Gold prices are down 26% and silver is down 45% over the past two years, and gold experts say the worst is over. Are they right?
Here’s just a brief summary of their hilarious views and ridiculous behavior:
Should it really surprise us that stubborn experts have been so badly wrong about the direction of bullion prices?
The fact is that they ignore every important technical and fundamental data point that contradicts their bullish views.
Plus they have a heavily vested interest in being bullish on gold (NYSEARCA:GLD) 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. Paulson rakes in hefty fees for making quarterly appearances about why he’s still bullish on gold.
Meanwhile, as their customers continue losing money, gold experts are laughing all the way to the bank.
The uncomfortable truth is that gold prices have been in a bear market since 2011 and gold investment demand has crumbled. Anyone that’s bought and held mining stocks or physical gold and silver bullion over the past two years probably knows that much.
The Truth About Gold Demand
Is gold demand really up? Actually, it's not. Over the past year, aggregate gold demand is down 23% and is led by a a massive 68% decline in investment demand along with a 62% collapse in buying from central banks. (See table below)
The only two categories that show increasing gold demand is jewelry and bullion bars/coins and both areas are closely tied to consumer behavior, especially in Asia. Is this really bullish?
The fantastic theory that frenzied buying of physical bullion by Chinese and Indian consumers is a bullish signal is laughable. And so are the many colorful conspiracy theories about the manipulation of the gold market.
In case you never got the memo, consumer sentiment is always a contrarian indicator, as the gold experts once again failed to mention. When besides never would a prudent investor ever make an investment decision based upon what the freakish masses are doing?
"Common sense and careful logic show that it is impossible to produce superior investment performance if you buy the same assets at the same time as others are buying," said the great Sir John Templeton.
That means the true sign of any market bottom – gold included – isn’t panic buying, but panic selling. And by that harsh measure, the gold market has yet to see its capitulation moment.
Profiting From a Gold Shock
Contrary to what the very wrong gold experts have said all along, our firm alerted readers that the real money in gold and silver would be on the short side.
On February 14, we wrote:
Despite a modestly rising stock market, the Market Vectors Gold Miners (NYSEARCA:GDX) has lagged both the broader US 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-day 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 31% and we exited our February 14 DUST trade with a +29% gain. But that’s just the tip of the iceberg.
In that same report, we told readers to buy June 40 GDX put options at $190. In early June, we sold the 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 world.
Winners Are on the Right Side of the Market
Our examination of the precious metals market points a very high profit opportunity for investors and traders who are on the right side of the market, and who are correctly positioned in the right investments.
The great gold crash of 2013 is one of the biggest investment themes the experts never saw coming.
Editor's note: This story by Ron DeLegge originally appeared on ETFguide.com
To Read More From ETFguide, See:
How Gold Experts Mislead the Public
How Do Stock Valuations Compare Today Vs. the Dot-Com Era?
The One Housing Indicator You Shouldn't Ignore
No positions in stocks mentioned.