Gold - Guidance: Knowing When, What and How to Profit
As you know, this fine financial blog (SafeHaven.com) is laced with commentary on Gold. So, having been an accurate forecaster of Gold for over 50 years, I would like to join the ranks of other authors here at SafeHaven.com. offering my guidance. I will keep you appraised of my views by using the rather simple Table below.
My focus for the analytics of precious metals is focused on: Gold Indices, the ETF, SPDR Gold Shares (GLD) and just ten Mining Companies. Another couple ETFs I like are (GDX) and its junior partner (GDXJ). Typically, gold and silver along with the above securities all move in sync. I am in the midst of pulling away from that theory and treat gold and silver separately.
As you also well aware, the highs in Gold were registered way back in August of 2011. I took my clients to Cash early in November 2011. My decision at that time was largely based on my matrix of the individual gold minors and the above referenced ETFs.
My current recommendation for gold is to continue to hold cash. Any resumption of any rally is sometime down the line, definitely not now and likely not soon. As a matter of fact I am expecting another pull back.
We all know that investors in gold lean heavily on their position that gold, over time, works as an inflation hedge. This position or thought carries with it some meaningful time periods of argument.
The below chart / graphic (1974 to recent date) clearly shows two positive exponential gains and one very long declining period that convinces me that gold is not what you are lead believe by many authors and gold bugs. I suggest that any investment that goes up more than inflation can be considered an "inflation hedge." Obviously, as with any other asset, it matters greatly at what levels you buy it. Perhaps even more important is when you sell it. At the tail end of a giant bull market, gold as in any other over-inflated asset does not hedge inflation properly. Misconceptions and distortions of facts and data can be very expensive!
The above very long-term graphic of gold's performance, offers an important perspective of why there are no sure bets, to lean on for making money any more. What you are told by many bloggers and financial analysts that appears to be golden can often be a major disappointment. Investors who bought gold in late 1979 or early 1980, spent 20 years absorbing losses. Not only did gold NOT compensate for inflation, it compounded its negative effects on purchasing power and your portfolio had some meaningful hurt.
More recently, gold has been a disappointment to many investors while it has been mostly treading water and ebbing south. Gold is trading well beneath its all-time high of $1,924 an ounce on September 6th 2011 and well above its subsequent low near $1,520 in late December 2011. With the continued hype by supposed advisors, most investors expected higher prices for gold this year. Since late January the price of gold has declined about seven percent and I expect more down-side.
If you need some encouraging news, I suggest you stay tuned to my future articles on gold. You may want to share your thoughts with me via Email. In all due respect there is very little good advice being published on gold, silver and precious metals. Analyzing the fundamental situation and staying close to the news is important, but the analysis would be incomplete without referring to long term technical charts.
|ETF- Symbol||Price||Rating & Direction||Guidance|
|GLD||$158||72 / C -- descending||Hold cash, the next move is down.|
|GDX||$46||68 / D -- descending||Hold cash, GDX is weaker than GLD.|
|GDXJ||$21||65 / D -- descending||Hold cash, GDXJ is the weakest of all. But, it may very well signal the next bullish inflection point.|
Gold Miners Valuated as a Group
You might wonder why I take great pain in valuating the miners as a group. The answers are that few Investors and others take the time to do the rather complex job of fundamental valuation. Valuation is a better lead indicator than any technical analysis ever invented. Us old guys believe that statement, unfortunately the younger folks seem to want to align themselves with the heir and forget that the tortoise won the race. In addition valuation provides me with my own private ETF and in-turn my own Very Accurate Indicator. Few financial analysts do valuation work anymore because it is so time consuming. My theory is if something works as well as this I will do it until the cows come home and bet on the tortoise every time.
The gold and mining industry is and has been weak for almost a year. This fact is applicable, both fundamentally and on the charts. The industry group is technically in sync with its fundamentals. That means that current Valuations are not that strong. I do have some encouragement to offer. Valuations are improving. Under bullish circumstances this would be a positive remark. However, it is clear when looking at the above tables and the charts below that the outlook remains negative. This current situation is not unusual, and only time will provide clarity as to that old question. The question that is yet to be answered is, do you buy, sell or hold? I hope you like my guidance in your search for profits.
The below 20-year Chart provides an excellent picture of both Gold and Silver. Taking time to study it just a bit will prove to be worth your time.
My Wrap on Gold
Currently, the above tables and charts present a clear and not-so-positive account of these ETFs and the seven mining companies. It is a fact that, the stock market cycles endlessly, both fundamentally and technically, from bullish to bearish and then back to bullish again. Unfortunately, this is a pattern that is not well-understood or taken advantage of by most investors. Just so you don't miss my point; gold does the same thing as the stock market, only it has a different pattern.
Within this present bearish time frame, there is nothing (longer-term) wrong with these ETFs and mining companies. It is simple what happens when they turn bearish, and is just the on-going "cycling effect" of the way the stock market and gold works.
I hope you understand and will continue to follow my work / analytics. It won't be long before I can offer you a bullish and up-beat forecast once again for the general market and for gold. I preach patience and discipline for investing wisely in the stock market. Try using these tools and see if your annual profits don't improve, markedly. you will find that it will make a big and positive difference. When buying or selling, taking a longer-term view of a security's price history is often the difference between profits and losses!
I am bearish on the world economies and the general stock market and gold. In today's financial world, I suggest that it is vitally important for you to understand that holding cash during questionable time frames in the marketplace is a much wiser choice than holding your present security's positions. I can assure you that; this is definitely a "questionable" time frame!
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