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
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
WEALTH INEQUALITY WASN'T BY HAPPENSTANCE! - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Stocks: Different This Time

Commodities / Gold and Silver Stocks 2015 Oct 16, 2015 - 12:39 PM GMT

By: Gary_Tanashian

Commodities

The title does not include a (?) after it and that is for a reason.  The gold sector’s fundamentals, both sector-specific and macro, are improving and this was not the case during the last exciting upturn in the sector circa summer 2014.

Back then, everything from Russia’s move into Ukraine to the Ebola scare were imagined to be sound drivers of the gold price.  This stuff proved, as expected, to be wrong when the whole complex made new lows in November of 2014 (prior to this year’s ultimate lows).


What is driving gold and the gold sector this year?  The things that we have been saying for years now would be needed.

  • Gold rising vs. commodities: Indicates a counter-cyclical global economic atmosphere (engaged)
  • Gold rising vs. stock markets: Indicates an environment in which mainstream investors would be motivated to consider the sector (constructive, not yet engaged)
  • Gold rising vs. global currencies: A self-explanatory indicator of waning confidence (constructive+)
  • Declining junk/quality bond spreads: Indicates waning confidence in the financial system and those who have propped it up (engaged)
  • Economic contraction as presented in mainstream economic data releases (constructive, not yet engaged)
  • Treasury yield spreads rise: Indicates risk aversion to systemic stress, whether inflationary or deflationary and waning confidence (10yr-2yr inconclusive as of yet, 30yr-5yr engaging)

There are more details, but the above would paint a picture of a counter-cyclical environment, which is the investment environment for gold and would set quality miners up for a big rally or bull market.  Here’s the Macrocosm (July 27) graphic again for a visual representation of the gold sector’s primary fundamental underpinnings.

macrocosm for gold, gold stocks

Dial back to this past summer around the time the Macrocosm shtick was created by someone with apparently too much time on his hands (not the case, I assure you!).  Back then (July 17) the Wall Street Journal called a bottom on gold exactly 1 week before it made its low at 1072:  Let’s Be Honest About Gold: It’s a Pet Rock

This was not a bunch of lunatics fighting each other for the right to get on the soap box and rally the troops to buy gold and hide in their bunkers for fear of the Russian horde (that and the Ebola headlines were so contrarian bearish it was palpable).  This was a classic bullish contrary indicator and most recently as HUI dropped to the long-term Head & Shoulders target of 100 (101 and change) we watched it scrape along the bottom of its downtrend channel for signs of a bounce, noting that the fundamentals were firming and aided, not hurt by the media this time.

Here is the linear scale chart NFTRH used to gauge this possibility last summer for subscribers, even as log scale charts were put forth on the internet showing a breakdown below the channel for the relatively new cottage industry in gold bearishness to consider.  Not this time boyz.

As you can see, it was touch and go at the channel bottom for weeks and I am not going to pretend to have been a resolute gold stock bull during that process.  Indeed, hear this clearly… gold stocks are in a bear market, technically speaking.  They are technically in a bear market even if they are in a bull market because not even the first technical milestone has been accomplished; nor would or could it be at his juncture.

But again, it is different this time because sector and macro fundamentals are either in line or slowly creeping in the right direction.  You probably don’t need me to tell you that there is going to be some turbulence ahead, whether HUI gets to what we are still calling its “bounce” target in the 150’s first or not.  But the nature of the sector is much improved from a fundamental standpoint; sector and macro.

The gold sector is on a technical bounce that we have anticipated since mid-summer and managed since September.  With sentiment getting over bullish and Commitments of Traders data putting a bulls’ eye on silver lately, the ingredients are in place for a negative reaction.  When it comes, whether from the bounce target in the 150’s or somewhere lower, it will pay for players to have their fundamental ducks in a row, unlike in summer 2014.

Many people know me as a chart guy but I am here to tell you that it is the fundamental backdrop that will be for all the marbles.  The charts right now, bounce aside, remain in bearish trends for gold stocks (aside from a few little gems bucking the trend), gold and silver.  We are following these trends consistently in NFTRH, but just as consistently we are keeping tabs on sector and macro fundamentals, which would lead the technicals just as most of the fundamentals noted above did in Q4 2008, only it was in quick time… like 100x faster than today’s situation.

NFTRH is a value per its peers not only in price (which will see a modest increase before year end), but also in its coverage of technical, fundamental (not company-specific), macro and sentiment/psych analysis across major global markets and chart based trade ideas.  I think a subscription is well worth your investment, but then I am biased (because I personally benefit as an investor from doing this work).  Check out NFTRH.com for more information and subscriber testimonials.

Bottom line on the article’s main topic, the gold sector is bouncing and this time it has a fundamental right to do so.  The sector is in a bear market but the elements are aligning to end the bear.  It is time to know what to tune out and what to take in when managing the process.  The negative reactions will come and only a clear view considering sector and macro fundamentals and technical analysis will define whether and from what levels those are buying opportunities.

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2015 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian 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