentals are telling
us, it's clear that gold at $1,350 is a long way from its eventual
peak, meaning gold is still very much undervalued: (Primarily due to
Government manipulation attempts to hold the price down so as to
preserve the value of both the US$ and the Euro.)
Five
Fundamental
Reasons Gold Will Soar
#1 You Can't Ignore
Inflation: Demand for gold as a store of value has surged amid
speculation that inflation will pick up after the Fed, the Bank of
Japan and the European Central Bank announced plans print more money
to buy more debt. This increased new money printing will raise
inflation expectations pushing gold to new highs.
That follows a pattern established from December 2008 to June 2011 as gold soared 70% following the $2.3 trillion created in the first two rounds of quantitative easing. Now that the Fed has made QE3 & 4 an open ended proposition, commodities in general and gold in particular will undoubtedly edge higher. In fact, since Nixon closed the "gold window" in 1971 the purchasing power of the dollar has declined by 86 cents so that now that 1971 $ is only worth 14 cents.
#2 Gold is Real Money: The significant fall in the purchasing power of a
dollar only strengthens the case that as a store of value, gold is
the only real money. The fact is gold has been a monetary tradition
for millennia. Nearly 2,000 years ago, Aristotle laid out what
characteristics make for good money. According to Aristotle:
- It must be durable. It must be portable. It must be divisible.
- It must be consistent It must have intrinsic value.
- So it's no accident that the most common basis for money - in all of human history - has been gold. After all, only gold meets all five of those requirements
- It is only in the past century that fiat money has supplanted gold or gold-backed currencies on a worldwide basis. Fiat currencies, like the dollar, are just a relatively recent and failing experiment in economics. So much so, it's become exceedingly dangerous to hold on to, as long term holders are losing a compounded 10% per year. That's why as many as 13 US States want to issue their own currencies using silver and gold. What's more, Utah has already signed a bill into law recognizing US mint-issued gold and silver coins as an acceptable form of payment. The coins are treated like US dollars for tax purposes and Utah State citizens can now contract to pay each other in gold if they so choose.
#3 Investment Demand is
Exploding: Large
institutional
investors (hedge funds and pension funds) are making increasingly
large allocations to gold, as are individual investors. One of them
is Pimco's Bill Gross who said in a recent white paper that gold and
real assets would be the only ones to thrive in an acute fiscal
crisis. According to Gross, the latest round of quantitative easing
made gold "even more attractive" and owning the metal should be
considered as part of a diversified portfolio. According to Morgan
Stanley's survey of 140 institutional investors in the US, gold
sentiment is now at its highest bullish reading since July 2011. Asia, with a population
that exceeds 2.5 trillion inhabitants and has a long-standing
cultural affinity for gold, is stoking global demand in a big way.
In fact, China is overtly encouraging its citizens to buy gold and
silver, while offering them gold-linked checking accounts to
facilitate their purchases. China is primed to overtake India as the
world's largest consumer of gold. A quickly developing middle class
whose members are experiencing rapid escalations in disposable
income are a major bullish driver for the price of gold.
#4 Central Banks are
Loading Up On Gold: According
to
the World
Gold
Council, central banks bought 254.2 tons in the first half
of 2012 and may add close to 500 tons for all of 2012. What's more,
the International
Monetary
Fund (IMF) says Russia added 18.6 metric
tons of gold in July. South Korea bought 16 tons (of #9 coal, LOL);
a 30% increase. Kazakhstan increased their bullion reserves for a
12th consecutive month. That shows how gold prices continue to be
underpinned by growing demand from the world's central banks. That's
important because up until 2009, central banks, who were steady
sellers, stopped selling gold altogether and instead became net
buyers as a way to diversify away from the US dollar, the Euro and
other fiat currencies. Since then, they've settled into a pattern of
gold buying that has been a major force behind the surging price of
gold. Since central banks are responsible for 16% of the total
global gold demand and are increasing their gold purchases. In all,
central banks across the globe hold 31,353 tons of gold as reserves.
As fiat currencies continue to crumble, investors can expect that
figure to rise. (So who has been doing the selling this Year?)
