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Is Gold Headed to $1,000 per Ounce?


November 20, 2013
Ron DeLegge, Editor

Precious metals are getting crushed (again). This time itís allegedly because the Federal Reserve hinted that curtailing its monthly purchases of $85 billion in U.S. Treasuries and mortgage securities could happen within months. Reality, however, rooted upon real life price action, says otherwise.

The bear market in both gold (NYSEARCA:GLD) and silver (NYSEARCA:SLV) actually began two-years ago Ė long before the QE-taper was even an embryo in the Federal Reserveís mind. Put another way, the correlation between the Fedís QE spending pattern and precious metals prices has been completely disconnected for more than two years. And the theory that relentless QE is bullish for gold simply hasnít been true. 

This is a very important point because it means the gold market isnít reacting based upon the Fedís behavior Ė as gold experts and the media would like you to believe.

WATCH: Gold Experts are Misleading the Public 

After peaking in late summer 2011, gold has since fallen 33% while silver has collapsed 54%. In other words, the genesis of the current bear market in precious metals began during the height of QE Ė when goldbugs least expected it. This was also a time period that was supposed to be most bullish for gold.

What about gold fundamentals?

Aggregate gold demand is down 37% year-over-year in all categories, according to the World Gold Councilís Q3 2013 research. (See table) Investment demand for gold is down 65% and global central bank purchases are down 33%. And anyone who says that gold demand is going up has fairyland view of the world.     

Profiting from a Gold Shock
Contrary to what the very wrong gold experts have said all along, the ETF Profit Strategy Newsletter alerted its subscribers that the real money in gold and silver would be on the short side.

In our Weekly ETF Pick from Feb.14 we wrote:

ďDespite a modestly rising stock market, the Market Vectors Gold Miners (NYSEARCA:GDX) has lagged both the broader U.S. stock market along with the SPDR Gold Shares (GLD) by a very significant margin. At present, GDX trades around $41.50 and is well below both its 50 and 200 day moving average. Buy the Direxion Daily Gold Miners Bear 3x Shares (NYSEARCA:DUST) at these levels. A double digit slide for gold would likely translate into a 20%+ loss in mining stocks. This scenario offers some big upside potential for bears.Ē

Since then, GDX has slid 55% and DUST has climbed 99%. But thatís just the tip of the iceberg.

In that same report, we told our subscribers to buy JUN 40 GDX put options at $190. In early June, we sold those same GDX put options for a 525% gain at $1,200 per contract.

Our GDX trade was a grand slam, but forget about what already happened. Whatís coming next in the gold market will shock the world.

Gold has already had 17 major false breakouts (see chart above) over the past two-years and another profit opportunity awaits investors who are correctly positioned.

Furthermore, the deflationary action in not just gold but all commodities (NYSEARCA:GCC) spells danger for other asset classes like stocks (NYSEARCA:IVV), currencies, and real estate.

The ETF Profit Strategy Newsletter uses technical, fundamental, and sentiment analysis along with market history and common sense to keep investors on the right side of the market. Since the beginning of the year, 74% of our weekly ETF picks have been winners.

Follow us on Twittter @ ETFguide

CommentsAdd Comment

Eric said on November 26, 2013
  @Marc - are you capable of doing any of your own research? Or is your number one talent reside in your ability to regurgitate literally every single line that is spewed out by gold pumpers who want nothing more than to turn you into a mindless sheep who stupidly follow the herd of folks committing financial suicide? Gold is going to $500.
TrainerM said on November 26, 2013
  Bitcoin will only last until the next hot virtual currency overtakes it any day now. Gold & Silver have stood the test of time. The author makes some interesting points about GLD's many head-fakes. I'm waiting for metals to hit lower prices before backing up the truck. There's still too many bullish gold bugs floating around.
Marc said on November 26, 2013
  Look at bitcoin. Look at fine art, vintage cars. All those things are going through the roof right now. Gold and silver should be, too, as similar tangible stores of value (all but bitcoin, that is). But gold and silver are being manipulated on the futures markets. But there's no futures market for fine art and vintage cars, so they can't manipulate those. I don't think the gold and silver manipulation can continue forever.
Charcoal said on November 25, 2013
  Don't buy gold!!!!
grant8 said on November 21, 2013
  Hi Marc, the main physical buyers of gold are Asian consumers rather than central banks, fund managers or large institutions. I'm not sure that consumers of any sort could be rightly called "stronger hands." Regardless, I don't doubt you that gold bugs are still buying on the dips.
Marc said on November 20, 2013
  You can see from the chart that bar and coin demand was up in the latest quarter. The decline was due to ETFs and similar products liquidating. So the physical buyers, who are stronger hands, are still buying.

Also, if it goes down to $1,000 it will be well below the cost of production. That's not sustainable IMO.
Crummy said on November 20, 2013
  I do agree that lower bullion prices are ahead and I'm getting my cash ready to buy GLD and SLV when prices go off the cliff.
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