GOLD: SURVIVING THE LAST FEW MONTHS OF THE BEAR MARKET PART II

In my previous article yesterday I tried to stress the importance of getting to the sidelines before gold begins the final decline into its eight-year cycle low. Today I’m going to show you what I think is in store and why.

First off let me dispel any notion that this was a natural bear market in gold. On the contrary, this has been a manufactured bear market brought about by intense paper market manipulation by the bullion banks ever since Germany asked for their gold back. It’s been my theory for almost 2 years now that the bullion banks are trying to force the gold market as far down as possible in order to maximize the potential upside once the secular bull market resumes. It’s also been my feeling that the manipulation would continue until gold at least retraces back to the $1000-$1050 level, and we may, and probably will, get a panic overshoot for a few days below that level.

Let me explain. Let’s assume that on the conservative side the bubble phase of gold reaches at least $5000. Well if the final phase of the bull market starts at $1500 and goes to $5000 that is a 230% gain.  On the other hand if the bullion banks can artificially depress the price of gold to $1000 or even $900 then the potential gain increases to 400% or more. And if you think that’s some juicy profits wait till I get into what I think is going to unfold in the mining sector.

The next thing I need to show you is a long-term chart of the HUI mining index. Notice how the bottom last November got far enough to test the 08 lows. Also notice that the bounce off of that bottom has been extremely weak, signaling that this was unlikely the final bear market low.

08 bottom

I think I can say with a great deal of confidence the bullion banks have every intention of breaking through that support zone in the next couple of months.

A major eight-year cycle low is usually characterized by complete blind panic. That’s not what we saw back in November, and a pretty good indication that the 8 year cycle low did not form last year like many are hoping. Blind panic is what we had in 2008, and it’s going to be even worse this time because the bear market has lasted much longer and damaged investor sentiment to a much greater degree. The panic at this 8 year cycle low is going to be more intense than it was in 2008. During the final two weeks into the 8 year cycle low traders will be selling at completely irrational valuation levels simply because the emotion of fear is in total control and all logic will have gone out the window. This is the “blood in the streets” phase. I think this phase is coming sometime in the next 8 to 12 weeks.

HUI 8 YCL

I can tell you that when the support at 150 breaks we are going to see panic selling like we haven’t seen since 2008. The bullion banks are counting on this. Why? Because they want to buy at the lowest price possible.

Now if you think the percentage gain from $900 gold, or $1000 gold to $5000 is big, imagine the profit potential to buy the HUI mining index at 100, 75, or 50 for a ride up to 1000 or 1500.

The bullion banks are trying to manufacture an opportunity like we have never seen before, and they are well on their way to doing it. All they need to do now is break that support level at 150 and trigger the final waterfall decline.

Now you see why I stress the importance of being on the sidelines. Almost no trader in the world will be able to survive when that support level at 150 breaks and the panic begins. The bullion banks are counting on it. They want you to puke up your shares at the lowest price possible. We are talking in the neighborhood of a 30% – 50% decline or greater in a matter of weeks. A drawdown like that is emotionally impossible to weather. You have to be on the sidelines when it occurs. More importantly you have to understand what is happening, why it is happening, and be ready to take advantage of this once-in-a-lifetime opportunity.

I have my subscribers on the sidelines waiting, and I think with the use of cycles analysis and some intuition I should be able to call that bottom when it arrives within a day or two of the exact low. Those traders that are on the sidelines protecting their emotional capital are going to make the trade of a lifetime this summer.

The most important thing right now is to protect your portfolio and your sanity by getting out of the way of this final move down. If you get caught in the final bloodbath phase you are almost certain to lose both.

Gold should bounce a bit this week before continuing lower. I would suggest using that bounce to exit positions and get to the bleachers if you haven’t already.

gold bounce

Gold bugs your redemption is almost at hand. I’m getting close to calling the bottom of this 4 year bear market. We just need to complete the final move down into the 8 year cycle low.

34 thoughts on “GOLD: SURVIVING THE LAST FEW MONTHS OF THE BEAR MARKET PART II

  1. John

    Only one problem with your theory; its the $USD. Double topped and now in a downtrend with 3 consecutive lower highs. Unless the $USD can rally above 100 on the index (highly doubtful), then your gold theory is busted.

