Precious metals are getting crushed (again). This time it's
allegedly because the Federal Reserve hinted that curtailing its
monthly purchases of $85 billion in U.S. Treasuries and mortgage
securities could happen within months. Reality, however, rooted
upon real life price action, says otherwise.
The bear market in both gold (NYSEARCA:GLD) and silver
(NYSEARCA:SLV) actually began two-years ago - long before the
QE-taper was even an embryo in the Federal Reserve's mind. Put
another way, the correlation between the Fed's QE spending pattern
and precious metals prices has been completely disconnected for
more than two years. And the theory that relentless QE is bullish
for gold simply hasn't been true.
This is a very important point because it means the gold market
isn't reacting based upon the Fed's behavior - as gold experts and
the media would like you to believe.
Gold Experts are Misleading the Public
After peaking in late summer 2011, gold has since fallen 33%
while silver has collapsed 54%. In other words, the genesis of the
current bear market in precious metals began during the height of
QE - when goldbugs least expected it. This was also a time period
that was supposed to be most bullish for gold.
What about gold fundamentals?
Aggregate gold demand is down 37% year-over-year in all
categories, according to the World Gold Council's Q3 2013 research.
(See table) Investment demand for gold is down 65% and global
central bank purchases are down 33%. And anyone who says that gold
demand is going up has fairyland view of the
Profiting from a Gold Shock
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.
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 (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 55% and DUST has climbed 99%. 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. In early June, we sold those same GDX put
options for a 525% gain at $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
Gold has already had 17 major false breakouts (see chart
above) over the past two-years and another profit opportunity
awaits investors who are correctly positioned.
Furthermore, the deflationary action in not just gold but all
commodities (NYSEARCA:GCC) spells danger for other asset classes
like stocks (NYSEARCA:IVV), currencies, and real estate.
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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