We live in very specific times. Getting a “like” on a post or picture becomes a necessary daily activity and means of self-validation. Not “liking” something that others posted or that is massively “liked” like may be frowned upon or even viewed as being disrespectful. Plus, it seems that no matter what you do, everyone gets offended very easily. When did honesty, independence and common-sense stop being virtues?
When it comes to gold investments and gold investment analysis, it’s surprisingly similar. You either like gold and think that it’s going higher right away or you’re “one of them”. “Them” can be anyone who tries to manipulate gold or silver prices, “banksters”, or some kind of unknown enemy. “Analyst’s” goal is often no longer to be as objective as possible and to provide as good and as unbiased analysis as possible, but to simply be cheering for gold and provide as many bullish signals as possible regardless of what one really thinks about them. The above may seem pleasant to readers, but it’s not really in their best interest. In order to make the most of any upswing, it’s best to enter the market as low as possible and to exit relatively close to the top. What happens before a price is as low as possible? It declines. Why would something like that (along with those describing it) be hated by gold investors? It makes no sense, but yet, it’s often the case.
The discussion below can be viewed as something positive or negative for any investor, but while reading it, please keep in mind that our goal is the same as yours – we want to help investors make the most of their precious metals investments. Call us old-fashioned, but regardless of how unpleasant it may seem, we’ll continue to adhere to honesty, independence and common-sense in all our analyses.
In the previous free articles, we discussed the short-term situation and we emphasized that the initial 2018 rally should not be trusted. Based on Friday’s session, we took some of our profits on the short position in the sector and we prepared for a rebound, predicting that it could be seen. However, it doesn’t seem likely that this week’s rally is a start of another powerful upswing. Conversely, it seems that another big downswing will follow in the upcoming months.
In today’s analysis, we don’t want to get into details of multiple factors that confirm this outlook. Instead, we want to remind you about the most important non-chart factor that suggests that what we saw at the end of 2015 was not the final bottom and we want to discuss one factor that potentially appears to have bullish implications for the long run – but actually doesn’t.
The key factor that is rarely discussed is the fact (measured by surveys and feedback that we received at that time) that the sentiment toward gold at the end of 2015 was not very bad. It wasn’t bad at all. Those considering investments in the precious metals market, have been expecting to see higher prices, not lower or steady ones. That’s not what accompanies epic bottoms. What accompanies them is extreme bearishness, disappointment, and running for the hills. We saw nothing from it. The precious metals market might have been oversold – ok. It rallied based on the above – ok. But the key thing that should have been present for the 2015 bottom to be THE bottom – was missing.
Consequently, another – final – downleg is still likely to be seen before the final bottom takes place and preparing for it is critical.
Moving on to the second point that we would like to cover in today’s analysis, we recently received a question regarding the possible formation of a major bottom in gold (supposed technical proof that the bottom was indeed in in late 2015). Let’s take a look at the charts for details (charts courtesy of http://stockcharts.com).
The formation is supposed to look like on the above chart. The lower lows preceded the bottom and higher lows follow it. Gold is still below the red resistance line – based on 3 previous highs, but it’s “about to” break out shortly.