#5 A Currency Crisis is
Looming: Five years into this crisis, the US, Europe, and
countless other economies are still struggling. That's why the
European Central Bank and the Fed have unveiled plans to fight the
crisis and reduce borrowing costs. ECB President Mario Draghi has
since announced an unlimited bond-buying program for distressed
euro-area nations, while Fed Chairman Ben Bernanke has committed to
unlimited QE3 &QE4of so-called quantitative easing. And that
reality has ignited a crisis of confidence about fiat currencies in
the minds of many investors and governments. If all that weren’t
enough Japan just announced plans to buy Government and Real estate
bonds to the tune of $1.4 trillion.
Future sovereign-debt downgrades from ratings
agencies are another potential triggers for a currency crisis.
According to the World Gold Council:
“The
ongoing sovereign debt crisis in the Eurozone underpinned European
investors’ enduring conviction in gold’s capital preservation
properties. Demand
for bars and coins from retail investors posted a 15% year on year
increase to 77.6t; 19% higher than the five year quarterly average
of 65.2t.” In spite of the Recent Manipulated Crash in Gold and
Silver. Gold and Silver will come back stronger than ever. WHEN ?
I can’t say but SHORTLY!
Under such conditions, gold – the ultimate store of
value and the oldest existing form of money on earth will soar as
investors seek to protect their purchasing power.
#6 THE THREE STAGES OF A
GOLD BUYING MANIA
- Stage One: Currency Devaluation.
- Stage Two: Investment Demand.
- Stage Three: A Culminating Mania-Buying Spree.
We've Yet to Reach the
Mania Stage: Where are we now?
At the moment, we were half way into stage two and the
recent Manipulated Selloff of both Gold and Silver will end up being
only and minor interruption: which means the mania stage isn't far
behind.
Stage three is when people
from all walks of life start lining up at pawn brokers and coin
dealers to buy gold and silver. That's when the public finally
becomes fully aware of Fiat money’s progressive slide. It's when we
will see a market bubble akin to what we saw with "dot.com" stocks
back in the late 1990s, or US stocks in late 2007 and the Gold and
Silver markets in 1979-80 that a Mania will become obvious.
We are currently witnessing
a stock buying Mania which is not back by solid fundamentals and
therefore is NOT SUSTAINABLE.
As the mania sets in, higher prices by themselves,
beget higher prices, with gold rising in the kind of near-vertical
climb that is the hallmark of a speculative mania - a bubble. This
is when and where the $6,250 price target will most likely be
reached.
Please Note:
A team of economists believe gold could shoot even higher than
$10,000 due to a frightening "pattern" seen in our debt and money
supply that guarantees they're going to fail.
There's no mania until you witness a gold mania and
despite the fact that we've been in a powerful Gold Bull Market for
more than a decade, I believe the best is yet to come for gold and
silver prices."
SO WHY SHOULD YOU INVEST IN GOLD?
Have
you ever stopped to ask yourself why, if the economy is as strong as
the government claims it is, they’re still printing money and piling
on the debt as if it was going out of style? This is not the sign of
a healthy fiscal and monetary system. And it’s not just the US
Government; but
Governments the world over that are debasing their currencies by
lowering interest rates and many have resorted to “quantitative
easing,” a fancy term that means nothing more than printing money.
In the US, the number of dollars in circulation has tripled since
2008, while worldwide; M2 money supply is up in all G7 countries.
As
the cry to cut government spending may be reaching a crescendo, the
politicians including the President are NOT listening. The
“official” deficit for 2012 was estimated at $1.1 trillion, although
in reality it was much higher when you consider our unfunded
liabilities. Total US debt at the end of 2012 was an understated
$16.4 trillion
How has gold responded to all of this? In the four years between
January 2009 and January 2013, gold was up 90%, while the S&P
500 rose 53%.
HOW
NOW
DOW
I am still technically bullish for the very short term expecting possibly
one more spike rally, which will then be quickly reversed. When that
occurs, it will suggest that the Final rally
from November 2012 has topped. That spike rally should occur
sometime over the next week or three. There is growing evidence that
a short term top is approaching, to be followed by a sharp decline
of between 5% to 10%: That decline will sucker most everyone into
thinking that the markets are starting an overdue massive selloff.
