I’m still shorting it

From the FOMO darling to the dumping target, this is typical for this asset and I have seen it again and again over years. I’m talking about gold (and same for silver)!

If your memory is long enough, you should recall that I said gold would come down soon back in Aug (see here). At that time, the heat for the shining metal was quite hot and as usually we saw a lot of FOMOs who had missed the initial boat when gold was in the dust bin late last year, a good time to buy but they didn’t. After seeing relentlessly moving up for gold, they finally wanted to catch up the boat and started to chase. That’s typically the moment “tragedy” starts. Not only for gold but virtually for anything else, when speculators become so much interested and bullish on something, the good days are often numbered and near its end. We nailed it with the help from the smart insiders, the truly smart money which I said has never been wrong on the big trend. No exception this time. Within just two months or so, gold has dropped from its recent peak around $1566 to now below $1500, about 5% decline. Not a big deal, you may say. Indeed, a 5% decline may not sound much but for money-type of assets like gold, it’s sizable. It is especially true for gold stocks that have already shed about 15% off its recent peak (for GDX) and much more for GDXJ for junior gold stocks. If you are on the wrong side, this is a real pain by my standard, period!

 

Now the million dollar question is whether we have seen the worst of the correction for gold and their stocks? The short answer is, we are close but not yet. Sure, we are seeing quite some resilience in this sector as people just want to step in to catch the falling knife in the fear of missing the bottom. But I’m not in hurry in closing my short positions for it and I think there is a higher chance we may see further weakness in the weeks ahead. Two major reasons: For one, the technical setup for gold has been damaged significantly and needs more work to recover. So far I still see more bearish than bullish TA for it. More importantly, the smart money is still not retreating much from their bearish calls and still holding near record high short positions till now. This tells me they are not seeing immediate good value for gold at the moment. So be prepared to see more weakness for gold/silver and more so for their related stocks.

 

Gold has a unique way of bottoming via a specific pattern. For the fairness to my Family members, I will reserve this “secret” to them. My Family will be the first ones to know if I’m convinced that the bottom has been reached for gold/silver. For long term, I’m a big gold bug and firmly believe the best day for gold will come with a lot higher prices down the road. For now, I’m just playing the swing game for short term gains as much as possible.