Goldbugs knew there was going to be a massive collapse. They
just didn't know that it would be gold prices that lead the
The SPDR Gold Shares (NYSEARCA:GLD) fell -7.86% in intraday
trading today, adding to its yearly loss of 11.15%. Other precious
metals like silver (NYSEARCA:SLV) are following suit too.
Meanwhile, investors (a polite word for panic driven maniacs)
yanked $9.2 billion from gold ETPs during Q1, according to
The sudden collapse in precious metals (NYSEARCA:GLTR) has
surprised many, but not us.
As we pointed out in an article I wrote titled "
8 Reasons Gold May Disappoint
" (published on Jan. 8, 2013), gold's 12 years of consecutive
yearly gains was masked by the fact that gold has been in
correction mode since 2011. (Our chart shows a 27.7% decline from
GLD's 2011 peak to today's level.) But the biggest trade of the
year hasn't been trading against gold itself. More on that in a
Is John Paulson the Most Misinformed Billionaire on the
"Paulson Loses More Than $300 Million as Gold Declines" reported
Bloomberg on April 12. And despite those handsome losses, Paulson
refuses to change his gold strategy, which implies more losses
ahead. According to reports, Paulson has around 85% of his $9.5
billion in hedge fund money committed to gold linked investments.
In an emailed statement, partner at Paulson & Co. wrote,
"The recent decline in gold prices has not changed our long-term
thesis. We started investing in gold at $900 in April 2009 and
while it's down from its peak to $1500, it's up considerably from
our cost." Remember that $900 figure for later.
Other Gold Experts
Over the past few years, our generation has amassed some of the
best gold sound bites in history. Has any of this advice helped
people to be on the right side of the market? Here's just a tiny
sample of the toxic advice:
"Peter Schiff-Dollar Vulnerable to a Massive Collapse, Buy Gold
and Silver" - USAWatchDog.org / Sept. 2012
"James Turk $8,000 per oz. gold by 2013" - Gold Money News / Dec.
"Gold with be $3,000 bid, no offer." - Harvey Organ, gold analyst /
Despite all of the colorful theories about what will or should
happen next in the gold market, none of these expert opinions has
Gold and the Classic Bull Trap
Although gold has the seemingly perfect macroeconomic backdrop for
a massive rally, Paulson and other gold experts have been snake
bitten by gold's bull trap.
By way of reminder, a bull trap is an inaccurate signal that
tricks investors into buying an asset they think is done going
down. The bullish investor buys the asset under the mistaken
assumption the worst is over. The final result is they get stuck
with an underperforming investment that continues to decline.
The buy-and-hold gold trade isn't working today and hasn't
worked since August 2011 when GLD peaked at $184.59. Similarly, the
buy-on-the dips gold strategy hasn't worked either.
What about the increasing bearishness of market sentiment with
While overly bearish sentiment towards gold could indicate a
major turning point or reversal, it still doesn't trump raw price
action. It never has and never will.
A Perfect "Set Up"
On Feb. 14, via our
Weekly ETF Pick
update we wrote about a high probability setup in the precious
"Despite a 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. The current downtrend for mining
stocks is still in place. Furthermore, 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. Buy the
Direxion Daily Gold Miners Bear 3x Shares (NYSEARCA:DUST) at
Since our February alert, DUST has gained over 100% in value.
That's not a typo. Furthermore, our GDX put options alert in that
same report are still open and have already generated a +475%
What about now?
The velocity of gold selling hasn't yet reached Ezekiel's
selling climax. He predicted in Chapter 7 verse 19, "Into
thestreets they will throw their silver, and an abhorrent thing
their own gold will become."
What price levels do gold and silver need to hold before a
complete breakdown occurs? What levels would signal that a price
rebound is underway? The
ETF Profit Strategy Newsletter
via its Technical Forecast identifies key support levels in metals,
stocks, bonds, the euro and other major ETF
Watch our ETF Channel @