This just came my way, and I thought it was fascinating? Why? For one simple reason: This fellow sees this market just as I do. He notes where the recent low was, back in December. He also notes, as I have been since then, that there has been NO trader/investor interest generated in this market since its reversal from 12/23.
In other words, using tools that I do not have in my bag, this guy sees the very same thing that I do, and he’s got access to analytical data, such as the COT report and ETF shares outstanding data that give him excellent sentiment measures. I was going strictly by price and volume in the charts, and his tools confirmed, with measures of extremes by his 2 particular tools. Check THIS out!
“For the First Time in a Year, We Have the ‘All Clear’ to Buy Gold
I expected to write this story months ago… But gold investors are remarkably resilient. They take a beating, and they don’t give up.
I’ve been waiting for gold investors to give up before buying… They finally have.
That means we have the chance to swoop in while things are cheap and the trend is moving in our favor.
I hope you’re excited. I know I am.
Because for the first time in nearly a year, we have the “all clear” to buy gold.
Let me explain…
Investors Have Finally Given up on Gold
I made a lot of enemies at the end of July…
I was a keynote speaker at the 2016 Sprott Natural Resource Symposium in Vancouver – maybe the first speaker at the event… In a room full of gold bugs, I told the crowd that I had personally sold all my gold and gold stocks the day before the conference.
The attendees thought I was crazy… Apparently, selling gold and gold stocks is never OK.
But as I explained in the January issue of True Wealth, it was exactly the right thing to do at the time.
Based on several measures, gold had gone from one of its most hated levels in history at the end of 2015, to its most loved level in history in mid-2016.
The chart below is the simplest way to see it. It’s one of my old favorites, the Commitment of Traders (COT) report for gold. Take a look…
The COT report shows what futures traders are doing with their money. It’s a fantastic contrarian indicator because when futures traders are all making the same bet… the opposite tends to happen.
That’s what we saw at the end of 2015… Futures traders were all betting on lower gold prices. That was the crowded trade.
And after years of falling gold prices, that ended up being the bottom.
Prices bounced back in 2016 and futures traders quickly changed their positions.
By July, the COT report showed traders were “record bullish” on gold. That’s when we sold the first half of our gold-stocks position. And it’s when gold prices began a six-month fall to end the year.
Now, futures traders are getting less bullish today. They’ve been losing money and reversing their bets.
Of course, the COT report isn’t the only place we see this. The picture is the same with retail investors. These folks tend to own “paper gold” – or the major gold ETFs.
Many investors don’t realize how much we can learn from studying ETFs. These funds create shares when investors put new money into them, and they liquidate shares when investors pull money out.
That’s a powerful tool. It means we can look at the share count of major ETFs and see what investors think about that idea right now.
In the case of gold, they’re scared. They’re taking their money out, and fast.
Ordinary investors had been selling gold for years before sentiment finally bottomed in late 2015. The SPDR Gold Shares Fund (GLD) saw 70% of its total assets disappear during that time. But then gold prices began to rally, and investors quickly came back.
The fund’s shares outstanding rallied 56% in just a few months. And they peaked alongside gold prices last year.
They’ve been declining ever since… falling 18% from last July through this January.
Just as you’d expect, investors have been throwing in the towel after months of losses. We’re not at extreme levels of disinterest yet… But ordinary investors are no longer optimistic.
So these buyers are giving up… But why buy today?
The reason is the trend… The downtrend in gold has finally reversed. So we’ve reached the point where gold is both hated AND in an uptrend. Perfect…
The Trend Is Back… So We’re Buying Gold
In the January issue of True Wealth, I said that gold could have a fantastic move higher in 2017. But we needed to wait for the “buy” signal. Here’s what I wrote…
We will be gold buyers when two things happen: 1) Gold becomes a bit more hated, and 2) the uptrend returns. That may take a few months.
I expect gold and gold stocks could be a top-performing asset class, particularly in the last six to nine months of 2017. I will let you know when we get the big “buy” signal.
A month later, both of these boxes have been checked… gold is more hated today, and the uptrend is back.
The chart below shows it. Gold prices bottomed on December 15 – a day before last month’s issue was published. But they’ve jumped nicely since then. Take a look…
Gold prices are up about 6% since their December bottom. That’s not a huge move, but the trend has clearly reversed.
It’s also important to note that the sentiment measures we talked about above haven’t reversed yet… That tells me that investors are still skittish toward gold. They don’t believe the recent rally.
That’s great. The biggest gains often happen when no one is paying attention… or when they’re too scared to act.
That’s the situation we have in gold today. The trend is up but everyone is scared. Perfect.
Needless to say, I was thrilled to read what Steve had to say… now, if his analysis is any good at all, is to wait for current risk from this recent rally to be wrung out, and for a new rally to commence that would show any trader/investor interest by way of expanding volume!
It’s what I look for everyday, right here. So, hang in there. Keep looking in, because when ever this should ever actually catch fire, and we are aboard for it… we’ll make more money trading in precious metals mining shares than you ever have before, doing anything else.
My most recent take is that I can see mining shares having reached a place of technical price support, but it’s now necessary to see if it will hold, and provide a place from which this market might actually launch from again.
Then, take note of this, because, if it should, it will have established a higher low, which is technically very significant to chart traders… here’s to your accumulation of real wealth!
Harold F Crowell