Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Gives Back 2015 Gains, Drops Towards 2014 Low – What is Next?

Commodities / Gold and Silver 2015 Mar 12, 2015 - 06:46 AM GMT

By: Jason_Hamlin


Gold has given back all of its 2015 gains and is falling towards the November 2014 low of $1,130 today. This is a level not previously seen since early 2010.

This action is being driven primarily by a robust US dollar index, which is flirting with the 100 level for the first time since 2003. Take a look at the exponential move higher in the USD.

This type of move is largely unprecedented, with the only other time in recent history occurring during the 2008 financial crisis. That spike was caused by a scramble for cash and liquidity, but the current spike is happening absent any major crisis. Sure, the ECB is easing and the U.S. stock market is outperforming many others around the globe, but I believe there is something greater behind the move. Could it be the market foreshadowing a coming crisis?

So, what is next for gold? It is time buy or do we risk catching the proverbial falling knife?

I believe we could see gold test the 2014 low of $1,130 this month, as the USD makes a run at the 100 level. Some are forecasting that gold could drop to support around $1,000 in the next few months, as we enter the low seasonal period for gold. I think this outcome is unlikely, especially given the price action today.

As I am writing this piece, gold stocks are staging a comeback rally and diverging from gold. In fact, the GDX is currently up 2.5%, despite both gold being down $10 or nearly 1%. This is very bullish in the short term, as mining equities tend to lead the metals higher and divergences like this typically signal a trend reversal.

I still expect a major rally by the end of 2015 and I don’t believe gold investors should get too discouraged by the current correction. It has been disappointing to give back all of the recent gains, but we must maintain a long-term vision.

The gold bull market of the 1970’s corrected by roughly 45% over a 2-year period before it reached mania levels with a 709% increase from the low! The current gold bull market has been correcting for about 3 1/2 years to date but has only corrected roughly 41% from its high.

This bull is unwinding at a slower and more moderate pace than the 70’s one and the correction, so far, hasn’t been as quite as severe as the 70’s. I remain convinced that the gold bull market is not yet over and the mania phase with the greatest profit potential is still ahead.

A multiple of 6X from the current price would put gold around $7,000 before this bull market is over. With projected leverage of 2X-3X from best-in-breed mining stocks, the potential exists to see your investments go up by a factor of 10 to 20 times!

Of course, this assumes a repeat of 1980 and you will have to sell near the top, but it helps to give some perspective of the potential gains that could be ahead.

Another bullish factor for gold is that the current price is below the cost of production for many mining companies. Just yesterday, Allied Nevada filed for Chapter 11 bankruptcy, and there is no doubt that others will soon follow. Their profit margins have been wiped out, they have no cash flow and the capital markets are not willing to risk throwing a lifeline.

The pricing mechanisms of the gold market are clearly out of whack when you can purchase the finalized product for less than it costs to dig it out of the ground, transport and refine it. This situation cannot last. As more miners shut down their operation or go out of business, supplies with decline rapidly. With constrained supply and a continuation of robust demand from central banks worldwide, it is not difficult to predict which way the gold price will be heading. It may not happen next week, next month or even during this year, but higher prices for precious metals are on the horizon.

In this context, we view the current correction as an excellent buying opportunity. Yet, the majority of investors will do what the majority has always done throughout history – sell low and then attempt to buy back at higher prices during a rally. Those with the wherewithal to do the opposite, diverge from the herd and buy the dip, are likely to be richly rewarded.

This does not mean that we advocate going ‘all in’ at this moment. The more prudent course of action is to buy in tranches at regular intervals during the corrective phases. This is what we are currently doing for Gold Stock Bull Premium Members, as we finally begin to put our large cash position in the portfolio to work. Click here to join us!

By Jason Hamlin

Jason Hamlin is the founder of Gold Stock Bull and publishes a monthly contrarian newsletter that contains in-depth research into the markets with a focus on finding undervalued gold and silver mining companies. The Premium Membership includes the newsletter, real-time access to the model portfolio and email trade alerts whenever Jason is buying or selling. Click here for instant access!

Copyright © 2015 Gold Stock Bull - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.

© 2005-2019 - 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