Tune Out The Noise And Listen To The MarketFriday May 20, 2016 15:06
As the chorus of short-term gold sector bearishness grows louder from the long-term bullish camp, the healthy and bullish price action of the miners continues to outwit the pundits and most of the subscription newsletters. Each week they trot out new reasons for a sharp correction that never comes to fruition as their credibility goes in the opposite direction.
Here are some of my favorite quotes from a few subscription newsletter writers since early March, when the miner correction was “supposed” to begin. The names of the authors have been omitted, as it is not my intent to embarrass anyone:
March 12th: “While the PM sector bulls have been working themselves up into a lather the Commercials have been piling up the shorts to a huge level, and since these guys are never seriously wrong, it means trouble, big trouble. If you go against them, especially at extremes, you are a fool.”
March 16th: “There is more carnage coming in the precious metals â€” and it’s already causing the next crash in the mining sector. With very rare exceptions, most miners are about to be toppled over again. They’re likely to give up as much as 100% of their recent gains, if not more.”
April 2nd: “Certainly the latest COTs for gold and silver look grim and should be a source of trepidation for bulls â€“ they suggest that gold and silver are going to go down with the markets generally.
April 13th: “So what should you be doing now in gold? You should be looking to buy the decline into May, or if you’re a speculator, you should be shorting gold, looking to make some money as gold slides into a late May cycle low.”
April 16th: “Large Specs are “foaming at the mouth” bullish, but look set to end up like the Plains buffalo, with the Commercials, the Big Money players, set to kill them and skin them by the thousand.”
April 26th: Speaking of the HUI price action. “If we are still in a bear market, then prices can push somewhat higher, followed by a sharp decline, losing all of its gain or more.”
These quotes are from some respected gold sector newsletter subscription services that continue to keep their subscribers out of this market and waiting for the new bull that has already started. This persistent anecdotal evidence leads me to conclude there is a substantial amount of money on the outside of this new miner bull that desperately wants in.
This constant parade of gold sector bearishness has kept me fully invested since I began accumulating miners last December and also gives me confidence that the miners should continue to lead this sector higher before a correction begins from higher levels. As I have stated in previous posts, I am looking for 28-30 GDX and 250-260 HUI before we see a good chance of a 20-25% correction in the miners.
David Erfle is a 52 year old self-taught mining sector investor. He stumbled upon the mining sector in 2003 as he was looking to invest into a growing sector of the market. After researching the gains made from the 2001 bottom in the tiny gold and silver sector he became fascinated with this niche market. So much so that in 2005 he decided to sell his home and invest the entire proceeds from the sale into junior mining companies. When his account had tripled by September, 2007, he decided to quit his job as the Telecommunications Equipment Buyer at UCLA and make investing in this sector his full time job. He personally survived two bear markets, witnessed incredible sector changes and had to alter his investment philosophy numerous times in order to adapt to changing market conditions."