Wow! Gold and the miners have absolutely gotten crushed. As I predicted in my last update, once the sector crossed past the short term uptrend of creating lower lows (see pic), they got hammered all the way down to the previous low and are shooting past creating new lows.
This is all happening because the Fed recently “stopped” its stimulus program which is causing the value of gold to continue its decline.
As I’ve stated in my previous article about how the market tends to overshoot, I believe this to be an amazing opportunity if you aren’t already involved in this sector. During panic phases like this, are a great time to start buying. If you have already started buying, continue to purchase on these massive dips.
I’m not saying to throw your whole portfolio at this sector. It could be years before it comes back. But long term, these current events are great opportunities to start building and/or strengthening your base.
Gold is getting crushed because we are all getting into the relaxation that our economy is doing well, picking up from the great recession. According to the feeling we get from the FED’s moves, we no longer even need stimulus.
Our economy is not doing this well, that the market should be at its all time highs. Its all smoke and mirrors. The majority of people are making less money, not working full time, etc.
This is absolutely a euphoria phase. However, like the housing bubble which lasted for years, this euphoria could last for quite a while longer.
At some point, and it may be years from now, another bubble is going to burst. I’m not smart enough to predict exactly what is going to pop this market bubble, but something is likely to trigger another recession, which will take all this euphoria money being pumped into the big cap stocks and move it into defensive positions (ie Gold and Miners) which will bring this sector back up and through to all time highs.
It may take another drastic event (9/11), or I’m thinking we’ll see some drastic action happen if we elect a Republican president in the next election. Or we could suddenly start showing inflation higher than the fed’s objective of 2% and the market will panic that massive inflation is about to set in, as an overshoot from all the stimulus, and all that funny money stimulus liquidity that’s out there from the 5 years of stimulus will storm out of the major corporations and over to the inflation protection areas like gold and the miners.
Be prepared for Gold and Miners to continue down in the near future, but in the long term, we are at a point of incredible purchasing opportunity.
I hope to write more in the near future, however I’m swamped with work and family.