Consensus Trumps TA, Trumps Fundamentals
I’ve read a lot of the “silver/gold will go down unless they go up”, type articles lately. It’s what people write when they don’t really know where we are in a cycle.
One signal and one signal only is giving a clear picture. Few investors use it, even fewer investors understand it. Basically most investors want to pay “analysts” to tell them what they want to hear. That’s why people believe you can lose money on a gold short position at the end of a gold bear market even if mathematics proves it impossible. “Don’t tell me it’s impossible, I want to feed my fantasies.” That’s why people mumble about gold being manipulated down as it climbs 660%. It’s their favorite fantasy.
I don’t know a lot of websites that actually make money for their readers. Ours does, we aren’t right on everything all of the time but I came into the bull market when it was brand new. Actually that’s why I started the website in the first place. I saw that it was a bull market and said so.
We have had a brutal correction in silver, gold and mining shares. According to consensus, it’s over.
We had a bottom on May 16 at a 3.91% premium to silver and it was shown accurately on the chart of the Sprott Physical Silver Trust at the bottom of the page. We just had a retest of the lows and had a slightly lower close of 2.39% premium of the trust to silver. That is the 2nd lowest value of the Trust since it’s inception. Only on November 8, 2010 did the premium go lower, showing 2.29% that day. November of 2010 was pretty meaningless because there wasn’t enough data.
(Click on images to enlarge)
My favorite chart until 2008 was of the XAU over Gold. It gave both clear buying signals and sell signals. It broke down in August of 2008 and was pretty worthless for tops but I think works perfectly for bottoms.
On May 16th 2012 the XAU over Gold touched a ratio of .0906, the lowest it’s been since the dismal days of October 2008 when the world was really ending: gold and silver crashing. On Jul 25th, as I write, the ratio touched slightly below that point.
We’ve seen a clear bottom in silver. We’ve seen a clear bottom in the XAU over Gold ratio and I think we've seen a clear bottom in the metals and the shares.
If you spend more than an instant a day worrying about the manipulation of gold and silver, you are chasing a fantasy. How did I call the top in silver and gold to the day in 2008? How did I call a top in silver to the day in 2011? How did I call a bottom to the day in May of this year after saying exactly what it was going to look like weeks in advance? If the most important factor in the movement of gold and silver is manipulation, no one could call tops and bottoms unless they were the one doing the manipulating.
According to the cheerleaders, you need to spend all your time worrying about how the Bank of England bailed out JP Morgan of a chump change position in silver that had to be making money. According to the cheerleaders, every time silver or gold go down, it’s because the “CARTEL” made it go down and every time it goes up, it’s because GATA is manipulating it higher.
Ignore the noise, there is a lot of it and the guys who parrot the cheerleaders and their nonsensical positions are all losing money. My readers on the other hand like making money.
I think the junior mining sector will be the place to be for the next 12-18 months. If I see a top coming, I’ll warn you.