But in may only be wave b-down
of the a-up, b-down,
c-up rally for the final wave that
will complete the multi-decade “Jaws of Death” pattern. Then the
final up wave will convince everyone that all is right with the
world, taking the Industrials toward 16,500 – 17,000, the upper
boundary of the Jaws of Death pattern creating a false sense of
security and euphoria. Once the Jaws of Death Pattern is completed,
it will mark the end of Elliott Wave’s GRAND SUPPERCYCLE 5th
and final wave of the multi-century BULL MARKET Springing the DEATH
TRAP shut. A massive CRASH will then begin and last several years
and will be worse than anything that has been seen in a century -
Grand Supercycle degree BEAR MARKET wave {A}
down will have begun.
PRECIOUS
METALS
Gold and mining stocks are putting in a bottom that will lead not only to
a strong rally, but will set the stage for a resumption of the Bull
Market for gold and silver bullion to be followed by their
respective securities.
The
Weekly Full Stochastics for gold and silver are at levels where
strong rallies started over the past five years. The coming rally
will be identified by new buy signals given in
the HUI and 30 day Stochastics.
We
are into the most trying times in our nation's history. We can
either succumb to our Government’s folly and go down with the ship
or take actions to personally prosper. As always, the choice is
yours.
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UNCOMMON COMMON SENSE
Aubie
Baltin CFA, CTA, CFP, PhD.2078 Bonisle Circle
Palm Beach Gardens, FL 33418
uncommon@aubiebaltin.com
561-840-9767
Don't forget to include your email address as well as your phone number.
Please Note:This article is for education
purposes only and is designed to help you make up your own mind, not
for me to make it up for you. Only you know your own personal
circumstances so only you can decide the best places to invest your
money and the degree of risk that you are prepared to take. The
Information and data included here has been gleaned from sources
deemed to be reliable, but is not guaranteed by me. Nothing stated in
here should be taken as a recommendation for you to buy or sell
securities. I am not a registered
investment advisor.
Monday, April 15, 2013
Gold's Bull Market Is Not Over
Gold's Bull Market Is
Not Over
Gold Is Headed Much Higher. This Is Why.
Gold Is Headed Much Higher. This Is Why.
Robert McHugh, Ph.D.
14 April 2013
14 April 2013
Above we show the big picture for Gold. Gold bottomed July 20th, 1999, wave II’s bottom. Since then, wave III up has been one of the all-time greatest Bull Markets in Gold. The question this weekend is, is Gold’s big Bull market from the July 20th, 1999 low of 252.80 over? Our Elliott Wave analysis shown above says no, the Bull Market rally in Gold is not over. Wave III so far has taken Gold up 1,670 points to the September 6th, 2011 all-time high of 1,923, which was a 761 percent gain in 12 years.
There are many reasons we do not believe Gold has topped, and believe that Gold has much higher to go. Wave threes that are not part of a triangle pattern (sometimes they can be) are impulsive, meaning they move the price vertically. These impulsive wave threes (in this case wave III) are made up of five subwaves. Above we can clearly see that wave III so far has only produced four subwaves. This means there has to be a fifth wave coming, a rally leg. In stocks, typically wave threes are the most dramatic. In precious metals, typically, wave fives are the most dramatic. Above we see that wave 4 is mature, and wave 5 up is next. We believe the consolidation over the past two years has been a wave 4 pattern, which includes a descending triangle pattern. It has been forming for 19 months. Wave 2 shown above was a zigzag decline. The principle of alternation suggests that the patterns for corrective waves 2 and 4 should form different patterns. Clearly that has occurred, which legitimizes the above count, and supports the need for a coming wave 5 within wave III.
If the coming wave 5 is to be the most dramatic move, then it will have to take Gold higher by more than the 750 points that wave 1 produced, and likely more than the 1,200 points wave 3 up produced. It suggests Gold should head for a price target of 2,700 to 3,000 when the coming wave 5 up finishes.
