Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Why You Shouldn’t Get Excited About Gold Price Mini-Rally - 26th Jan 21
The Truth About Personal Savings Everybody Should Know and Think About - 26th Jan 21
4 Economic Challenges for 2021 - 26th Jan 21
Scan Computers 2021 "Awaiting Picking" - 5950x RTX 3080 Custom PC Build Stock Status - 26th Jan 21
The End of the World History Stock Market Chart : Big Pattern = Big Move - 26th Jan 21
Stock Market Recent Sector Triggers Suggest Stocks May Enter Rally Phase - 26th Jan 21
3 Top-Performing Tech Stocks for 2021 - 26th Jan 21
5 Tips to Manage Your Debt - 26th Jan 21
Stock Market Intermediate Trend Intact - 25th Jan 21
Precious Metals Could Decline Before their Next Attempt to Rally - 25th Jan 21
Great Ways of Choosing Good CMMS Software for a Business - 25th Jan 21
The Dark Forces behind American Insurrectionists - 25th Jan 21
Economic Stimulus Doesn’t Always Stimulate – Pushing On A String - 25th Jan 21
Can Karcher K7 Pressure Washer Clean a Weed Infested Driveway? Extreme Power Test - 25th Jan 21
Lockdown Sea Shanty Craze - "Drunken Sailor" on the Pirate Falls Crazy Boat Ride - 25th Jan 21
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold Contrarians Will Get Killed

Commodities / Gold & Silver 2009 Nov 20, 2009 - 09:40 AM GMT

By: Jordan_Roy_Byrne

Commodities

Best Financial Markets Analysis ArticleIn the last ten years, the financial world has experienced quite a few bubbles. Ten years ago there was the tech bubble. Then the housing bubble. And then the credit bubble. There was an Oil bubble too. With all these bubbles popping up, so to has an increase in bubble calling and contrarian thinking. As a result, sentiment analysis has become more popular.


One has to look at three things: fundamentals, technicals and sentiment. For contrary thinking (in terms of sentiment) to be most powerful, either technicals or fundamentals need to agree. As an example, I anticipate a reversal when sentiment is overly bullish and that market is running into technical resistance. Just because sentiment is bullish, doesn’t mean a reversal is coming.

The reality however and this is very important to understand, is that sentiment follows the trend most of the time. A secular bull market evolves as more and more people become bullish and invest in that market. Over time, sentiment is going to be more bullish because there are more participants in that trend. That is what causes higher prices. It is the very nature of a major bull market for sentiment to be bullish.

First, let me debunk the bubble callers and those who say Gold is a crowded trade. I’ve heard at least three different people say this. Google that and you’ll be amazed at the number of results. Here are some excellent charts. 

The first chart I saw in an editorial from Puru Saxena, here: http://www.321gold.com/editorials/saxena/saxena111309.html

The second chart is c/o of Casey Research, which I saw in an editorial by Chris Puplava here: http://financialsense.com/Market/cpuplava/2009/1118.html

Does it look like the Gold market is anywhere remotely close to a bubble? Apparently, the bubble callers and crowded trade folks haven’t done their research. Doesn’t look crowded to me.

Even if a few more people own gold, my bet is that they don’t own enough of it. Gold is under-owned. John Paulson, the great hedge fund manager is pretty bullish on Gold, but he doesn’t own much more than 10% in his fund. (Perhaps that is why he’s starting a Gold fund). Dennis Gartman, I believe only owns around 5% (He’s said so on television). Months ago, Steve Leuthold was on Bloomberg and he was bullish on Gold but said he only owned 1-2%. A time ago, most folks would have 10% of their worth in Gold, whether it was in a bull market or not. Most people who own gold investments, don’t own enough.      

Moving along, it is important to understand the technical ramifications of Gold’s move past $1000/oz. A market that breaks free from a multi-decade base is a market that shoots much much higher. There are numerous examples of this but we’ll discuss only two. 

Oil had traded between $10 and $40 for nearly 25 years. It broke past $40 and we all know what happened in 2008. In just a few short years the market rose nearly 300% following the breakout. 

Then there is the Dow Jones breakout in 1983. The market consolidated underneath 1000 from 1966-1982. It brokeout in 1983, retested the breakout and then ran to 2700. The markets 3-year run from mid 1984 to mid 1987 was probably the strongest three year run it had dating back to 1933. The market advanced 170% in four years. 

Gold has followed a similar pattern, if you use $700-$730, the monthly resistance. Gold broke past that in 2007 and then retested it in 2008. The breakout past the 2008 high confirms that Gold is in new territory. Judging from history (and there are many examples), Gold is at the start of a major move higher. Our target for this move is $2,100-$2,300 in the next 12 months.

It is interesting how these major breakouts occur at a time when fundamentals are their strongest. How can anyone call Gold a bubble when gold production continues to decrease? How can anyone call Gold a bubble when monetization is rampant? How can anyone call Gold a bubble when the FHA and FDIC will need to be bailed out? How can anyone call Gold a bubble when the US deficit is in the trillions of dollars? The deflationary forces plaguing us are bullish for Gold. That is what the market is saying and that is how traders and investors are reacting.

There is a reason the recognition phase in a bull market comes after that major breakout. Humans are reactive and when it comes to the markets, they follow the herd. It is only after price breaks out do the fundamentals become so obvious. The views of the bubble callers and wanna be contrarians are baseless, misguided and ironically, coming at the worst possible time.

Good Luck and Good Trading!

For more information on our Gold/Silver stock newsletter and examples of accurate real time sentiment analysis, please visit: http://www.trendsman.com/Newsletter/GSletter.htm

Jordan Roy-Byrne, CMT
http://www.trendsman.com
http://www.thedailygold.com
trendsmanresearch@gmail.com

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.

Jordan Roy-Byrne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules