Silver vs Gold investment: Are Both Dead?
Updated March 2023
But what we call our despair is often only the painful eagerness of unfed hope.
George Eliot
Gold and precious metals, in general, had a spectacular run from 2003-2011, and it was around that time we published our first article on Gold-eagle. At that period, we were pounding the table on Gold, Silver and the entire precious metal sector. Is this the end? Is this monstrous bull dead? We have stated repeatedly, that every major bull market has to experience one back-breaking correction… Usually, the correction ends with a 50% pullback from the highs, translating to a low of roughly $960.00. Apparently, Jim Rogers holds a similar view.
Gold is in a correction, and the correction has gone on for four years,” Rogers said. “Although I am not buying gold, I expect an opportunity to buy gold sometime in the next year or two. For instance, if gold goes under $1,000, I hope I’m smart enough to buy a lot more gold.
For the past two years until April or so of this year, Gold bugs abruptly found faith, and when you find religion in an area that does not merit or warrant it, the result is always dire. Against the backdrop of trillions of new dollars being created yearly, how could Gold put in a top, and to make matters worse, pull back so firmly? Unable to find a plausible answer, they started to chant kumbaya or look at tea leaves or anything that might explain this back-breaking correction.
Prayers, magical incantations, etc. Are always answered, but instead of a reward, the retort meted out is usually further melancholy and anguish. Based on this development, we stated several months ago that we could expect Gold to trade even lower. Again, Jim Rogers appears to concur.
“There are still too many mystics in the gold market who think gold is holy so cannot decline. When/if they give up and throw their gold out the window because ‘she lied to me,’ gold will make a firm bottom,” Rogers said.
Silver Gold Bull: Gold Breaks Key support
Now that Gold has traded below $1100, religion is being abandoned, and the wailing and gnashing of teeth phase is taking hold; all their prayers have gone unanswered and hopelessness is setting in. They cannot fathom how with trillions of more dollars being printed, Gold instead of soaring continues to get hammered. Again, we need to repeat the phrase we recently used…….. “Welcome to my lair said the spider to the fly… to which the fly responded which one”…
We have two worlds coexisting together, the illusory and the real. The masses (crowd) have embraced the illusory, so the illusory supersedes reality for now, and this is what the Gold bugs do not fathom. The masses actually believe money is created from trees in contrast to sweat and labour, and so until they think otherwise, the Fed can continue running the press, and the masses will be none the wiser. They have not yet grasped the true meaning “Fiat money.”
The assumption is that these worthless pieces of paper backed by nothing are worth their weight in Gold. The masses will be none the wiser, but you can; Gold is not going to drop to zero, not in the face of the largest currency war the world has ever witnessed. We have spoken of this war in the past and termed it the “race to the bottom”. Every nation is actively looking for a means to debase its currency to maintain its competitive edge. The Chinese have decided to join the currency war and stunned the markets by devaluing their currency twice in two days. We warned of these coming currency wars as early as 2003.
The two devaluations come after a run of poor economic data and have raised suspicions that China is embarking on a longer-term slide in the exchange rate. A cheaper yuan will help Chinese exports by making them less expensive on overseas markets. Full Story
Silver Gold Bull and Global Currency wars; The race to the bottom
This statement signals to the United States of America that it, too, can partake in the ongoing game. As the adage goes, it takes one to cry, two to tango and three to have a party. Notably, China has recently entered a currency war, and the battle will undoubtedly intensify. Consequently, we expect that numerous nations will emulate China’s move.
Vietnam has already joined the bandwagon and has twice devalued its currency to maintain its competitive edge. Similarly, since President Jokowi’s accession to power, Indonesia has allowed its rupiah to depreciate significantly; from a low of 11,500 to the dollar, it currently trades at 13,800. In light of the aforementioned developments, it is worth pondering whether gold will indeed continue to plummet as the currency wars intensify.
Silver vs Gold investment: Gold looks spunkier
For the trader or investor who was astute, Gold issued several signals indicating that a top was imminent. The two major signals were issued in the latter half of 2011 and towards the end of 2012. There was ample time to take some profits off the table or hedge one’s position. Attempting to get out at the exact top or trying to get in at the precise bottom is not only almost impossible to achieve but is also a process fraught with pain and misery.
Gold has violated its long-term uptrend line, indicating that the bottoming phase is likely to be relatively volatile and frustrating. The chart above illustrates the Gold ETF (GLD), which mirrors Gold relatively well, give or take a few points—the first level of support kicks in at 100, which correlates roughly to $1000 for Gold. A weekly close below this level will most likely result in Gold testing the $960 range.
A test or a break of $1000 should be viewed as an enticing opportunity to purchase this precious metal. In this era of extreme volatility, there is always the possibility that Gold could overshoot; conversely, it could refuse to buckle and trade down to the $960 range. It is unwise to fixate on absolute prices. If it is a bargain, take advantage of the opportunity to buy, rather than attempting to save a penny and lose a pound. The astute investor will use this phase to build and add to their position instead of complaining. Only the foolish complain and then state that they would have acted differently given the opportunity. The reality is that they will never change and will always respond in the same manner.
Tactical Investor Outlook
The drug pushers in the media are giving the news junkies their daily fix, catering to the twaddle scenario that the world will end. Step back and reflect on how lucky you are that individuals of such calibre exist, ones that seem to feed and thrive on this rubbish. Every time you run into an idiot, be grateful that it’s those idiots who make your life infinitely easier. Most do not see this part of the equation or story; they focus on the false premise that idiots make their lives harder when, in fact, the opposite is true. Market Update July 17, 2015
Rather than reciting fundamental data to support Gold’s potential to soar, we will emphasize the importance of following the trend and technical analysis. While current sentiment readings suggest a potential bottoming action, the technical outlook for Gold still indicates the possibility of further downside.