Above we get a closer look of corrective waves 2 and 4. They should be proportional in either time or price regression, or both, for this mapping to be correct. Wave 2 down took about 7 months and saw Gold fall a bit over 300 points. So far, wave 4 down has taken 19 months and taken 450 points off Gold. In terms of time, since this is a 14 year Bull market from 1999, those two waves pass the proportionality test, lending validity to the wave count. In terms of price decline, 300 points and 450 points are close relative to the 1600 points Gold rallied from 1999 to 2011. In percentage terms, wave 2 took Gold down 30 percent, and so far wave 4 has taken Gold down about 24 percent. Again, close. So we conclude that all waves from 1999 to 2013 are proportional as labeled, which supports the scenario that the decline from September 2011 is a wave 4 corrective decline inside a mega-rally bull market, that by definition of an impulsive wave’s required subwaves, will be followed by a huge wave 5 up rally.
Next, we want to study the pattern from 2011, labeled wave 4. We want to understand it, label it accurately, and project when it will end, and at what price it will end. Initially it looked as if wave 4 down was simply forming a five wave descending bullish triangle. However, Friday, April 12ths’ nearly 100 point plunge broke decisively below the support shelf for such a triangle pattern, meaning something else is going on. There are a ton of overlapping waves in this pattern from September 2011, so we know it is corrective, and not the start of an impulsive Bear market in Gold. Gold has not topped, and is not in a Bear market. Let me be clear about that. What is happening is wave 4 decided to become more complex. Wave fours and wave b’s are notorious for acting unpredictably, having a mind of their own, and metamorphosing from one pattern to another.
However, by breaking the bottom boundary of the descending bullish triangle, a horizontal shelf that has served to stop declines several times over the past 19 months, clarity has arrived. Wave 4 has formed an a-down, b-up, c-down move, with a-down a smaller version of the descending bullish triangle, wave b-up rallied out of the triangle upon its conclusion in a three-wave {a}-up, {b}-down, {c}-up simple flat, followed by an impulsive wave c-down move which will bring about the conclusion of wave 4.
Where and when will wave c-down of 4 bottom? One possibility is the intersection of the declining trend-channel for wave c-down we show in the second chart with the bottom boundary of the rising trend-channel from 1999 to 2013. That projects a bottom for Gold around 1,375ish to 1,400ish, around June, 2013, possibly sooner. The above labeling suggests wave {iii} down is underway, and waves {iv} up and {v} down are needed before Gold’s wave 4 bottoms.
While this is disappointing for Gold bugs, the good news is that once wave 4 completes, going long Gold should produce excellent returns.
There is another reason we believe Gold is bottoming, and that is the position of the Weekly Full Stochastics, shown on the next page. The current levels are supportive for a bottom in Gold soon, and the start of a powerful rally.
According to the above chart, Gold is about to start a strong rally. Since 2007, every time Gold’s weekly Full Stochastic fell to the 20ish level, and the Fast crossed above the Slow, Gold began a rally that lasted at least two months, some times lasting longer, and rallied at least 150 points, at least 10 percent. Gold could rise 250 points during this next rally, the first leg of a five wave rally for wave 5-up.
Gold is a safe haven during times of crisis. Political, military, financial, disease, or natural disaster events serve to boost Gold’s value. The perception that these threats are likely serves to create demand for Gold. Fiat currency hyper-creation from central banks, as we see going on now, serves to boost the value of Gold. Economic crises that jeopardize the value of currencies serve to boost the value and demand for Gold. Should one nation decide to move its currency to a Gold standard, demand for Gold could exceed ready supply quickly. The world is a dangerous place, and Fiat monetization of sovereign debt borders on the irresponsible. These fundamental issues bode well for Gold’s long-term value.
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This Is The Final Liquidation Of The Gold Bug
Mike Swanson
14 April 2013
... Now many are selling disgust. CNBC is saying that gold is done, because Ben Bernanke and President Obama have put the country on the verge of a coming economic boom. They say command and control economics is the future and anyone who doubts this by owning gold is a dinosaur. In the last month we have seen days in which good economic news comes out that gold has gone done in value. Then on days when bad news has been announced gold goes down too instead of doing up.
