Gold - Guidance: Knowing When, What, Why and How to Profit

By: Steve Bauer | Wed, Sep 26, 2012
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Another look at Gold after nearly two months since my last posting. This past rally, and I say "past" has provided an even more clear statement that Gold is not heading up measurable soon. That includes Silver. The reason "WHY" is my insistence on the absolute need for fundamental valuations to be clearly improving and they are Not!

The longer-term horizon appears to be declining and my more near-term (fundamental / valuation) work does not support a near-term / meaningful rally. My (technical / chart) analytics suggests a pull-back which may already have started.

Gold Nugget

I follow, for guidance some 40+ Gold & Silver Mining Company as well as several prominent Precious Metal ETFs and Precious Metal Indices. For the longer-term only a handful of these Companies are forecasting strong to decent earnings growth. Even fewer are giving year over year quarterly earnings that are noticeable positive. This situation may change in the coming weeks but I tend to doubt it.

The above supports the "WHY" this past rally has fizzled and is likely to turn down very soon. Perhaps it already has.

Much is written about the "WHAT" and the "WHEN" - you may have noticed that in my articles I insist on also knowing the "WHY!"


F + C = R Accurate Forecasting (plus) Precise Confirmations (equals) Results (Consistent Profits)

Forecast Accuracy

Now that I have, joined the ranks of a Gold and sometimes Silver authors in this fine financial blog (SafeHaven.com) I hope you will find that - offering my guidance will be of help to your on going profits in these Commodities. I will keep you apprised of my views by using the rather simple Table of ETFs below. Let me know if you need further guidance and I will respond promptly.

My focus for the analytics of precious metals is focused on: Principle on the Miners, Gold & Silver & Copper Indices, the ETF, SPDR Gold Shares (GLD) and just ten Mining Companies. Another couple ETFs I like are (GDX), its junior partner (GDXJ) and (SLV). 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! "Misconceptions" are created by Very Poor Advice coming from those who fail to look at the Big (Longer-Term) Picture.

Gold 1977-2012

The above very long-term graphic of Gold's performance, offers an important perspective of why there are Never Any 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 and I expect more down-side.

If you need some encouraging news, I suggest you stay tuned to my future articles on Gold. I do see some positive and profitable possibilities. 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.


ETFs Rated - September 26th. (my first article on Gold)

ETF- Symbol Price Rating & Direction Guidance / Forecast (near-term)
GLD $158 69 / D+ - - 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.
SLV $33 69 / D+ - - descending Hold Cash, the next move is Down.

Two Year ETFs Chart for Gold & Silver -- September 26th.

GLD 2-Year

Two Year ETFs Chart for Gold & $Silver -- July 30th.


Gold Miners Valuated as a Group

You might wonder why I take great pain in Valuating so many Miners as a group. The answers are that few Investors, Financial Analysts and Bloggers 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 them selves 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 Indicators. Valuation work is also very time consuming. My theory of Investing Wisely is if something works as well as this does, I will do it (long hours or not) until the cows come home and you can bet on this old Tortoise every time.


Industry Status

Buy/Sell/Hold

The Gold and Mining Industry is and has been weak for almost a year. This fact is confirmed, both fundamentally and on the charts. The industry group is technically in sync with its fundamentals. That means that current Valuations have Not been all that strong leading into this time frame. 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 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 must always be answered is, do you Buy, Sell or Hold? At this time I advise your Holding Cash. I hope you like my guidance in your search for consistent 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.

Twenty-Year Chart of Gold and Silver
Larger Image


My Wrap on Gold

Gold Forecast

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 cyclically turn bearish, and is just the on-going "cycling effect" of the way the stock market and Gold / Precious Metals 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 / Precious Metals.

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 profitable difference. When buying or selling, taking a longer-term view of a security's price history is often the difference between profits and losses!


Conclusion

I am currently bearish on the world economies and the general stock market and Gold / Precious Metals. 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!

 


My Email Address is: senorstevedrmx@yahoo.com
Thanks for permitting me to share my "stuff."
I would appreciate your Telling a Friend or Two about my postings here in SafeHaven.com. It is by far the best financial blog on the web.

Smile, have Fun - "Investing Wisely",

 


 

Steve Bauer

Author: Steve Bauer

Steven H. Bauer, Ph.D.

Steve Bauer

Steve has several degrees, i.e. post graduate degrees and doctorate and a great deal of (too much) continued education. For seven years, he did a stent as a University Professor of Finance and Economics.

Dr. Bauer also writes for SeekingAlpha.com. His articles can be viewed at: http://seekingalpha.com/author/steven-bauer?source=search_general&s=steven-bauer

He owned a privately held asset management firm and managed individual investor and corporate accounts as a Registered Investment Advisor - for over 40 years.

Professionally he is a financial analyst and private asset manager / consultant / mentor.

Steve can be reached at senorstevedrmx@yahoo.com

Copyright © 2010-2013 Steven H. Bauer, Ph.D.

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