The Great Gold Crash of 2013 is one of this
year's biggest investment themes the gold experts never
saw coming. And most of them, after being utterly blindsided, are
still in complete denial.
Look no further than Mr. Loudmouth himself, Peter Schiff. Here's
what he said on June 11 in an interview with Futures Now:
"Gold can certainly make a move up to $1700 or $1800. When
the world figures out the position we're in, it's gold that's
going to the moon."
Lest we remind the dear reader, this is the same Mr. Schiff who
on Feb. 13 said in a MarketWatch report he was sticking to his
$5,000 per oz. gold forecast. And before that, on Dec. 6, 2012,
Schiff told Yahoo! Daily Ticker that "gold was still in an
To be fair, Schiff is not the only gold expert who's been long
and wrong about gold. Mr. Schiff is joined by a venerable list of
other "smart money"* guys, that remains bullish on various gold
linked assets. This includes David Einhorn, Dennis Gartman, James
Turk, John Paulson, James Grant, and Marc Faber.
For the rest of the world, (not the one with its ostrich head
buried in the sand, the other one) it's important for you to
understand a few gold facts:
1) Global gold investment demand is down 51% over the past
year. (Source: World Gold Council)
2) Gold has already met the generally accepted definition of
bear market, with it 20% decline from peak to trough.
3) Gold and other precious metals are in the midst of a
severe technical downtrend.
4) Gold is underperforming every major asset class. (See relative
performance table below)
5) Gold manipulation or not, being short or completely out of
gold, has been the right place to be.
In ETF land, the SPDR Gold Shares (NYSEARCA:GLD) has declined
around 23% in value and is down over 32% since August 2011. And
gold mining stocks (NYSEARCA:GDX) are down a breathtaking 52% over
the past two years. The sign of a true bottom, as with all markets,
are panic stricken sellers, not brainwashed buyers who are
delighted to buy more.
Learning from Their Mistakes
In the meantime, we can't help but wonder the following question:
Why do experts like Schiff & Company continue to be so wrong
about the direction of gold prices? As we see it, there's a few
reasons behind their epic failure.
First, gold experts have heavily vested interest in being
bullish on gold (NYSEARCA:IAU) 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.
Just as Harry Houdini fooled his audience with eye tricks, gold
experts extrapolate impressive data and deflect attention from
gold's real price action with scare tactics and dogmatic arguments
about why gold will soar.
Second, gold experts have zero trading discipline. This is
mainly because they don't use protective stop losses to guard
against catastrophic declines. John Paulson alone is sitting on
roughly $1.5 billion in losses from busted gold bets. For the
experts that tell you to buy physical bullion, you can't protect a
physical gold position with a stop loss and besides that, hedging
against lower prices isn't how goldbugs are bred to think. Instead,
goldbugs continue to be married to the gold trade, until death do
them part or they get slaughtered or whichever comes first.
Finally, gold experts suffer from a behavioral disorder that
psychologists refer to as "affinity bias" disorder (ABD). Instead
of carefully examining the soundness of an investment, ABD causes
the individual to buy investments they are enamored by, but that
may be disadvantageous. ABD can trick a person into buying things
that reflect their social or personal biases, rather than a clear
headed and subjective analysis of the real opportunity.
Profiting from the Gold Shock
Contrary to what the very wrong gold experts have said all along,
the ETF Profit Strategy Newsletter, since early 2013, alerted its
subscribers that the real money in gold, silver, and miners would
be on the short side.
Besides troublesome charts, we observed incredible market
distortions between the relative performance of gold versus other
major asset classes. These dislocations were (and are) especially
pronounced in gold mining stocks (NYSEARCA:GDXJ).
In our #Timestamped
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 mid-February, DUST has gained 199%. And in that same
report, we told our subscribers to buy JUN 40 GDX put options at
$190. In early June, we booked a +525% gain in those GDX puts at
$1,200 per contract. (Our latest time stamped metals trade is
already up over 100% and is still an open position.)
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 ETF Profit Strategy Newsletter and Technical Forecast cuts
through the daily reams of misinformation by telling subscribers
what to buy, what to sell, and when to do it.
In summary, the moral of the story is that even convincing
arguments about why gold prices should rise can be badly wrong. Let
real life price action be your guide - not dogmatic
P.S. Watch our latest video:
How Gold Experts are Misleading the Public
*A decoy phrase for "dumb money"
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