    1. gary Post author

      Gold has had no problem going down along with the US dollar lately.

      But if we take the currencies out of the equation I’m just purely looking at it from a cycles standpoint and gold has made a lower low signaling a failed daily cycle and an intermediate cycle that is now in decline.

      1. John

        I also disagree with your gold analysis. We had a gold low in November followed by a retest in March that in-fact made a higher low. A simple trend line shows that we can go down to roughly $1150 and not violate that trend line. There is nothing to worry about here. I will be happy to change my opinion if this trend line is broken and we have a confirmation with a lower low.

    2. karni

      John is right. As I wrote about gold important low but NOT major low. The bear market low will be next year.
      Many miners have already 5 wave impulses higher so no blood bath forget it(next year) – higher low with gold 1100 and silver higher low. USD confirms it. HUI fake break lower below 150 and sharp reversal.

        1. karni

          I would wait for an intermediate bottom probably in August.
          Than cycle and seasonality will be favorable for a move higher.
          If Gary is right we will see a bloodbath and buying opportunity of our lifetime:)
          Or I think it will be just an important low and something like 100% move higher for the miners HUI around 300. Just a warm up for the “buying opportunity of our lifetime” in 2016:)
          Watch for signs if gold make only slightly lower low something like 1090 +- 10 points
          but it should stay definitely above 1050. I think this will confirm that just a correction since November 2014 is running.

          It will be worth trading and if I am wrong we will make more money:))) so who cares.

      1. fazsha

        The people who would puke up their shares at the bottom of a manufactured gold plunge are the same people who, if they had happened to be on the sidelines to start, would refuse to buy at the low. Let’s be honest; none of us knows the exact day of a low. The safest thing to do is to get in, and forget it, knowing that the endgame is going to be higher prices. I will sacrifice having only a 230% gain instead of a 400% gain in exchange for the absolute certainty that I will be IN THE GAME when it happens, and not waiting for the right moment to buy. Waiting for that moment will drive one mad.

        1. fazsha

          Besides, if you believe Gary, then you have to be short gold, because it will be the easiest money in the world. There is no way I am ever going to be short gold. I will be long or I will be in cash, but I will never go short; I could never forgive myself after all these years of waiting for gold to perform like I expect it.

    3. willem

      gary,
      you could be very right about what to come ,i did some own research and
      make of it this;
      gold +- 850
      silver +- 7
      xau +- 19
      hui +- 40
      grexit? maybe more than one country.

  2. Don

    If the last major low was late 2008, why do you call for an 8 year low now in mid-2015? Does that suggest it will have to be retested next year or is there a full one year window to an 8-year low? Thanks for your reply.

    1. gary Post author

      I’m expecting the 8 year cycle to contract a little bit due to the CRB’s 3 year cycle coming due this year. They should both bottom pretty close together like they did in Oct. 2008 (gold) and March 2009 (CRB).

  3. SMB

    I agree…possibility for gold spot to trade 950/1050, with outside possibility of 850/950.
    Silver 12.75/13.25 with outside possibility 11.75/12.50.

    Then we will see the start of a phenomenal rally over next few years. Along the way there will be large pull backs..!

    During this time we will see Dollar Index also rally towards 115/120 (maybe much higher). Majority of people will not be able to reconcile commodities and the dollar rallying in tandem..!

  4. Cooloser

    A higher intermediate low doesn’t guarantee anything in Gold. We had a higher intermediate low from Dec/Jan 2014 to June of 2014 and yet price of gold has steadily fallen since then. A higher intermediate high in the price of Gold would be a game changer.

    1. Robert

      He wrote those silver-bullish comments when the metal was over $30 in October 2011. I’d say he screwed the pooch or whatever the Arabian equivalent is. What has me PO’d is that the miners continue to churn the stuff out though they are losing money doing it, execs continuing to collect juicy salaries as their shareholders wither on the vine.

  5. Bob UK

    So there appears nothing to do currently other than to sit on the sidelines in cash and watch both the conventional markets and the commodity stocks?

