Gold investors are in a psychological bear market, but is it a real one?
What is the difference?
I got this email last week:
I love your perspective on precious metals and money management. You’ve been right so many times over the years.
Also your modules on technical analysis are really well done (I like them better than the Weinstein book).
So getting back to technical analysis basics, with these things being true:
— Gold’s 200 day moving average trending downward for 4 months
— Gold’s 200 day moving average acting as resistance 3 times in the past 3 months
… wouldn’t it be accurate to say Gold is now in a cyclical bear, rather than a simple correction?
While it’s true that the GDX:GLD ratio is now trending up a bit since 8/23, this pattern has been playing out for 3 months and still Gold can’t break through resistance.
For those invested in gold, “elephant in the room” might be too strong a phrase for this dynamic, but after this confirmation of the 200ma firmly acting as resistance now, it does seem like this is the basic question to address.
Notice that I did not say that gold traders are in a bear market, because there are no gold traders to speak of. Not a single gold stock or metals ETF is in the Robinhood top 100 list. While institutional investors, hedge funds, and the mega rich invest in gold as a safe haven (not crypto), the masses have zero interest in it.
People who have been watching gold this year have seen that it is basically exactly where it was at the start of the year. They are being bored to death and boring markets feel like psychological bear markets, especially when you can go to Youtube and are presented with endless videos, thanks to its algorithm, promoting things like Cathie Wood or crypto coins. That is the world that now dominates the trading word. Except for Kitco News, there is basically zero discussion of gold on Youtube anymore. It has all been pushed out by what Robinhood traders want to hear about, as they make up the bulk of Youtube viewers interested in the financial markets.
This is why my most recent videos got little views and my last video was barely pushed out by Youtube at all to people. If you don’t deliver what the masses want Youtube will not show it to people anymore. You are in effect punished now by Youtube if you talk about gold. When gold one day goes up enough to interest the masses then videos about gold investing will appear again to people in their Youtube feeds. For now it will remain only a niche market in the eyes of Google and Youtube. This is the time of Cathie Wood and not Jim Rogers. Youtube channels like RealVision have made the switch to grab viewers. It once talked about gold now it is 100% technobabble and crypto collectible coins. So, from a psychological perspective this makes it feel like a bear market for gold when it comes to market commentators too.
None of this is important, because this is not what a real bear market is from a price perspective. Gold finished Friday above it’s 200-day moving average. As you noted, at times it has gone below that level this year, but never by much. It has really been trading around this level as you can see from this chart.
Gold is simply going sideways. If it was in a bear market its 200-day Bollinger Bands would be expanding while gold would be trending down, making lower lows every quarter.
It’s not doing that.
It’s simply going sideways.
As I have pointed out before, since 2000 it has had times when it has gone sideways for a few years.
It’s just doing that again.
The good news is that it has come off of support in August and so is now positioned to rally back up towards that $1900 resistance level. I’d look for the GDX and gold stocks to now finally get a bid.
That sideways trend will end when gold smashes through that $1900 level, like when it went through $1300 in the fall of 2019.
Take a look at this chart with many of the previous long sideways periods highlighted for you.
It’s very difficult to jump in and out of sideways markets, because it’s easy to buy into rallies as they end and then sell on bottoms as bear market predictions appear. This is why I use a rebalancing strategy that enables me to buy a little bit of buying on dips.
I did write about that strategy last month in a post you can find here.
Money management is also a topic that Robinhood traders and the masses have absolutely ZERO interest in.
And I mean ABSOLUTELY ZERO.