Then on Friday the Cyprus government said it would sell gold and give the proceeds to the European Monetary Union to finance its bank bailouts as it gives up its national birthright. It seems no news is good for gold. Goldman Sachs sent a note to clients last week telling them to short gold. Marc Faber told a reporter this weekend that he thinks gold could drop to $1,300 an ounce before bottoming.
Many are saying gold is over and there are some now that have held on to their gold positions for years and are now selling. Some are taking that money and moving it into the S&P500 in obedience to the talking heads on CNBC and really more in fear of missing out on more stock market gains than anything else. If that turns out to be a mistake well at least they won't be alone - so for many there is emotional comfort in that. They'll lose money with everyone else and that isn't as bad as possibly being all alone in gold while your neighbors in their boring mutual funds make money not knowing what they are doing. But that is not prudent investment behavior.
And Goldman Sachs isn't always right. What Goldman Sachs does with its own money and what it tells clients can be two different things. Back in March of 2000 Goldman Sachs talking head Abby Cohen told people to keep buying Internet stocks just as they topped. In July of last year Goldman Sachs sent a note to clients telling them to SHORT the S&P500 due to what they thought were signs of economic weakness in the US economy. That was a mistake and this call now to short on gold on their behalf will be proven to be one too.
"So what is going on then?" you probably are asking. Why is gold falling? What does this mean? Are all the economic risks gone? Is deflation coming? Is Fed QE the miracle CNBC's Steve Liesman says it is? Yes there are some who hate gold bugs, because they represent doubts over the Federal Reserve. They wish they would become extinct.
But gold is not going away. Here is the thing. No one really knows exactly why gold is falling, because there probably is not some big economic reason for it. The truth is markets are cruel. They go up and trap people at tops and then fall far enough to cause as many people to sell on a bottom as they can. This is how bull and bear markets work.
Bear markets do not come to an end when news all of a sudden gets better. They come to an end when every potential seller in them sells out. This is what really causes bear markets - more selling than buying. Gold has been in a bear market now since 2011. However, that is a two year bear cycle within a long-term secular bull market cycle that has been going on for gold now for over a decade and is not over yet.
There are two things you need to realize. When this gold bear market is over a new bull market will begin and those that are invested in that bull market will make an absolute killing. Gold is still up over 480% from 2001 even with its decline of the past two years. And since then gold has gone through two other major declines which lasted over a year that led to awesome gains once they ended. There is no reason to think this time will be different.
Whatever you do you need to make sure that you are in gold during that next bull market. To sell now would mean to give that up. Perhaps though you have to sell. Maybe you own too much. Maybe you are on margin. Maybe you are a hedge fund with investors that now will have no more patience for your gold positions with the S&P 500 going up the past few months. You see bear markets force people to sell for many reasons. Hundreds of millions of dollars are being forced out of the gold market right now.
Second you have to realize that there is nothing easy about trying to make big bucks out of a financial market, because financial markets are cruel. If you thought the gold game was going to be easy than grow up. But realize that nothing else will be any easier. Don't think for a second that the S&P500 is going to remain an easy game for people either. Since I've been in the financial markets there have been two massive stock market wipeouts that were just as bad - if not worse - than what we are witnessing in gold right now. And I am sure eventually once this bull market in the US stock market ends there will be another cruel bear market that will wipeout another round of investors.
This is how the stock market works and this cycle will never end. You see bull markets thrive on buying. They depend on more people putting more money into use to drive them higher. As people buy they get bullish. If someone has money and is on the sidelines he has doubts about the market. But once he buys he pushes those doubts away and proclaims himself to be a bull! That is why at major market tops bullish sentiment is widespread and just about everyone you know is in. But when there are no buyers left to get in the bull market ends as sellers take control.
As bear market start people hold on in hope. Each rally that comes appears to be the start of a new bull market, but as each successive rally disappoints more and more people sell. Sellers take control of the market. Whether the news is good or bad the market drops anyway.
You see the NEWS DOES NOT MATTER. In bull markets bad news is bought and in bear markets all news gets sold. The news means nothing. All that matters is whether the sellers are in control or the buyers. All that matters is whether the market is in a bull market or a bear market and that is ALL YOU NEED TO KNOW. Trying to figure out why gold is dropping right now is a total waste of your time. It is dropping because it has been in a bear market for almost two years now and at the end of bear markets you can get crashes and extremes in bearish sentiment as every person who is a potential seller finally sells in a giant capitulation. What you are witnessing is not some grand change in the world economy, but the mass liquidation of all remaining gold bugs. It is simply the natural process of a bear market cycle that started in the Fall of 2011.
