Gold (GLD), Silver (AGQ, ZSL), GDX, Updated Chart Of Psychology Of Gold And Silver Investors, PSON, China PMI Hits 9-Month Low, Swiss Lawmakers Reject Government Plan On Banking Secrecy

For readers both returning and new, we feel it's a good time to review our record, reiterate our style, and thereby set up our current thinking on gold and silver.

Regarding precious metals, we were not always bearish.  In our inaugural post in August 2006 we wrote:

"Gold is currently fluctuating around $640 USD. We're very bullish and long on shares and bullion, as well as with silver and platinum and copper. Extremely bullish on uranium, which hit a new high of spot $47.50 USD today. Bearish on housing prices, and have been for a year now - the Canadian market should fare favorably, particularly in Western Canada, but the US market is in for a major shock. Bearish on the US dollar."

Uranium nearly tripled by 9 months later at which point we booked massive gains on our uranium stock holdings, many up several-hundred percent, expressing concern that a consolidation was due and perhaps the top was in.  We were alone in that view, as virtually every blog, newsletter, and financial media had become wildly bullish on uranium. 

We were also totally correct on housing, as indeed the US housing market cratered in 2007 while the Canadian market remained robust - especially out west - finally starting to decline only recently.  At the time, these were extremely unpopular views.

As for the U.S. dollar, it dropped about 20% over the next two years.  Another very unpopular yet correct position of ours had been to turn extremely bullish the U.S. dollar at virtually the exact lows.

Even more unpopular and profitably correct was our bearish call on gold and silver in August of 2011.  Here's an excerpt:

"Gold is up nearly $200 this month so far, as a 'flight to safety' which ironically will eventually prove to be anything but safe, as is everything else that goes parabolic including silver when it was at $50 at the beginning of May. Gold might not be at a top yet, but silver was in early May when it crashed and now its bounce seems over and the next leg down begun."

The high for gold was just three weeks later.  The high for silver was a week later, and by six weeks later we'd booked over 60% gains on half of our silver short in late September 2011, writing:

"We feel completely certain that the silver bull market is over for a very long time to come, and quite possibly gold has topped too."

That was within 4 days of the highs you see here on the 2-year silver chart:

The ultimate high in gold proved to be earlier that month.

Let's fast-forward now to March 07 of this year, when we posted this warning about silver and gold:

"Today we post an update to show that a 4.5-year up-trend in silver is quite possibly over.  This strongly suggests that the low-$20 range will be hit, and we believe silver will go much lower thereafter.  [...] Many are holding on and are now in the red as they bought or averaged-up at the highs. Now as gold and silver continue to drop lower the margin calls will ring out and then it'll get very ugly for those who have yet to learn that what goes up must come down, and that no amount of armchair economists, poor logic based on bogus data, or ridiculous conspiracy theories (naked shorts, GATA, et. al.) will keep the price up."

Additionally on March 27 we warned again about silver, in this post "Look Out Below!" stating that "if silver falls much further, another cascade could occur."

A massive drop begin a few days later, precipitated by a slight drop first just as we'd warned. 

Here's a closer look at silver for reference:

On the weekend of May 19 we posted that it was time to look for a bounce in gold and silver.

The very next day, our suggested position in AGQ closed up 14% from the open. We were stopped out of the position the day after for great short-term gains and warned that "gold and silver continue to struggle, which suggests that another leg down before a bounce is just as likely as a rally at this point. "

That brings us to the present.  First we'll update our controversial, yet totally accurate so far, chart (seen in that May 19 posting) which reflects the psychology of gold & silver investors as they move along the "Seven Stages Of Grief ". 

Most gold & silver bulls, if they're honest with themselves, will recognize having gone through some of these stages already. This very important posting, entitled "Clutching At Straws And Still Drowning", could prove very helpful and educational to them.  However those still in denial are likely doomed to continue moving lower towards "acceptance" and may never learn the lessons necessary to invest or speculate successfully. 

The "Inner Self-Criticism" and "Withdrawal" stages are marked by capitulation selling, often made necessary by margin calls, and then no longer even checking portfolio quotes or answering questions from the colleagues, clients, friends or family they'd talked into buying at the highs, sadly probably with borrowed or rainy-day funds. 

As seen on the graphic above, those are the stages we're at now, so we must look for a big bounce as the odds are rapidly increasing that one will soon begin.  Those who bought high and sold low, and lost even more money buying all the so-called dips on the way down, will not chase the coming big bounce until it is near its highs, just like they did back in April, buying when they should've been selling. 

Do not make the same mistake.  It will prove to only be a bounce, though it may last much longer and go higher this time.  Also do not be too eager to try to time a bounce, as both gold and silver could plunge dramatically before a bottom.  This is a game only for experienced, and consistently successful, speculators who are well ahead on gold and silver over the past few years.  We are nowhere near a safe level or environment for so-called "value investors" in metals or miners.

With caveats out of the way, here's how GLD and AGQ look as of the June 18 close:

GLD may be putting in a triple-bottom (in red) circa $129 and is currently safest to enter above the green line (currently $135), while AGQ has possible support around $19 (red line) and is a safer entry above the green line (currently $22).

A closer look at AGQ along with some call options suggestions for AGQ and GDX is found in our posting from June 15 in which we wrote that "It's still 50/50 whether a base has formed before a rally, or whether another drop will occur first. The safest positioning remains to be out of precious metals or slightly short."

In case of a bounce, we'll finally put a stop on our remaining levered silver short 1/2-position in ZSL, at $88

As this post is about to be published gold is down $66 to $1310 and silver is down $1.60 to $20.10 in overnight trading, leaving gold slightly below the lows for the year hit in April ($1320), and silver slightly below its lows for the year hit in May ($20.25).  Should those lows hold, it's possible that the bounce begins today.

A much greater collapse over the next day or two is also very possible, so re-read the warnings above before considering any speculations.  Definitely do not go short at this point.



This news coincides nicely with our recent post on pump & dumps -
Fox commentator paid $50,000 to tout stock

Below is the PSON chart as of June 19, down 55% from the April highs when most people were buying. Note this was not the 1st major sell-off since those highs when the promotion was in full-swing. 

We don't suggest any wrongdoing whatsoever, simply making observations about the chart and warning to always beware and book some gains during massive spikes on massive volume:

News: 

Swiss lawmakers reject government plan on banking secrecy to ease deals with US authorities

China PMI Hits 9-Month Low

It seems nothing much has changed in the past year.  Last May we were posting about sharp drops in China's PMI, as well as predicting an imminent bounce in silver.

Silver hit a low the next day, and by four months later was 30% higher. 

We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the positions we do, or for mentioning any positions or publicly traded companies in this blog. If we hold existing positions we divulge the fact. This blog is merely a diary of some of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.

Please presume that we, she, he, I, it, them, they, us and you are purely fictional characters and that everything written in this blog is satire intended for comedic amusement only, and not to be taken seriously in any way. Just like "real" analyst proclamations. Thank you.


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