jueves, 9 de abril de 2015

jueves, abril 09, 2015
Don't Buy Gold Now, Wait Until It's Under $1,000
             
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Summary
  • 10 reasons why gold will rise.
  • 10 reasons why gold has fallen.
  • The missing ingredient: Fear.
Gold is back over $1,200 once again, and we may be getting a little bounce with precious metals, as we haven't yet taken out the November 5 lows. We did come within $15 of the $1,132 low on March 18th, and on this most recent decline in the last week, we only got down to $1,185.

Since the gold bull market began in 2000, April has seen gold rise from March in just 5 out of the last 15 years. May has seen a rise in 8 out of 15 years; June 10 out of 15; July 6 out of 15 and August 10 out of 15. What does this data mean as to whether or not one should buy gold today, based on seasonal patterns? It means nothing.

Those who sell gold will give you every reason in the book to buy it. The following are reasons for gold's rise that I have heard in the last year (this doesn't mean I agree with all of them).

10 Reasons Why Gold Will Rise
  1. A dollar crash imminent
  2. The weak economy
  3. Inflation
  4. Geopolitical uncertainty (ISIS)
  5. Russia/Ukraine
  6. Iran (Nukes)
  7. Peak gold
  8. China and India demand
  9. Mints running out of coins
  10. It can't go any lower
The price of gold a year ago was $1,292. With all the reasons to buy gold above, you would think gold would rise in price, right? Why hasn't it?

10 Reasons Why Gold Has Fallen
  1. A stronger dollar
  2. Fed's threat of higher rates
  3. No inflation
  4. No war (no fear)
  5. Iran nuke talks
  6. Drop in unemployment
  7. Pays no interest (Treasuries do, albeit small)
  8. Higher stock market
  9. Low volatility
  10. Lower demand
When I write my Current Thoughts 5 days a week, I have to call it like I see it. I sell gold for a living, and most would think I am biased towards the top list. But you don't see me mention any of those reasons as to why one should buy precious metals, outside of my take on the economy.

If you call me and ask, you'll hear me flat-out tell you what I think is going to happen with gold, and I have been consistent with this for a long time.

Understanding Gold

If you showed to an average person on the street a one-ounce gold coin, they may or may not know the purchasing power of that metal. Most are very surprised to hear what it is worth what I tell them.

The average person today still knows nothing about gold. Even financial advisors still know nothing about it. I remember a few years back, CNBC commentators Mark Haines and Erin Burnett posing the question to viewers: "Burnett: Gold, what is it? Haines: I don't know."

Nouriel Roubini, in 2009, said when gold was trading at $1,000 that Jim Rogers' call of gold going to $2,000 an ounce was "utter nonsense." Gold did go to just over $1,900 an ounce.
How could all these intelligent people not understand gold or think gold could rise as it did? Are they thinking the same way today?

Roubini, in 2013, when gold was $1,329 an ounce, did call for gold to fall to $1,000. I happen to agree with him this time. While Roubini missed the $900 run-up in gold, people will, of course, believe him now when he calls for lower prices for gold, and simply ignore his past inaccuracy.

But is the gold rush really over, as Roubini says? He believes that a fall to $1,000 in gold would be devastating to gold mining stocks, like we have seen lately with Allied Nevada (NYSEMKT:ANV) declaring bankruptcy.

I personally agree with Roubini that there will be trouble ahead for the gold mining stocks, especially if we do fall below $1,000 an ounce.

The Missing Ingredient

The one missing ingredient that all gold bugs need to occur today is FEAR. Back in 2009 and before, when the CNBC hosts and Roubini were wondering about the yellow metal, many saw that there were underlying issues with the economy, and especially our banking system. CNBC typically looks at the economy one way, and clearly didn't see the financial crisis coming. They and advisors like Roubini didn't understand where gold fits into a diversified portfolio, or for that matter asset allocation, which I will explain more in a bit. They only saw the stock market up and the economy as strong-looking through their rose-colored glasses.

When I first wrote my article "8 Indicators That Tell Us Where Gold Might Go Next," I spoke about volatility as represented by the VIX. At that time (July 2014), the VIX was at 27.91 and gold was $1,283 an ounce. Today, the VIX is at 14.37 and gold is just above and below $1,200.

There really isn't any fear in the markets today.

I would have to see the VIX over the 20 level, and for a safer play over the 26 level, for a change in my thinking on gold (along with my other indicators confirming my stance).

The Threat of Higher Rates by Fed Members

In the last 10 days, we have seen 3 Fed members come out and speak of a need for higher rates.

Below are recent headlines from these members;
This was preceded by former Fed member Richard Fisher's final speech on March 9th calling for a "prompt" rate hike.

Ever hear of the saying "Don't fight the Fed?" But for the life of me, I can't read the data as bullish like they do, and I can't see how anyone else can either. The underlying data isn't good, as I pointed out with this summation in my last article "Data is Dead; All Hail the Fed!"

Since that article, we have had Chicago PMI miss, U.S. construction take a dip, and U.S. manufacturing slow to a 22-month low. But hey, the unemployment numbers on Thursday showed jobless claims fall by 20,000 (after an increase adjustment of 8,000 for last month). The media and the Fed, of course, don't look at the real unemployment figures as shown in U-6 data to be at 11% still.

Why Gold Will Fall Below $1,000 An Ounce

While most of the ingredients are there to make for a move in gold, without the main ingredient, it won't get going. When you make sugar cookies and leave out the sugar, you won't have a cookie you want to eat. Without fear, you don't want to be long gold.

While the indicators I follow have helped me decipher what is going on in the gold markets, many are asking why I think gold will fall below $1,000. I've tried to answer this question by pointing out the reasons most say to go long versus the reasons why gold has fallen. It is clear that the second list above trumps the first list.

While we wait for the price of gold to bottom, the best advice I can provide at present is to take from what has moved higher and allocate it to what is being clobbered. Over time, an asset allocation model to investing will help buoy your portfolio. Of course, many asset allocation models don't include gold. This is true even with the SEC on their website. Commodities, in general, have always been viewed as a "risky" investment. Yes, there is volatility, but the so-called "safe" investment, the U.S. dollar, was at 99 in 2003 and fell to 72 in 5 years - a 27% fall.

Now, the dollar has had a 37% rise, while gold has risen in price in almost every currency in the world during that time. Would it make sense to insure this dollar rise today?



The best way to do this is to dollar-cost average into an allocation in gold for your portfolio. This doesn't mean sell all your stocks and buy gold and silver. The stock market can go to 20,000 if it wants to. But gold will, at some point, see some fear back in the market and will shine again. I have said many times that I will write my all-in article between $850 and $1,000 gold, and I will explain my reasoning then.

There are many ways to invest in gold and silver, from the various ETFs like the SPDR Gold Trust ETF (NYSEARCA:GLD) and the iShares Silver Trust ETF (NYSEARCA:SLV), to buying physical, to even playing gold mining stocks through ETFs like the Market Vectors Gold Miners ETF (NYSEARCA:GDX), the Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ), the Direxion Daily Gold Miners Bull 3x Shares ETF (NYSEARCA:NUGT) and the Direxion Daily Junior Gold Miners Index Bull 3X Shares ETF (NYSEARCA:JNUG), although I would only consider those short-term trading vehicles.

Buying individual mining stocks will be a play soon enough, but not just yet.

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