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Gold – The More Hate, The More Bullish We Become
After gold's breakdown on Sunday July 20th, we have seen an avalanche of negative commentaries. Admittedly, from a chart perspective the breakdown does not bode well. We have to get that straight. The technical breakdown is going to lead the price of gold in US dollar terms towards $1,000 /oz, potentially lower.
But if we compare this breakdown in gold with the one in April and June of 2013, we would say the one from last week is a small dip on the long term chart while the one of 2013 was a real collapse.
However, the negativity that was triggered by the latest small price drop is much stronger.
Consider the following mainstream media headlines of the last week:
- "Let’s Be Honest About Gold: It’s a Pet Rock" (Wall Street Journal)
- "Gold is Doomed" (Washington Post)
- "Gold Is Only Going to Get Worse" (Bloomberg)
- "Two Reasons Why Gold May Plunge to $350 an Ounce" by (Market Watch)
- "Gold's tumble is far from over" (CNBC)
- "Deutsche Bank says gold’s fair value is $US750 an ounce" (AFR.com)
- "Wall Street Bets Gold Drops Below $1,000" (Barron's)
- "Are There Any Reasons to Own Gold?" (Bloomberg)
From those articles, we selected the three most impressive quotes:
- “Gold is a weird relic of antiquity.”
- "Gold won’t just drop below $1,000 an ounce but, eventually, to a far, far lower price."
- "Gold is out of fashion like flared trousers: no one wants it.”
News headlines are a great way to gauge sentiment. And they are simply telling a 'hate story' currently.
In particular, that one last quote of the ones above is very interesting: “no one wants it.” Really? Nobody? As in, “this time must be different?”
Let's face it. Markets can become extreme, but markets do not remain endlessly at extreme levels. They also do not trade endlessly in one and the same direction.
Along the same lines, sentiment as measured by statistical methods is simply confirming what we see in the news headlines. Sentimentrader's optimism index for gold stands at 12 on a scale from 1 to 100 (the latter being the highest value). And guess what, gold has currently the lowest reading from all assets (including currencies, commodities, stock market sectors).
The bullish percent index for gold miners, which measures the number of stocks in a bullish trend, is standing at zero.
The sentiment surrounding gold can't almost get worse. But if 'everyone' is bearish, and there are no more sellers left to sell, what will take place in such an environment? Indeed, buyers will pop up.
Although we do not believe that markets trend higher or lower based on 'reasons', we still think there are two signals that indicate there is not much downside left for gold.
First, there are smart market participants, always. They also see the current sentiment. If the majority of market participants do not want to buy gold, then smart investors will do the opposite at the time selling is exhausted: go long in that market.
We believe those 'smartest' participants are the commercial traders in the COMEX futures market. Please note that we do not promote COMEX, as we firmly disagree with the way COMEX works (price discovery in gold is meaningless given the futures market). But the positions of market participants at COMEX provides interesting insights.
Today, we see that commercial traders are writing history: they hold the smallest net short position ever (since the COT report has been published in 2006).
In other words, they are positioned for a rally. And they are doing so right at the time the mainstream media is screaming that “no one wants gold.”
Source: Sharelynx
The second indicator we rely on is the top of crude oil and gold in 1980. Even if gold would go towards $850 /oz, it would be acceptable to believe it remains in its long term bull market, as it would simply retest the 1980 high.
From a secular point of view, the 1980 top was the highest point of the previous secular bull market.
We find a similar situation in the crude oil market. The price of crude oil peaked in 1980, after which it was tested 24 years later (when it broke out) and 29 years later (support did hold). Crude is now close to test that price level again.
Source: LY Advisors
Let's not forget that the price of gold and crude oil are reflecting the world around them. The only possibility to have oil and gold prices in the trading range of the 80s and 90s, is a deflationary bust of historic proportions. The monetary masters of today are doing 'whatever they can' to avoid deflation, and that should, in the end, translate in the price of oil and gold.
Please mind that we are not saying that gold is about to start a strong bull market right away, similar to the one between 2004 and 2007. Our point is that the downside is limited. Even after a bear market rally which we anticipate in the short term, the price decline can continue, but it should have sufficient stopping power around the $850 /oz level. That makes for a 15% to 20% downside potential.
So rather than panicking, we look at the level of hate surrounding the gold market, and we become more bullish by the day.
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Obviously, no one has told these jerkoffs that the best time to buy is when no one else wants the asset.
It's called value investing, aka smart investing, the secret to success.
"The monetary masters of today are doing 'whatever they can' to avoid deflation, and that should, in the end, translate in the price of oil and gold."
I disagree.
It seems apparent that the monetary masters are doing whatever they believe is in their own interest. They have most recently been printing seemingly infinite amounts of debt-money and buying valuable and productive assets with debt. Mind you, the banks don't have the debt themselves ... they cannot, they create debt and create money. However, they own the claim on the assets that the debt has purchased at whatever price.
In essence, the banks own all equities and real estate and whatever else has been purchased with their debt-money.
And, for the most part the banks have been happy to collect interest on their debt with no expectation that the principle will be paid back ... because mathematically it cannot be paid back. The banks are also pleased with the amount of control holding the debt gives them. The debt allows them to corrupt whomever they choose and dictate their actions.
Based on the above, do I believe that the banks will do anything they can to avoid deflation? No, I do not think that the banks care anything about society as a whole or the wellbeing of the world, other than as it serves their covetous nature. I think the banks currently believe a functioning world is better for them than a completely dysfunctional world because it is harder for them to control a dysfunctional world... and that is the only reason.
So, the banks sit poised with their finger on the button, always threatening to blow things up so that they can continue to extort and corrupt ... as is their way.
Gold: Use the cockroach strategy
http://deviantinvestor.com/7238/gold-use-the-cockroach-strategy/
President Lyndon B. Johnson on July 23, 1965 regarding the act that removed silver from U.S. coins:
“Our present silver coins won’t disappear and they won’t even become rarities. We estimate that there are 12 billion – I repeat, more than 12 billion silver dimes and quarters and half dollars that are now outstanding. We will make another billion before we halt production. And they will be used side-by-side with our new coins.”
“Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coins. There will be no profit in holding them out of circulation for the value of their silver content.”
Yea, well he was another in a long line of stupid shits holding that office.
Corrupt, not stupid.
What I want to know is what exactly is "full faith and credit" ? Is that the ability to drone the people of the world when they threaten hegemony or send out the Nazi IRS to beat fucking dollars out of citizens while the corrupt politicos steal everything not tied down, expand the money supply exponentially and promnise ignorant dreggs and illegals free shit to the end of time to buy votes ? Fuch Janet Yellen and Barack Obama , I have no faith in those lying ass holes and they have no credit with me.
Stormtrooper
As Demi Moore uttered in G.I. Jane, "Kiss my a$$" But nice Try!!!
Thanks! I take that you ain't sellin either.
Im buying as much as I can get my hands on from commissions earned by helping others acquire physical bullion.
if you're interested in helping people get some physical bullion and earn your bullion for WAY below spot price for helping them - get in touch - you might be very pleasantly surprised by what can and is being done..
www.teamramgold.com
So, with all of the bearish sentiment, why won't anyone sell me their gold for$850/oz? I'm willing to buy their pet rocks.