Our trading methodology strongly emphasises mass psychology and technical analysis, which leads us to believe that Gold is nearing a bottom. Investors who understand the significance of mass psychology and contrarian investing may find the current sentiment readings and technical indicators to be compelling reasons to consider investing in the precious metal sector.
Instead of relying on the same old fundamental arguments, we encourage investors to pay attention to market trends, sentiment, and technical indicators to guide their investment decisions. By taking a holistic approach incorporating multiple factors, investors can make more informed decisions and improve their chances of success in the market.
The Technical Outlook
From a technical analysis perspective, there is still potential for more downside as our reliable trend indicator has yet to turn bullish. However, we have been advising our subscribers to deploy small amounts of money into Gold because we sold near the top and are using our profits to get back in. We warned our subscribers to close the bulk of their positions in Gold, Silver, and Palladium bullion around August 2011. We did not attempt to sell near the top, and we attribute it more to luck than skill.
While this phenomenon has occurred before, we will always attribute it to luck. Trying to predict the top or bottom is a task best reserved for fools with plenty of time. Instead, we look for bottoming or topping action and changes in the direction of the trend. We might have been a bit more conservative if we were establishing positions for the first time.
Market Timing is a Fools Errand
Attempting to time the market ideally is a fool’s errand, as knowing the exact top or bottom is impossible. Instead, investors should focus on identifying a change in trend and act accordingly. In today’s highly leveraged markets, finding the precise bottom is even more challenging. Trying to do so is akin to searching for a needle in a haystack.
For investors who believe in Gold at higher price points such as $1800, $1600, or even $1200, the current price of $1100 should be a cause for excitement. It’s important not to follow the crowd, who often sell when they should be buying and buy when they should be selling. Many investors express regret that they didn’t buy when markets were experiencing a downturn. However, when the opportunity finally presents itself, these individuals are often the first to flee.
Silver vs Gold investment: Mass Psychology Take
From a mass psychology and trading perspective, it seems that the bottom for Gold is not too far away. Sentiment readings are bearish, Gold bugs are in despair, and many contrarian investors are unsure of their footing. These factors bode well for the precious metals sector in the long run. From a technical analysis perspective, Gold has one more leg down, but it may not be too steep.
This will only reinforce the foolish notion that the Gold bull market is dead. It is important to remember that every bull market undergoes a back-breaking correction, and Gold is no exception. We believe that the next leg up will yield even larger profits. As for
Typically, the back-breaking correction phase ends when the 50% mark has been hit, meaning that Gold would need to dip to around $960. If this scenario were to occur, it would be wise to back up the truck and buy like the world will end. It’s important to remember that trying to predict the exact bottom is like finding a needle in a haystack, so it’s essential to focus on bottoming or topping action and changes in the direction of the trend. It’s also important not to mimic the crowd’s mindset, whose sole function is to sell when it’s time to buy and buy when it’s time to sell. Instead, take a contrarian approach and look for opportunities when others are fearful.
Silver vs Gold investment: Experts Firing lofty targets
Regarding the lofty gold price targets being discussed by some market technicians and analysts, it’s essential to question the feasibility of such targets. While some analysts have predicted targets of $10,000, $15,000, or even beyond $20,000, it’s important to note that gold has not yet traded at $2,000.
What matters most is ensuring you are invested in the market and not getting caught up in discussing how high gold prices could go. As the saying goes, “you need to be in it to win it.” Our targets from years ago still stand, with our first target of $1,500-$1,800 already being hit. Once gold hits $2,000, we believe the next phase of the true bull market will begin, with a high target of $5,000-$5,500 and a possible overshoot to $6,000.
The mass of men lead lives of quiet desperation.
Henry David Thoreau
Central bankers are chasing Gold.
Central banks have been increasing their gold holdings in recent years, which could be seen as a signal of confidence in the metal as a store of value. However, it’s important to note that central banks also have their motivations and strategies for buying gold, which may not necessarily align with those of individual investors. It’s always a good idea to do your research and analysis before making any investment decisions rather than simply following the actions of others.
- “Central banks snap up gold amid uncertainty” (Reuters, 2021): https://www.reuters.com/article/centralbanks-gold/central-banks-snap-up-gold-amid-uncertainty-idUSL1N2KU22L
- “Central Banks Are Buying More Gold Than Ever Before” (Bloomberg, 2020): https://www.bloomberg.com/news/articles/2020-10-12/central-banks-are-buying-more-gold-than-ever-before
- “Why central banks are buying more gold than ever” (World Gold Council, 2021): https://www.gold.org/goldhub/gold-focus/2021/06/why-central-banks-are-buying-more-gold-ever
- “Central Banks Keep Buying Gold as a Hedge Against Increased Volatility” (Fortune, 2021): https://fortune.com/2021/02/25/central-banks-buying-gold-volatility-hedge-inflation/
- “Central banks bought more gold in 2019 than any time since the 1960s – and 2020 could be even bigger” (MarketWatch, 2020): https://www.marketwatch.com/story/central-banks-bought-more-gold-in-2019-than-anytime-since-the-1960s-and-2020-could-be-even-bigger-2020-01-31
- “Central banks add to gold reserves as diversification continues” (World Gold Council, 2021): https://www.gold.org/goldhub/gold-focus/2021/01/central-banks-add-gold-reserves-diversification-continues
