February 6, 2018
If the Dow dropping 2500 points in 5 trading days
has not produced a rally in Gold?
Yesterday afternoon, when Dow Futures were off about 1800 points
for the DAY, Gold, the supposed SAFE HAVEN,
was up only about $5-$6…which is NOTHING.
THIS SUGGESTS THAT EVERYBODY WHO EVER
WOULD BUY THIS MARKET…HAS ALREADY DONE SO…
AND THEIR HOPE IS THAT SOMEBODY ELSE
WILL BE DOING THE BUYING NECESSARY TO MOVE IT HIGHER.
I THINK THE NEXT MAJOR EVENT IN GOLD WILL BE
I SEE THIS AS A MAJOR, MAJOR SHORT…
I SEE GOLD $200-$300 LOWER,
AND IMMEDIATELY SO…
I actually wrote the bearish piece on gold that follows here late last week…Then we had yesterday’s nifty start to this week in stocks…and Gold’s ANEMIC response to stocks crashing has only amped up my bearishness…I mean, really, with what happened yesterday (preceded by last week’s 1000 point drop) GOLD SHOULD HAVE RALLIED…AT LEAST SOME…Instead, it BARELY upticked and is making new recent lows again today.
There is no doubt in my mind that the single most popular…and unanimous…opinion among the squawking heads today is that Gold can ONLY be going up, with their usual wrong-way-sheep-herd “logic” being that EVERYBODY needs to own some of this “safe haven” market to protect against hyperinflation, or the stock market crashing, or any number of potential boogeyman geopolitical crises.
As I have written before, I watched this same story play out…for two decades…after Gold topped out at $875 in 1980…during a time when virtually every brokerage house on the planet continued to beat the inflation or “safe haven” bullish drum for owning Gold for YEARS, while it did nothing but erode in value…Of course, there were occasional bullish periods, or rallies, but for 20 years, owning Gold was a LOSING idea.
So what should be different about it now? Believe me, during those 20 years there were those same-as-today innumerable global and domestic crises to contend with, and ongoing fears of, “When will stocks crash?”, and analysts bleating that “Hyperinflation is coming!”…And yes, Gold finally DID become a bull market again, but 20 years later? And after having gone from $875 to $250?
Guys. With EVERYBODY on one side of this trade in which they ONLY make money if it goes up (pays no interest, no dividends, it actually costs money to seriously own it)…And with my VERY firm belief that we are about to see the Fed getting MUCH more aggressive about raising rates (they will NOT just be saying “Ho Hum” to inflationary pressures or the potential for an overheating economy), I THINK THE GOLD MARKET IS ABOUT TO GET SLAMMED.
This IS a market that can make some BRUTAL downside moves, as, let’s face it, this is NOT a market where industrial supply and demand are really much of a factor. Gold moves up and down primarily on nothing but investor emotion, and to reiterate an old market adage which I believe is ESPECIALLY true in the precious metals: MOST MARKETS (like stocks for example) TEND TO GO DOWN MUCH FASTER THAN THEY GO UP…and in the same vein, NEVER forget what I am always reminding you. ALL OF THE “INVESTING” MARKETS ARE NOTHING BUT A GIANT MOB PSYCHOLOGY GAME”. Same old sh*t. It’s mostly greed…and FEAR that determine where any of these markets are going.
Let all those TV/Internet guys yap about Gold being “ready to break out on the upside”. Similar to the Bond market, after 3-4 years of going nowhere (all the while being touted by the brokerage houses spewing ideas of how many different SUPPOSED crises?) I THINK GOLD IS HAS THE POTENTIAL TO GET ABSOLUTELY CLOCKED ON THE DOWNSIDE. I BELIEVE, AT A MINIMUM, THAT ITS NEXT TARGET IS UNDER THE $1050 LOWS FROM A FEW YEARS AGO…OR SOME $280 FROM HERE…OR $28,000 PER FUTURES CONTRACT.
I STRONGLY RECOMMEND BUYING GOLD PUTS HERE…
Here’s the big picture with a little history added…
How many times have you heard some talking head mouthing that idea, “Well, everybody needs to have some Gold in their portfolio”, like it’s written in stone…And I say it’s NOT. For sure, there ARE times to own it as a trade…but I say this is sure as hell NOT the time to be just blithely sitting on something that virtually EVERY forever-wrong-brokerage-house in the world has been touting for $700-$800 on the wrong side since 2012…No, it doesn’t have to happen just like it did in the early 80’s but I do think some version of that IS what’s coming next. All the markets go up AND down…and I ABSOLUTELY THINK THE NEXT BIG MOVE HERE IS DOWN…PROBABLY TO SOMEWHERE UNDER THE $1000 MARK.
Here is an option I like at current levels (which may be different by the time you read this)…
And if you need a reminder as to just how big the markets can move nowadays…Here is what the Dow futures have looked like during the past 4 days…
No, I’m not suggesting Gold will go down this hard…but I am trying to show you that $150-$200 in Gold would NOT be a truly big move…
And no, I did not see this almost 3000 point selloff in the course of 5-6 days coming in the Dow…much less yesterday’s 1800 point ONE DAY swing in Dow futures…But I suspect that this sell off will serve to regenerate a lot of the negative/cautious wrong way sentiment that has been the hallmark of analysts for 1000’s of points on the upside in recent years.
As for my read on stocks here, it’s almost folly, in the midst of these jaw dropping, record setting, one day swings, to offer up an opinion as to what the short term outcome will be…But in general, my first guess would be that we’ve finally had the forever touted “correction”, but that it happened SO fast and SO big and so out of nowhere that ONE of those herds of analysts who have been “predicting” a sell off for 2-3 years actually caught it…And now the market is probably ready to move forward again…maybe at some sort of slow grind…as opposed to the straight up action we’ve had for the past 6-7 months…OR…we’re headed for a year of SIDEWAYS action in equities while the economy rolls firmly along…as HAS BEEN predicted by the surge in stocks we’ve BEEN having for the past year…In other words, I’ll remind you that the stock market is a barometer of FUTURE economic activity…and it has already indicated that the coming year is going to be HOT economically…
Moving on to our other two primary trades…
I CONTINUE TO THINK JUNE EURODOLLARS ARE HEADED, AT LEAST, TO THE 97.50 AREA...Just because we have seen some volatility in stocks does NOT mean that the demand for money (borrowing), and vigorous economic activity, are going to be slowing. Quite the contrary. I still see the Fed as being FAR behind the curve in their tightening campaign…AND THEY WILL BE SPEEDING UP THE PROCESS.
And I firmly believe the Bond market is just getting into crash mode…I’m not predicting it, but to suddenly be down another 5-7 points…in a matter, literally, of days, would not surprise me at all…because I have seen that sort of action too many times in this market not to be aware that it could easily happen here…especially with the fact that Bonds have basically done NOTHING for a year…and now they ARE on the move..
Big things are happening…NOT just in stocks…and though I may be dead wrong, I think I see more opportunity here than I have seen in years.
Give me a call if you want to go with me…
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Gold, Treasury Bonds, Eurodollars