1. Gold stock investors
have been experiencing a type of “2008 again” decline in
the price of their gold stocks, yet many other assets have barely declined at
all. The question on everyone’s minds is, “Will this pain end
soon, or is it just the beginning of something much bigger?”
here now. There are some good reasons to believe the Dow could be making
an important top. “Sell in May and go away” is a respected
market adage that is based on seasonality, and it is in play now.
3. Aggressive speculators
likely have a lot of sell orders just below the 12,700 area. I’m more
interested in buying the Dow if it falls than trying to guess if it is making
a top. It may be simply consolidating for a move towards 14,000, but if it
does fall hard, I want to start buying it very lightly.
The Dow has risen almost seven thousand
points from the 2008 lows near 6500, so I would not commit very much
capital to a price sale of only one thousand points.
The 12,200 price zone is very light support.
here now. You can see more substantial support near 11,200. Buying the
Dow very lightly about every 1000 points down is prudent, but investing huge
amounts of capital after a few thousand points of price weakness is
definitely not a good idea.
If the Dow starts a severe price decline,
could that cause an acceleration of the decline in gold and gold stocks? Yes
it could, and you need to be prepared for such an event.
A lesson for gold stock investors who think a
bottom is in can be had from the price action of natural gas recently. A lot
of investors became interested in natural gas at about $6.
Instead of bottoming, it went to $2, and
investors who thought that such a decline could never happen found themselves
in a fair amount of trouble.
I bought all the way down, and if natural gas
goes much lower, I’ll continue to accumulate it. Most investors
allocated too much capital in price areas where they thought gas had to stop
falling, so their cash reserves are now low or non-existent. Your buy
orders should always be “smaller than you know is rational”.
This is because the market itself is not rational.
Let’s not see a repeat of that natural
gas situation with gold stocks now. Many investors and analysts are sure that
gold stocks must bottom soon. Perhaps, but are you prepared to deal with much
lower prices if they don’t? Prepare now, rather than assume that much
lower prices are impossible.
I think you need to be prepared for
dramatically higher prices as well as dramatically lower prices. Selling gold
stocks now probably serves no other purpose than transferring your holdings
to powerful bank-type entities.
here now. That’s DUST-nyse, a
triple-leveraged fund that bets gold stocks will decline in price. Some
investors are just hoping that gold stocks turn up now. They hold enormous
positions in a wide array of gold stocks bought at much higher prices. If you
are in trouble emotionally, financial trouble is never far behind.
12. If you can buy huge
amounts of gold stock at prices much higher than where we are now, surely you
can buy a tiny position in DUST now, to hedge your emotions. It doesn’t
take a large counter-position to quell most investor nervousness, but most
people keep waiting for a gold stock rally before they will take any action.
That’s only making the situation worse. It’s exactly what
happened with natural gas.
When you accumulate an asset, your short
position should gradually increase as the price falls. Your net long position
should grow larger, but your absolute short position should also grow. Send
me an email to email@example.com
and I’ll send you a free video explaining these tactics in greater
Fundamentally, most investors in the gold
community understand that governments around the world have become horrific
freedom-robbing machines that seem bent on borrowing infinite amounts of fiat
16. Their debts cannot be
paid, and money printing will increase tremendously, but it can take a long
time before this situation creates dramatic institutional liquidity flows
into gold stocks.
17. Many investors who own
gold stocks think they would be better off owning bullion now. I don’t
agree with that premise. My main focus now is gold stock accumulation. Gold
bullion could fall a lot further than where it is now, and that could further
demoralize investors who book losses on gold stocks and buy bullion as their
version of the public sector’s “growth with safety” trade.
They could end up selling the new bullion at a loss if it falls. It's
possible that gold stocks start rising while bullion falls to the $1400-$1500
18. Please click
here now. You are looking at the weekly chart for gold with a focus on
the rise from the 2008 lows. The $1577 support zone has been touched 3 times
on the reaction from the highs at about $1923.
19. There’s nothing to
be afraid of. The fundamental case for owning gold is stronger than ever. The
“banksters” are not afraid of $1432 or
$1266, and nor are the Indian gold dealers. Adopt their mindset. While there
is enough fear for a “turn” at this point in time and price, I
have to wonder about how high a rally would go without a major change in the
European debt crisis.
20. I think a major change
is coming. If a number of weak members are ejected from the European Union,
the euro could stage an enormous rally.
21. The most powerful
investors in the world seem to agree with me. Please click
here now. You are looking at the liquidity flows in the euro. The
commercial traders are buying the euro in massive size, in opposition to the
large speculators and funds who are shorting it.
22. Do the commercial
traders believe that a European sea change is coming, one that is extremely
positive for the euro, and hence for gold? I believe their liquidity flows
spell the answer to that question in neon light.
23. The uptrend line in gold
may have broken, but commercial traders are buying anyway. Are you?
They’ve bought many failed uptrend lines in the past, and they will buy
many more, profitably.
24. Could GDX and your
individual gold stocks tumble to much lower prices
before governments around the world embark on “the great reflation”?
Yes they could, which is why it is important to trade smaller than you know
is rational and carry a position in an investment vehicle like DUST!