Gold and silver have more or less confirmed they have bottomed and are ready
for a multi-year rally. Their trend has not fully 'reversed' to the
upside yet but the market breadth and internals for the precious metals sector
are very bullish. My subscribers know that I am 'bullish' on precious metals
and believe that they will be the best performing 'asset class' within the
next three to five years for those who can only buy long (profit from rising
prices). There are a few more big opportunities unfolding in other assets also
but that is not what this article focuses on.
There are more than enough signs which indicate that a looming 'financial
crisis' is impending and will last longer than the Great Financial Crisis (2008-2009)
did and will test the values of our society.
During the 'Great Depression', although gold was not traded freely, the gold
mining stocks made a 'killing' while the rest of the stocks were plummeting
into a bottomless pit.
During the 'Great Depression', Homestake Mining, which was the largest US
gold miner, at that time, outperformed the Dow Jones Index by a huge margin;
the chart shown below clearly illustrates that while the other investors were
monitoring their stocks which plummeted at close to zero valuations, the investors
of the leading gold miner, Homestake Mining, incredulously multiplied their
investment!
During the period that the Dow Jones Index crashed, Homestake
mining returned more than 1100% profits to its' investors.
Fast forward to the 'Great Financial Crisis' of 2007- 2008, when the stock
markets and commodities plunged, however, gold and silver entered into a strong
'bullish' trend as seen in the chart below.
The historical references indicate that during a financial crisis traders
tend to flock towards gold which outperforms the markets by a huge margin!
Gold has lost its' luster, in the past five years, after topping out in 2011
when the FED and other Central Banks embarked on a money printing spree. However,
for the first time in six years, gold returned with a massive 17% rally in
2016.
Despite announcements of further QE made by the ECB as well as negative interest
rates which were announced by the BOJ, gold has 'held its' own'. This indicates
that the traders are not buying the current upward move in the SPX, but rather,
are accumulating gold at every dip.
The 'smart money' enters the 'asset class' at an early stage of the new bullish
trend, hence, it is important to follow the 'smart money' so as to verify if
they too believe in my hypothesis that we are about to witness a 'massive financial
crisis' unfold!
Chart Shows the Number of Contracts Owned by Large Investors
The 'smart money' continue to invest in gold. They have increased their holdings
to 184,218 contracts (according to the latest Commodity Futures Trading Commission
data) which represents double their holdings of two months earlier. This is
also the highest holdings since 2012.
Is the 'smart money' favoring only gold? No, they are also loading up on silver.
Professionals have increased their net-long positions by 54,885 contracts which
is a 30% increase; the highest percent reached since 2006, according to CFTC
data.
The data (in the chart below) clearly points to the investment preferences
of the Money Managers. They are utilizing the current dips in order to add
to their positions in gold and silver.
I have talked about how gold and silver will be the 'asset class' to invest
in, for the future for many years, but we have been waiting for them to bottom
first before getting positioned. The current accumulation in both suggests
that gold and silver have put in their long-term bottoms. This will be an uptrend
for several years if my analysis is correct.
Due to monetary policies, enacted by the FED and the other central banks,
I expect that the SPX is now completing its' 'topping formation'. The retail
traders and others may dump their gold and silver because they believe that
the stock market is starting a new 'bullish' trend.
I expect that there will be an exceptional opportunity to buy soon in metals.
I want to maximize the gains of each and every dollar that is invested, therefore,
I will advise my subscribers when it is the most optimum entry point.
Continue to follow my analysis and trades so you will know when the optimum
time to enter into gold and silver is and then watch your investments grow
exponentially.
