Gold News

Why Upset the Gold Bug "Community"?

Because groupthink and b/s have misled a lot of private investors...
 
I DON'T write stuff like this trying to provoke. I write it trying to cut through the b/s, says Gary Tanashian in his Notes from the Rabbit Hole.
 
The simple message of my note last week was that gold bugs fight a righteous fight, monetarily speaking. That is because the asset, gold, is a counterweight to unbelievable degrees of shenanigans, with out-of-control people in high places believing (or would have us believe) that it is all as simple as shifting things on balance sheets to get them out of the light of day, promote risk taking and let an 'organic' economy finally take root.
 
What a load of crap. It makes me want to puke and suspect it does for the average gold bug as well. But the adherence to honesty is exactly what makes someone hold so dearly to their beliefs (and in some cases, their portfolios). The current environment, perverse as I believe it is, is designed to make people finally give up on the dream of making things better.
 
I have negative feelings about the gold bug leadership because I think a good proportion of them are little more than ego stoked doofuses who can't see through their own bias and agenda. But the power of the message is rooted in right and wrong and that is exactly why they (some of whom you may know as mighty intellectual thinkers) hold such power. Most people are basically good and they want to fight for good.
 
This impulse to fight for what is right has been used every step of the way by the gold sector leadership to keep people in line. A lot of people casually familiar with the financial markets were rapidly brought on board into that 2011 blow off amid the climax of the last inflation phase (silver and commodities blew off) and then the Euro crisis (gold blew off).
 
Isn't it notable that gold had its blow off during a deflationary event (Euro crisis)? That is telling and supportive of our thesis that it is a deflationary pull and eventual economic contraction that would provide the real investment backdrop for gold and especially gold miners.
 
However, that was a time for caution, as what we called the Euro crisis "Knee Jerks" came flying into gold out of fear and pure momentum. I knew they would cause damage (to we long-term gold bulls and to themselves) although I sure did not know the duration and intensity that the damage would carry.
 
So I wrote an article talking about how the sector needs to be cleaned out, the leadership needs to be rejected. Just recently, for instance, a high-profile interview came out talking about how Ebola could end the price declines in gold and silver. How pathetic. We warned of this in NFTRH and sure enough, destruction was visited on the sector within days.
 
Want another example? September of 2013. The US Fed rolls over and does not begin to taper QE, some gold bug website immediately publishes a high profile article glad handing the leadership for a job well done in fighting the forces of evil and we immediately publish a post Scary Gold Bug Article on Cue. Next up? Price destruction for the sector.
 
So the view stands that along with fundamentals that are not fully in line, the Psych profile is not fully fixed either. Not yet. It's a bear market. Bear markets tend to see to these things eventually.
 
Suffice it to say that anything can change in a heart beat. But the reality is that when gold lost $1180 recently and when silver lost the $18 area a while back, the long-term price chartswere cooked. Further, HUI broke down after a summer full of hype about Ukraine faded (as we knew it would) so here is what we are left with.
 
If gold can climb above 1180 and hold there it can start to think about negating its bearish technicals. Otherwise it is what it is, a bearish price chart.
 
 
If gold vs. the stock market can close the 2008 'fear gap' and begin a new phase sooner rather than later, great, we would have honesty returning to the system and another positive for the gold mining investment case.
 
 
But these things have not happened yet. What's more, silver is just a mess below a key breakdown point.
 
 
Gold stocks are trying to bounce from the recent bottom at around the 2008 lows. While we have been observing this bounce by short-term charts in NFTRH's interim update service, the monthly plainly tells would be investors to use caution. The Head & Shoulder measurement no longer seems so crazy these days.
 
 
There is so much more to the picture that even this bloated article could not scratch the surface of. Only hard and sometimes boring work will see people through the changes from the end of one thing and the beginning of another. To my eye, the next big opportunity for speculators would come from the short side. On a positive note, that would be the final act of this phase, especially if it closes out the target on the H&S noted above.
 
Aside from that, I am always willing and ready to admit I am on the wrong course, so that is why daily and weekly charts are used routinely in Notes from the Rabbit Hole. Subscribers caught the prospect of the current bounce, and we'll tend it and see if it turns into something more. But short of certain parameters, a bounce is all it is.

Gary Tanashian successfully owned and operated a progressive medical component manufacturing company for 21 years, through various economic cycles. This experience gave Gary an understanding of and appreciation for global macroeconomics as it relates to individual markets and sectors. Along the way, Gary developed an almost geek-like interest in technical analysis (TA), to add to a long-time interest in human psychology. Various unique macro market ratio indicators were also added to the mix, with the result being a financial market newsletter, Notes From the Rabbit Hole (NFTRH) that combines these attributes.

See the full archive of Gary Tanashian.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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