Right now the sentiment surrounding this gold market is just about as bad now as I've ever seen it.
I have hinted at the extreme depressed sentiment including the following important indicators:
The latest development worthy of "decade extreme" or "record extreme" within the Precious Metals sector, comes to us thanks to Mark Hulbert Financial Digest. According to Mark's latest WSJ column, there has been a huge plunge in exposure of various Gold newsletter advisors. Currently, the Hulbert Gold Newsletter Sentiment index (HGNSI) is at -31% net short, a historical record low since the inception of the survey in 1997. Essentially, this means that the average Gold newsletter advisor is telling subscribers and various other clients to be short Gold with 31% of their portfolio.
I just want to plead with you, do not give up on gold! You see no one cannot predict at what exact price the current gold price drop is going to end, but I can tell you two things for sure. I can tell you first of all that gold stocks are super cheap now on a fundamental basis with many gold stocks paying big dividends - dividends bigger than you can get from buying a US treasury bond. Newmont for example has a P/E of 10 and is paying a dividend over 4.30%.
I know you are probably thinking well they were cheap a month ago too and that doesn't mean that gold and gold stocks can't go lower. And yes you are right! They can. But one thing we both know for sure all bear markets come to an end and this one will too. And once it does gold prices will explode in value and a whole new cycle of gold investors will make a mint off of it.
I plan on being a part of that. I have a little gold and gold stock position so this drop has barely made a dent in my portfolio. You see I own positions in markets all over the world and gold has just been a tiny part of my portfolio. I didn't want to buy a whole lot of it until I was sure the bear trend was over.
Now I am getting excited about the idea of buying more of it. Tomorrow morning I am going to send premium WSW Power Investors my game plan for doing just that. We are all learning lessons from these markets. You never stop learning.
If you have had no choice but to sell gold positions because of this decline or feel like you must due to the impact a further drop in gold would have on your portfolio or your job if you are a fund manager then the lesson you need to take away from this is not that gold is now bad, but that you need to manage your money differently in the future. The mistake you made was not in owning gold, but in owning too much of it or not reducing your position at the right time and taking some profits if you sold years ago.
Maybe you are in cash and are feeling no pain at all though. I do not know what your personal position is on gold as I am writing this for myself and thousands of others who will read it. What all of us must do, no matter what our current investments are, is figure out what is the best way to make money in these markets going forward. If you believe like I do that gold will go higher once again once its current decline that started way back in the Fall of 2011 is over than you must figure out how you want to be a part of that next bull run in gold and precious metals. You need to figure out when you want to buy it and how much.
You need to figure out how you want to manage your money in a bull market. You see people buy in tops and sell on crashes over and over again never learning anything, because they never stop to learn from what they have already done. Once you learn then you make money in a sustainable manner.
Bull markets come and go. So do bear markets. These cruel cycles and patterns never will end, because they are human nature. With gold we are witnessing climatic bear market crash action. We are witnessing the liquidation of the gold bug and the beginning of a bottom. The only thing left once all of the potential sellers are gone will be the few strong hands left - those will be the people who just own a little bit so they don't get crushed so much they have to sell and those simply tough enough to hold on. They are the few and the brave.
What you have to think about though isn't being tough - but getting smarter when it comes to investing. Market action like this is when it makes sense to make plans to buy. Think about last year when European markets crashed and everyone said it was stupid to invest there. No one believed, because no one was left to believe. And now the gold bugs are almost all gone too.
14 April 2013
... Now many are selling disgust. CNBC is saying that gold is done, because Ben Bernanke and President Obama have put the country on the verge of a coming economic boom. They say command and control economics is the future and anyone who doubts this by owning gold is a dinosaur. In the last month we have seen days in which good economic news comes out that gold has gone done in value. Then on days when bad news has been announced gold goes down too instead of doing up.
