In October 2004, the New York Yankees did the unthinkable. They
blew a 3-0 lead and lost the World Series against their archrivals
the Boston Red Sox. Is a similar epic collapse happening in the
precious metals market?
After racking up a 144% gain from late 2008 to mid-2011, gold
prices have choked their lead against other investments and
crashed over 35%. No doubt bullion enthusiasts are still in denial,
but the luster of gold's gains - fueled by the Federal Reserve's
trillion dollar QE (quantitative easing) - have definitely
The chart below shows how the SPDR Gold Shares (NYSEARCA:GLD)
has erased 35.4% of its performance over the past 28 months. In
reality, the fixation on gold's 12-year streak of consecutive
yearly gains from 2000 to 2012 has been largely masked by a bear
market that began two years ago.
How has gold performed against other major investments from when
the Fed's QE began in late 2008 until now?
If we compare gold's relative performance gain of 60% versus
competing asset classes, we get a clearer picture of the actual
performance lag. Over the same five-year period (2008-2013), the
S&P 500 (NYSEARCA:IVV) gained almost 105%, emerging market
stocks (NYSEARCA:VWO) gained 78% and U.S. REITs (NYSEARCA:VWO)
gained more than 92% and that's not even including dividends! From
that perspective, gold has been a dog.
Profiting from a Gold Crash
Contrary to what the very wrong gold experts have said all along,
the ETF Profit Strategy Newsletter alerted its subscribers that the
real money in gold and silver would be on the short side,
especially with gold/silver mining stocks.
from Feb.14 we wrote:
"The Market Vectors Gold Miners (NYSEARCA:GDX) has lagged
both the broader U.S. stock market along with the SPDR Gold
) 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 (NYSEARCA:DUST)
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 47% and DUST has climbed 102%. In that
same report, we told our subscribers to buy JUN 40 GDX put options
at $190. In early June, we sold those same GDX put options for a
525% gain at $1,200 per contract.
Gold has already had 18 major false breakouts over the past
two-years and is acting just like the 2004 Yanks.
Gold has also been a sucker's paradise because people keep
buying it at the wrong time and the wrong price thinking they
can make a future profit by being ignorant of the prices they paid.
"The golden rule of investing: no asset (or strategy) is so good
that you should invest irrespective of the price paid," said James
Montier of GMO.
The deflationary action in not just gold but all commodities
(NYSEARCA:GCC) spells danger for other asset classes like stocks,
currencies, and real estate. That means another big profit
opportunity for investors who are correctly positioned.
Profit Strategy Newsletter
uses technical, fundamental, and sentiment analysis along with
market history and common sense to keep investors on the right side
of the market. Since the beginning of the year, 74% of our weekly
ETF picks have been winners.
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