Back in December very few investors were bullish the metals.
After all, silver (NYSEARCA:SLV) had fallen over 30% and gold
(NYSEARCA:GLD) over 25% for the year.
But, by March the metals (NYSEARCA:GDX) had rebounded 10%, and
just when everyone got aboard that rally and turned bullish, the
metals fell back to test their three year lows.
A similar bounce in the metals just occurred.
Is this the one to finally get all aboard bullish on?
What Drives Precious Metals?
Most investors have heard of the saying, "Be fearful when others
are greedy and greedy when others are fearful" and the metals
market recently has been a perfect example of this in action.
Back in December, the precious metals' declines caused many long
time bulls to throw in the towel. Check out some of these
headlines from the beginning of this year capturing the prevailing
- "Moody's Lowers Downside Targets to $900 on Gold and $15 on
- "Gold Prices Remain a Sell for Two Reasons"
- "The Gold Rush is Over and Gold Bugs Know It"
Compare the above stories to our article, "
Will Extreme Bearish Sentiment Lift Gold?
" written 12/27 and you will see why our contrarian take on the
markets has helped us stay ahead of the precious metals' price
moves. We were calling for a sentiment driven turning point
in their prices when most others were calling for continued
Followers of our research know that in late December we were
getting our subscribers long the metals as sentiment had indeed
reached an extreme on the bearish side. The precious metals
then rallied 10%+ as the leveraged (NYSEARCA:NUGT) and metal mining
ETFs (NYSEARCA:GDXJ) rallied well over 30%. (FYI, during the
final week of December 2013 - just as hatred for gold assets
peaked - we bought the GDX JAN 2013 20 call options
(GDX140124C00020000) at around $140 and via intraday trade alerts
on 1/2/14 and 1/9/14 we sold the position for a blended two-week
gain of 27%. It was a great trade!)
But, headline reading isn't the only way to identify sentiment
There are also more objective ways to measure gold and silver
(NYSEARCA:IAU) sentiment which we captured and outlined as part of
our analysis for our subscribers in the chart below. Speculators,
which typically includes the media's take on the markets, usually
become the most bullish at exactly the wrong time.
In contrast speculators also become the most bearish
(NYSEARCA:ZSL) at exactly the wrong time.
Check out the following chart which we included in our ETF
Profit Strategy Newsletter published 12/21 that supported our
thesis of getting long the metals.
Why We Were Long the Metals in December When
Everyone Else Was Bearish
I can't tell you all the details about the current state of the
metals' market sentiment, that is reserved for our subscribers, but
I can tell you that we are now at another major extreme in
sentiment as we position to take advantage of the next big
Is it a bullish extreme or a bearish one? I know which way
we are placing our bets.
Profit Strategy Newsletter
uses sentiment extremes combined with technical and
fundamental analysis to help identify the prevailing trends in the
markets. Readers receive actionable investment ideas and
our biggest winner so far this year is a +188% timestamped trade
from our 6/4/14 Weekly Picks.
Follow us on Twitter