Then on Friday the Cyprus government said it would sell gold and give the proceeds to the European Monetary Union to finance its bank bailouts as it gives up its national birthright. It seems no news is good for gold. Goldman Sachs sent a note to clients last week telling them to short gold. Marc Faber told a reporter this weekend that he thinks gold could drop to $1,300 an ounce before bottoming.
Many are saying gold is over and there are some now that have held on to their gold positions for years and are now selling. Some are taking that money and moving it into the S&P500 in obedience to the talking heads on CNBC and really more in fear of missing out on more stock market gains than anything else. If that turns out to be a mistake well at least they won't be alone - so for many there is emotional comfort in that. They'll lose money with everyone else and that isn't as bad as possibly being all alone in gold while your neighbors in their boring mutual funds make money not knowing what they are doing. But that is not prudent investment behavior.
And Goldman Sachs isn't always right. What Goldman Sachs does with its own money and what it tells clients can be two different things. Back in March of 2000 Goldman Sachs talking head Abby Cohen told people to keep buying Internet stocks just as they topped. In July of last year Goldman Sachs sent a note to clients telling them to SHORT the S&P500 due to what they thought were signs of economic weakness in the US economy. That was a mistake and this call now to short on gold on their behalf will be proven to be one too.
"So what is going on then?" you probably are asking. Why is gold falling? What does this mean? Are all the economic risks gone? Is deflation coming? Is Fed QE the miracle CNBC's Steve Liesman says it is? Yes there are some who hate gold bugs, because they represent doubts over the Federal Reserve. They wish they would become extinct.
But gold is not going away. Here is the thing. No one really knows exactly why gold is falling, because there probably is not some big economic reason for it. The truth is markets are cruel. They go up and trap people at tops and then fall far enough to cause as many people to sell on a bottom as they can. This is how bull and bear markets work.
Bear markets do not come to an end when news all of a sudden gets better. They come to an end when every potential seller in them sells out. This is what really causes bear markets - more selling than buying. Gold has been in a bear market now since 2011. However, that is a two year bear cycle within a long-term secular bull market cycle that has been going on for gold now for over a decade and is not over yet.
There are two things you need to realize. When this gold bear market is over a new bull market will begin and those that are invested in that bull market will make an absolute killing. Gold is still up over 480% from 2001 even with its decline of the past two years. And since then gold has gone through two other major declines which lasted over a year that led to awesome gains once they ended. There is no reason to think this time will be different.
Whatever you do you need to make sure that you are in gold during that next bull market. To sell now would mean to give that up. Perhaps though you have to sell. Maybe you own too much. Maybe you are on margin. Maybe you are a hedge fund with investors that now will have no more patience for your gold positions with the S&P 500 going up the past few months. You see bear markets force people to sell for many reasons. Hundreds of millions of dollars are being forced out of the gold market right now.
Second you have to realize that there is nothing easy about trying to make big bucks out of a financial market, because financial markets are cruel. If you thought the gold game was going to be easy than grow up. But realize that nothing else will be any easier. Don't think for a second that the S&P500 is going to remain an easy game for people either. Since I've been in the financial markets there have been two massive stock market wipeouts that were just as bad - if not worse - than what we are witnessing in gold right now. And I am sure eventually once this bull market in the US stock market ends there will be another cruel bear market that will wipeout another round of investors.
This is how the stock market works and this cycle will never end. You see bull markets thrive on buying. They depend on more people putting more money into use to drive them higher. As people buy they get bullish. If someone has money and is on the sidelines he has doubts about the market. But once he buys he pushes those doubts away and proclaims himself to be a bull! That is why at major market tops bullish sentiment is widespread and just about everyone you know is in. But when there are no buyers left to get in the bull market ends as sellers take control.
As bear market start people hold on in hope. Each rally that comes appears to be the start of a new bull market, but as each successive rally disappoints more and more people sell. Sellers take control of the market. Whether the news is good or bad the market drops anyway.
