How ugly has the gold market gotten? So ugly that even goldbugs
are completely dazed and confused.
Here's just a brief summary of their hilarious views over the
past few months:
Gold's Uptrend is Still Intact: Peter Schiff - Yahoo! Daily
Ticker (Dec.6, 2012)
Gold at $5,000 and beyond: Peter Schiff sticks to his call -
MarketWatch (Feb.13, 2013)
James Turk ups his $8,000 an ounce peak gold price forecast to
$11,000 - Arabian Money (Jan. 6, 2013)
Gold Bets: John Paulson Loses $1 Billion - Hedge Co. (May 6,
Should it really surprise us the gold experts have been so badly
wrong about the direction of bullion prices?
The fact is they ignore every important technical and
fundamental data point that contradicts their bullish views.
Plus they have a heavily vested interest in being bullish on gold
(NYSEARCA:GLD) and silver (NYSEARCA:SLV) because it's good for
their businesses. Schiff and Turk both have large marketing
enterprises that sell physical bullion to the public. Paulson rakes
in hefty fees for making quarterly appearances about why he's still
bullish on gold.
Meanwhile, as their customers continue lose money, gold experts
are laughing all the way to the bank. (And the customers that
suffer from Stockholm Syndrome don't just enjoy losing money, but
they like defending their captors.)
The uncomfortable truth is that gold prices have been in a bear
market since 2011 and gold investment demand is down 51% over the
past year. (see table)
Anyone that's bought and held physical gold and silver bullion
over the past two years probably knows that much. But it gets
Gold Markups Add to Pain
The typical markup that bullion dealers charge customers is between
5% to 8% over spot prices and others (we won't mention any names)
skim even higher percentages!
If there's anything that could ever make a ghastly pawn dealer
look good, it might be grotesque the food chain markup in the
physical bullion marketplace.
Here's how it works:
The U.S. Mint marks up the price of coins it produces (usually
around 3%) to cover the value of the metal along with minting,
shipping, and other costs. Authorized purchasers who buy from the
Mint add their own markup. And if they sell to dealers who sell to
the public, another markup gets added. Guess who's at the bottom of
the food chain? That's right, physical bullion buyers.
And if bullion buyers are unfortunate enough to purchase
fractional coins, they get hammered a little more. That's because
the markups for fractional coins, like a half-ounce or
quarter-ounce, routinely reach above 10% to 20% of spot
Here's what it means:
In a rising gold and silver market (NYSEARCA:GLTR), rising
prices can cover the steep transaction costs for buying and selling
physical bullion. Conversely, in a sharply declining metals market
- as we have right now - it's impossible for lower prices to cover
the ridiculously high transaction costs of taking physical
delivery. And if we include the cost of storage and insurance, the
pain worsens and that's why owning physical metals are turning out
to be a bad investment. Will it match the cold spell from 1980 to
Profiting from a Gold Shock
Contrary to what the very wrong gold experts have said all along,
Profit Strategy Newsletter
alerted its subscribers that the real money in gold and silver
would be on the short side.
In our Weekly ETF Pick from Feb.14 we wrote:
"Despite a modestly rising stock market, the Market Vectors
Gold Miners (NYSEARCA:GDX) has lagged both the broader U.S. stock
market along with the SPDR Gold Shares (
) by a very significant margin. At present, GDX trades around
$41.50 and is well below both its 50 and 200 day moving
average. Buy the Direxion Daily Gold Miners Bear 3x Shares (
) at these levels. A double digit slide for gold would
likely translate into a 20%+ loss in mining stocks. This scenario
offers some big upside potential for bears."
Since then, GDX has slid 33% and our Feb.14 DUST trade resulted
in a +29% gain. But that's just the tip of the iceberg.
In that same report, we told our subscribers to buy JUN 40 GDX
put options at $190. Today, those same GDX puts are up +525% to
$1,200 per contract.
Our GDX trade was a grand slam, but forget about what already
happened. What's coming next in the gold market will shock the
The cute idea that frenzied buying of physical bullion by
Chinese and Indian consumers is a bullish event is laughable.
Consumer sentiment is always a contrarian indicator, as the gold
experts, once again failed to mention. The sign of any market
bottom - gold included - isn't panic buying, but panic selling.
(See Ezekiel 7:19)
Our examination of the precious metals market points a very high
profit opportunity for investors and traders who are 1) on the
right side of the market, and 2) who are correctly positioned in
the right investments. The gold shock could turn out to be one of
the biggest investment themes the experts never saw
The ETF Profit Strategy Newsletter and
cut through the daily reams of misinformation bytelling subscribers
what to buy, what to sell, and when to do it. Our no bull
approach is known worldwide.
P.S. If you hated this article, then you'll love the one I wrote in
January titled: "
8 Reasons Gold May Disappoint in 2013."