Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Amid Market Turmoil, Gold Stocks Find Heavy Accumulation

Commodities / Gold and Silver 2011 Sep 14, 2011 - 01:19 AM GMT

By: Jordan_Roy_Byrne

Commodities

Best Financial Markets Analysis ArticleThe collapse of 2008 remains fresh in mind. And yes, while collapse is the most overused word in the financial markets (next to bubble), 2008 was indeed a collapse for everything. Our beloved gold stock sector plunged roughly 70% in only three months. This collapse hangs in the back of the psyche each time global trouble intensifies and the gold stocks selloff. In the last week or so I've received many emails from subscribers who are worried about a Euro crash and a potential repeat of 2008. Let me explain why there is absolutely no need to worry if you own the gold stocks.


First, crashes and big declines don't happen frequently. The fact is, a crash and recession pave the way for a new advance and recovery. There has to be a long buildup of new excesses before the next major decline. Sure markets can correct 20-30% but after a big bust there is much flat-lining. For example, Japan's economic growth for much of the past 20 years has flat-lined. We've had two bad recessions and bear markets in the last 10 years. Don't you think that has already cleansed some excess from the system?

Secondly, and this is most important, the credit crisis has transitioned from the private sector to the government sector. Much of the needed liquidation in the private sector has already happened. However, rather than let the liquidation run its course governments stepped in terminated the liquidation and absorbed some of the massive losses and debts of the banks. In doing so, governments have put themselves and their creditworthiness at risk.

You should have noticed that markets perform in different ways in these differing crisis'. A private sector credit crisis is strongly deflationary. Everything declines in nominal terms while government bonds and and reserve currencies rise. Gold fell in nominal terms but was a very strong performer in real terms. In a government led credit crisis, some currencies rise and some fall. The same can be said for bonds. Equities and commodities will initially decline but far less than in a private sector credit crisis.

Consider the performance of the precious metals complex. In 2008, Gold fell 30% but performed well in real terms. Silver and the mining stocks collapsed. Today in the perhaps "repeat of 2008," Gold accelerated 25%, Silver advanced off its bottom and the equities as of a few days ago completed a major breakout. Yet with the Euro falling, Greece near default, the Eurozone in turmoil and the general equity market struggling, investors remain skeptical of our beloved gold stocks.

The fact is, the gold stocks are undergoing significant accumulation by the smart money. The daily chart of GDX (below) shows a strong recent surge in both accumulation and on balance volume. Moreover, consider the past two days. Yesterday GDX gapped lower and was down about 5% at the low of the day. The market rallied into the close and was only down about 1% from where it opened. Today we see similar activity. The market moved lower early but has gradually made it back to positive territory.

It is also wise to check the money flow indicators on a larger time scale. The strong daily accumulation is no aberration as it is confirmed by the weekly chart. Note the strength of the increase in accumulation and on balance volume.

Yes, in recent weeks we've written much and probably too much about the gold stocks. However, the opportunity is too great and potentially to profitable to ignore. We've shown the value, the lack of ownership, the improving fundamentals and the beautiful technical setup. The market is breaking out and this is to be expected given the huge positives in the money flow indicators. Yet some still worry. They think this could be 2008, even though it is clearly not. We guided our subscribers through the earlier weakness and are now taking advantage of the major profits that lie directly ahead.

If you’d be interested in professional guidance then we invite you to learn more about our service.

Good Luck!

Jordan Roy-Byrne, CMT
Trendsman@Trendsman.com
Subscription Service

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.


© 2005-2022 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