You see the NEWS DOES NOT MATTER. In bull markets bad news is bought and in bear markets all news gets sold. The news means nothing. All that matters is whether the sellers are in control or the buyers. All that matters is whether the market is in a bull market or a bear market and that is ALL YOU NEED TO KNOW. Trying to figure out why gold is dropping right now is a total waste of your time. It is dropping because it has been in a bear market for almost two years now and at the end of bear markets you can get crashes and extremes in bearish sentiment as every person who is a potential seller finally sells in a giant capitulation. What you are witnessing is not some grand change in the world economy, but the mass liquidation of all remaining gold bugs. It is simply the natural process of a bear market cycle that started in the Fall of 2011.
Right now the sentiment surrounding this gold market is just about as bad now as I've ever seen it.
I have hinted at the extreme depressed sentiment including the following important indicators:
• In early March COT reported Gold short positions reached the highest level in over a decade
• In early March Gold's Public Opinion reached one of the lowest levels in at least a decade
• Last week COT reported Silver short positions reached the highest level in almost two decades
• Last week Silver's Public Opinion reached one of the lowest levels in at least a decade
The latest development worthy of "decade extreme" or "record extreme" within the Precious Metals sector, comes to us thanks to Mark Hulbert Financial Digest. According to Mark's latest WSJ column, there has been a huge plunge in exposure of various Gold newsletter advisors. Currently, the Hulbert Gold Newsletter Sentiment index (HGNSI) is at -31% net short, a historical record low since the inception of the survey in 1997. Essentially, this means that the average Gold newsletter advisor is telling subscribers and various other clients to be short Gold with 31% of their portfolio.
I just want to plead with you, do not give up on gold! You see no one cannot predict at what exact price the current gold price drop is going to end, but I can tell you two things for sure. I can tell you first of all that gold stocks are super cheap now on a fundamental basis with many gold stocks paying big dividends - dividends bigger than you can get from buying a US treasury bond. Newmont for example has a P/E of 10 and is paying a dividend over 4.30%.
I know you are probably thinking well they were cheap a month ago too and that doesn't mean that gold and gold stocks can't go lower. And yes you are right! They can. But one thing we both know for sure all bear markets come to an end and this one will too. And once it does gold prices will explode in value and a whole new cycle of gold investors will make a mint off of it.
I plan on being a part of that. I have a little gold and gold stock position so this drop has barely made a dent in my portfolio. You see I own positions in markets all over the world and gold has just been a tiny part of my portfolio. I didn't want to buy a whole lot of it until I was sure the bear trend was over.
Now I am getting excited about the idea of buying more of it. Tomorrow morning I am going to send premium WSW Power Investors my game plan for doing just that. We are all learning lessons from these markets. You never stop learning.
If you have had no choice but to sell gold positions because of this decline or feel like you must due to the impact a further drop in gold would have on your portfolio or your job if you are a fund manager then the lesson you need to take away from this is not that gold is now bad, but that you need to manage your money differently in the future. The mistake you made was not in owning gold, but in owning too much of it or not reducing your position at the right time and taking some profits if you sold years ago.
Maybe you are in cash and are feeling no pain at all though. I do not know what your personal position is on gold as I am writing this for myself and thousands of others who will read it. What all of us must do, no matter what our current investments are, is figure out what is the best way to make money in these markets going forward. If you believe like I do that gold will go higher once again once its current decline that started way back in the Fall of 2011 is over than you must figure out how you want to be a part of that next bull run in gold and precious metals. You need to figure out when you want to buy it and how much.
You need to figure out how you want to manage your money in a bull market. You see people buy in tops and sell on crashes over and over again never learning anything, because they never stop to learn from what they have already done. Once you learn then you make money in a sustainable manner.
Bull markets come and go. So do bear markets. These cruel cycles and patterns never will end, because they are human nature. With gold we are witnessing climatic bear market crash action. We are witnessing the liquidation of the gold bug and the beginning of a bottom. The only thing left once all of the potential sellers are gone will be the few strong hands left - those will be the people who just own a little bit so they don't get crushed so much they have to sell and those simply tough enough to hold on. They are the few and the brave.
What you have to think about though isn't being tough - but getting smarter when it comes to investing. Market action like this is when it makes sense to make plans to buy. Think about last year when European markets crashed and everyone said it was stupid to invest there. No one believed, because no one was left to believe. And now the gold bugs are almost all gone too.
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