Gold - REVISITED Weekly Buy Signal
On January 18, 2013, gold gave a "Weekly Buy Signal." I published an article stating such on February 7. Gold closed on Friday, February 1, at $1,670. The buy signal looked solid, the gold market had turned up, fundamentals were strongly bullish (in the assessment of many others and myself), and it looked like a beautiful sunrise after four months of darkness and downtrend in the gold, silver, and related stocks.
Sometimes it does not work out well. Examples are that gold buy signal and QE-4ever.
A golfer is normally pleased when he hits a mighty drive off the tee. Occasionally that drive fades a bit too much, glances off an unfortunately placed tree, and makes an unlucky bounce out of bounds. That golfer must hit another from the tee box, and this time he is "hitting three" instead of "hitting one."
Sometimes it does not work out well. Examples are that drive and timing the gold, silver, bond, and stock markets.
We learn something and move on. The facts, as I see them, are:
- Buy signals, such as referenced above, are good about 80 - 90% of the time. That means they don't work or are early 10 - 20% of the time. That January buy signal did not work. Sorry. It happens.
- Why? Pick your favorite explanation: The G-20 needed positive news and weak gold prices to support their paper money systems; JPM slammed the market to clear their shorts and generate profits on the way down; The Fed might slow or stop QE; the big traders are preparing for a massive run-up in gold and silver and wanted to flush as many weak longs as possible; George Soros sold gold ETF positions; Chinese and Russian buyers wanted lower prices; Chinese buyers pulled their bids due to their new year celebrations; it just wasn't time to rally; or whatever.
- Bottom line: The gold market went down. Silver was down even more, and those of you who own physical gold and silver LOST NOTHING in the take-down.
- If you are accumulating physical metals, now is an even better time than any time in the last five months. The stuff is on sale - take advantage of the lower prices.
- If you were leveraged or long the futures, you have my sympathy. I hope you had stops in play.
- Markets bottom when the sentiment is least bullish or most bearish. The sentiment numbers currently indicate massive pessimism in both gold and silver markets. Great bottoms are constructed out of overwhelmingly bearish sentiment. An article discussing sentiment is Gold & Silver Prices Drop Into Severely Oversold Area.
- Gold prices on average correlate very tightly with the total official US debt, which is over $16,500,000,000,000 and increasing rapidly (the unfunded liabilities are much higher). Read Why Buy Gold?, and look closely at the graph of official national debt and gold prices. You may not trust gold to increase in price for the next four years, but I expect that better than 99% of those who read this article believe that the national debt will substantially increase in the next four years, political "hot-air" notwithstanding. If the national debt will substantially increase, so will gold, especially if you buy it when it is severely oversold - such as NOW!
- I trust gold to more than double from here in the next four years, but that's my opinion and you must make your own decision with your investment dollars.
- Consider the opinion of someone (Bob Moriarity) who has "seen it all" from around the world. He sees a market bottom in gold and silver.
- The bottom fell out of both gold and silver, yet the fundamentals have not changed. If gold was a buy at $1,700, then it is still a buy at $1,575. If you aren't certain enough to invest actual money, wait until the rally looks more established, but don't second-guess your analysis based on the emotions of panic and fear. If sentiment is intensely bearish, then all the sellers have sold and there are only buyers left. As Bob Moriarty says, "At every bottom in a market, any market, there are 100 reasons to sell. That's why you should buy."
Gold Market Indicators
The weekly Stochastic and TDI indicators are extremely oversold - about the same as the bottom in 2008. They will probably turn up on the weekly chart with the March 1, 2013 data. Daily indicators are in a similar position - not since 2008 have they been this oversold. A rally is due and likely, but the indicators have not yet turned up.
Sentiment is overwhelmingly bearish. A rally is due.
The US government is still borrowing and spending like nothing can go wrong. The Fed is still "printing money" and, practically speaking, cannot stop without crashing the economy. This seems unlikely to change anytime soon. Debt increases are followed, on average, by the price of gold increasing.
If you are buying gold and silver for insurance, they are currently "on sale."
If you are buying for speculation, then the risk/reward balance looks highly favorable.
If you are buying for investment, then the "secret" is buy low, sell high. Gold prices are now "low."
If you believe the gold bubble nonsense, why are you reading this article?
If you want articles about gold being overvalued, irrelevant, a bad investment, and heading down, there are many to read. Here are three.
- Gold: Don't count on $1,000
- Gold - Bad Investment: 3 Reasons why I don't buy Bullion
- The Fed's gold is good -- now sell it!
In my analysis, it shows a multi-year oversold condition that is an excellent setup for a substantial rally. The correction has lasted long enough that it has "worn out" and disappointed many investors. The "weak hands" have sold and that means the gold market is ready to rally.
Will it rally substantially from here? My crystal ball is cloudy, but the charts, sentiment, and fundamentals all favor a strong rally. Time will tell.
Other good articles suggesting a bottom is at hand:
- Time to Buy Precious Metals Now
- How Close to the Final Bottom in Gold Are We?
- Gold Market Update
- The Chart That Tells You All You Need To Know About Gold
Invest wisely! Paper or metal? Debt based paper or real money vindicated by 3,000 years of history? Keynesian money printing or gold in a private vault? A helicopter drop of paper or Gold Eagles in your hand?