December 29, 2016
This is the beginning of a great question from David which is from the previous post and is worth a read, along with many other comments:
I think we are in the process of making a secular low in the PM complex as you have mentioned many times as well. Right now every newsletter writer and his mother are predicting sub 1100 gold if not lower. So again have to agree with you on the sentiment. It is awful.
From a cyclical perspective, we may see some volatility in the next few months but then we are we are headed higher for the next 3-5 years. There will be corrections along the way but the line of least resistance will be up.
Yes, I agree with David and believe this process (accumulation) began in April-June 2013, and we are in the final parts of it. But there will still be more volatility/entry points next quarter. The rally out of that low, in January for GDX, was different than all of the other rallies since the 2011 highs. It was much more sustained and powerful. The character of the market had changed. Next year will eventually be another good year for gold shares, as this one was actually pretty darn good. Also, yes the sentiment has recently been awful in gold, but that is changing. There was a rush by speculators to sell shares, and now they are reversing that situation. And on the sentiment thing, there is a pretty famous guy who seems to have a bit of a grudge against gold. People have sent me his comments calling for much lower gold prices. He may be right, but my answer remains that this late year time frame will be a retest at a higher level, with a rally out of December and another push lower in the 1st quarter. There are people all over the place who have been extrapolating their lower price for gold. So just like the selloff caused doubt amongst many gold bulls, now it’s the gold bears’ turn.
Just like agriculture, the PM miners have been in a huge trading range, with a few failed attempts to push higher, for decades. The potential here is enormous, which is one reason why last December I was so bullish. The XAU index in January actually went below the October 2000 low. But very cheap can get even cheaper, as we found out for several years. So no matter how cheap something is we can’t get sloppy with our entry points. It always looks easy looking in the rear view mirror, and on a long term basis. However, when we narrow the time frame and look at the GDX chart I’ve been running this year, and remember what we’re going thru now, the reality of this business is more apparent.
The light volume a few days ago didn’t bother me, as I believed it would reappear, and it did today, as another sign of strength – they are adding up. The sentiment overall in gold is awful. And although bonds are in a major bear market, currently the sentiment there is just as bad. While the sentiment in the stock market is pretty giddy. And I’m still bullish overall on the US$, the sentiment there is also “what could possibly go wrong”. The comments section from the previous post discusses these sentiment issues, plus taking trading profits in MUX today, GDX resistance, sitting tight in the gold shares, and more.
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.