Risk vs. Reward (Au Style)
The broad market, supported by the glorified boiler rooms on Wall Street, the glorified infomercials in the mainstream financial media and the glorified monetary clerks at the Fed, operates to its own set of rules and cycles. For instance, now we have conventional investors who used make cracks about their 401k's becoming 201k's actually becoming hopeful that they will regain all of their lost value. The wonders of inflationary monetary policy has brought this prospect tantalizingly close to becoming reality. Close, but...
Over in the gold sector however, where investment is actually a form of revolution (against inflationary fiat monetary systems), it is not so easy. Investors simply must be mindful of the risk vs. reward setups at all times because the same forces arrayed in support of the stock market are lined up against the barbarous relic. I am not saying this is a conspiratorial cabal, but I am saying that macro manipulation (like the recent 'reworking' of US Treasury yield curves) is just the way it is, whether it is planned out in the shadows to the most minute details, or just the result of embedded 'business as usual' academic myopia in a fiat system.
Take today for instance; it is a fine day for precious metals investors who are prepared for it. The caution signals were all there and it is now time to think like a capitalist... like a predator... like a revolutionary... like someone who avoided the worst of what the manipulative entities had to dish out and is now in evaluation mode as to how to proceed. You are a precious metals player? You are at war. Win the friggin' thing.
With that, we take a quick reading of two indicators NFTRH and its subscribers have been watching.
Bullish Percent Index on the GDM gold miner index can continue to decline to target. Will this come with a final regurgitation and capitulation? I don't know, so that is why I am slowly picking off individual items as they come on sale. We began watching this one when HUI/GDM failed to make a higher high at the equivalent of HUI 555 in February.
We have been watching for a projected double bottom in the leading HUI-Gold ratio for the better part of a year now, since it broke below an important moving average. This has allowed NFTRH analysis to temper its enthusiasm despite wildly bullish bigger picture projections. We are almost there folks, and I suspect a large portion of the gold 'community' wishes it had more cash reserves in the event this signal registers.
When you are at war, you do not personalize the enemy. You plot, you analyze, you gain intelligence and you survive long enough to employ tactical countermeasures.
Given the sentiment backdrop, which we have also been keeping a close eye on, one wonders if the massive topping pattern on the weekly HUI (yes, we are factoring that as well) is little more than fodder for trend followers and gold perma bears to scare gold bugs with.
What the heck, let's throw up (apt wording, isn't it?) one more graph. Sentimentrader.com's Public Opinion data out just two days ago has finally taken a hard lurch down to where a precious metals bull with cash on hand would want to see it. Unless the rules have changed, you never but never feel actionably bullish when the public is red lining bullish optimism and you never but never get bearish - as long as the secular bull remains intact - when it is green lined.
The working price target for Au is lower, but we are getting there and I am getting more bullish by the week because data points are starting to converge all over the place. There is a level of concern about the technical pattern on HUI, GDM, etc., but in the precious metals, sentiment usually wins and it surely has the power to invalidate a chart pattern; neuter it if you will. We shall certainly see soon enough.
You have got to love the markets. You really have got to.