    Just watch and wait.

  6. Don

    Gary, given that you are quite sure that we are going to see some “panic” selling to a final low for gold, would it be correct to assume that you currently short gold in s big ? If not, please explain. Thanks.

  7. Don

    Gary, given that you are quite sure that we are going to see some “panic” selling to a final low for gold, would it be correct to assume that you currently short gold in a big way? If not, please explain. Thanks.

    1. gary Post author

      I don’t like to sell short. I find it hard to make money on the short side. Markets go down differently than they go up. Usually I just invest somewhere else while I wait for an asset to move down. Then try to buy at the bottom when I think it’s done.

  8. JohnWilkinson

    Let’s say Gary is correct that the final phase of the bear market is going to end, sometime over the next 3-12 months. It’s important to remember that the next bull market in gold could take years to get going. You could easily witness as much as a 24-48 month period of flat-lining around the bottom. It’s happened before. Good luck everyone. The stars are NOT aligned for gold today like they were 10 years ago.

    1. JohnWilkinson

      It is the long term history of gold to trade quietly for years if not decades, oscillating in a range, interrupted by huge spikes. You seem to be saying that the history is opposite–that the spikes are what one should expect. Do you know your gold history?

      I will tell you what I have learned from 20 years of observing stock investors, tech investors, commodity and gold investors: although it seems surprising, many are always anticipating either a big move up or a big move down that *never materializes.*

      1. Slvrizgold

        What in the heck do you mean it is gold’s “long term history?” Gold has only been free floating against fiat currency since 1971 when you could buy lots of things with a nickle. You’re extrapolating that like the go-go 1980s and 90s when gold went into hibernation will continue into the future and I don’t agree. The world was completely different then. The country with the reserve currency wasn’t the largest debtor in world history. Derivative financial madness was 1% what it is today. I tend to believe gold will not go to $800 or silver $10. Prices that low would cause widescale mine shuttering the likes we’ve never seen before. Where will new supply come from? What happens to silver price when the world demand is over 1 billion ozs a year and yet supply shrinks hundreds of millions of ozs and goes into a massive deficit? $16 is a midrange pizza, or a short cab ride, or what.it costs to go to a movie and get one popcorn (but not a drink too.) I know an ounce of silver is worth more than any of those things. 16 bucks doesn’t even buy a good 12 pack of beer. It doesnt even buy enough food for one person for one day. The world has too many people who know the price of everything yet cannot evaluate their value. We getting to the point where 20 dollar bills are new fives. Lol. The genie is out of the bottle. NO FIAT CURRENCY HAS EVER DEMONSTRATED AN INCREASE IN PURCHASING POWER AND IT WILL BE NO DIFFERENT THIS TIME. I’m not saying gold cannot go down from here, but the downside is 10-20% possibly, but not defintely, andnunless you are geriatric or have terminal illness you will see gold at a multiple of $1180, and triple digit silver in your lifetime! And you will curse at what is happening to the world’s money. One person at a time.

  9. Bill Fee

    Gold is for kings , Silver is for gentalmen , Labor for the poor , DEBT for slaves .
    How much do you owe ? It will be 100x’S past depressions ! Most Americans are
    Poor in the mind ! Our citizens are in debt and think Thay are Kings !

  10. Braden

    If gold is heading to $5k, does anyone really care whether they bought at $1200 or $800?

    Just average in and load up the wagon if we see anything below $1000.

    Hold 5 years and relax.

  11. Rick

    Gentlemen,

    Great posts on Gold!

    I just purchased 750 shares of Randgold stock at a 5 year low of $55 a share. My $43,000 turned into $51,000 in just 2 weeks, 19% return! I sold 140 shares to get back to my primary dollars, I took my profits!

    Randgold has $100 million in cash with no debt. They are very aggressive ion Africa gold mining. They also pay dividends, .60 last year.

    It feels good going forward that gold will continue to climb. My gut tells me $80 is obtainable but nervous on $80+. I will probably buy more soon. I also dumped money into gold mining stocks AU, AUY, FCX and NUGT which all returned nice $$$$ last week!!

    Your thoughts?

    Thank you

    Rick

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