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Millions of investors have been skinned alive in the gold market. They got married to their positions and failed to realize that gold is like any other market. What goes up, must also pullback.
Even some of the savviest investors in the world got killed in gold. Billionaire investor John Paulson lost as much as $600 million in last week’s gold rout and nearly $1.5 billion since gold peaked in 2011.
Another huge investor, David Einhorn also lost big. Ron Paul has lost big. So has billionaire hedge fund manager Kyle Bass. And more.
Even the central banks have been pounded by gold, losing an estimated $560 billion in last week’s gold rout.
That’s just the big investors. It doesn’t count the tens of billions of dollars lost by average investors all over the world.
Fortunately, those following my analysis are not among them. I have been consistently bearish gold for well over a year now, and anyone following my work either avoided huge losses …
Or even better, acted on the more specific advice I’ve given in my paid publications, went short via futures or inverse ETFs on gold, and cleaned up big time.
The Level of Disbelief in Gold’s Correction
Means More Losses Lay Ahead
When investors in any market are in denial about what’s happening, it’s virtually a sure fire sign that the current trend is going to continue.
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| Millions of investors refused to believe gold could fall so far … so fast. |
Why? Because they’ve suspended all semblance of logic and they’ve become so irrational that they can’t see the forest for the trees.
For instance, in gold right now you have three types of investors …
1. Those who believe gold was “ambushed” by big investors who wanted to trash the market and inflict losses on small investors.
But if that were true, then why did all the big investors I mention above lose so much money? Surely, they would have gotten wind of the ambush and been able to avoid a big portion of the actual losses they took, wouldn’t they?
Then there are …
2. The gold investors who believe the gold market is “manipulated” by a combination of big investors, politicians, and central banks set on pushing the price of gold down to “keep a lid on inflation,” or at least the perception that inflation is out of hand.
But if that were true, then again, why did so many big investors take such big losses? And why did central banks lose as much as $560 billion?
Central bankers are not the smartest traders in the world, but they’re certainly not dumb and stupid.
3. And then, there are the gold investors who refuse to believe that there are deflationary forces at work, and they claim that gold has lost touch with reality, and that the current decline in gold therefore represents the buying opportunity of a lifetime.
Again, that’s denial, plain and simple. It’s touted by analysts and investors who refuse to believe that a market can — and must — go down, even if it’s just setting the stage for the next bull leg higher.
Look, markets never go straight up year after year as if there’s nothing but blue skies ahead.
The fact of the matter is that the biggest, strongest bull markets are those that correct violently, shake out all the weak and even strong long positions and buyers …
And clear the air for new buyers to come back into the market.
So if you’re a real student of the markets and a real gold bug, then this violent correction that has occurred in the gold market should have been expected, and further, should be music to your ears!
For in the end it is about the best thing that could have happened in the gold market.
It will allow the gold market to refresh itself, to reenergize, and to set the stage for a massive new leg to the upside.
Right now, you should expect a bounce in gold. But as I said in my special Money and Markets column of April 15 …
Gold’s Historic Collapse Is NOT Over
Keep your eyes on the $1,412 and $1,458 levels. One of those two levels should cap any bounce in the gold market.
On the downside, I repeat the key support levels you should be watching:
$1,298.70
$1,244.90
$1,160.90
$1,028.40
$Â Â 993.90
Each of the above levels should temporarily hold once they are hit. But based on my system models, I repeat my warning of my April 15 special column: Gold will likely not bottom until it hits major long-term support at $1,028.
If you’ve acted on any of my suggestions to purchase inverse ETFs such as the ProShares UltraShort Gold (GLL) and the Direxion Daily Gold Miners Bear 3x Shares (DUST) … or even the ProShares UltraShort Silver (ZSL) for a play on silver’s downside …
Hold those positions!
And most important of all, do not be tempted to buy any gold, or silver, or mining shares, until I give you the all-clear!
Instead, let those who are in denial about gold’s correction continue to get their head handed to them.
When they finally realize that all their theories about gold market manipulation and ambushing, central bank shenanigans to depress the gold price, and more of such conspiracies …
Are nothing but gobbledygook, then gold will finally bottom!
Best wishes,
Larry
Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader.
Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.
{ 19 comments }
Thanks for your advice Larry.
Thank you!
how about silver's key support levels?
$21, then $17
Larry,
Enjoy reading your column. Keep up the great work. Any thoughts when gold might bottom ( ie. six months)?
Cycles point to an August bottom.
Tell us about silver Larry please!
Incorrect judgments of the author:
1. Author mixes into one two different gold market – the metal and paper.
2. The author claims that someone "lost money" and leads some numbers. I own physical gold. I have not lost in 2008, when the price dropped from $ 1,000 to $ 700. I bought for $ 1,000, I bought for $ 900, I bought for $ 800 and $ 700, too. But I have not lost anything. And now, in 2013, I also have not lost anything.
I repeat, the owners of physical metal have not lost a cent.
The term "loss" is inextricably linked to the closure position. I'm not going to now sell my gold. Central banks are also not going to now sell their gold. What did we lose? Nothing.
I buy gold right now and I know, that I do not lose nothing, as it was in 2008 and in 2006, too.
Gold shorts – it's like someone trying to piss into the wind. He pees in between gusts of wind, and he hopes he will have time to finish writing until the wind will blow again. Where is the logic?
I know many people who have tried to play in the gold shorts.
They were brave men with iron balls. They now sell potatoes. The glory and eternal memory of a true hero, Amen!
Are you kidding me? What about all those who bought much higher?
Larry Edelson they will be rewarded in about 12 months time mate. holding physical gold is a safe bet, better than an y other type of investment, MORE QE on the way, FOMC will probably increase the print run. japan is upping teh ante, korea to follow suit
europe already priming their pumps. totla bollox by this author, as they are ETF traders, not gold investors. go physical, go long and hold on for the shit storm heading to the US form europe very very soon, once the forex in the US$ collpases on the lack of interest in the petro dollar ponzi scheme, then the fake CPI data can't be papered over, as all the imported stuff, will be going up 20%
How soon can we expect a low around 1100? recently Dr Marc Faber says we could see a bottom soon.
http://drmarcfaber.blogspot.com/2013/04/we-could-see-major-low-in-gold-soon.html
Best guesstimate: By August.
What a HORRIBLE day for gold and silver! Just lost THOUSANDS today shorting silver! Pretty much lost all the money I made shorting from the two day crash!
Well, the $1,458 level seems to have been blow out of the water and held considerably well. Seems to be more than just short covering in my opinion. The big question is sustainability? What time line do you think we are looking at for a correction lower? I think the consensus here is that a consolidation period must occur in order to support the much anticipated vertical bull spot price…again time line, any.
thoughts?
Bounce already nearing an end. Gold has not bottomed. Neither has silver.
That might very well be true. It's entirely possible that PAPER gold and silver have not bottomed. Good luck getting PHYSICAL delivery on anything from COMEX or taking delivery on any large quantities. Expect to see the physical premiums jump. One large wholesaler I know has silver 1 oz eagles for $5 over spot. The last time silver was at $23, the premium was $1.99. Supply is very tight for physical metals. There is an unlimited supply of paper metals, so why shouldn't the price drop? It would be a very interesting study to compare the physical markets over the next five years with the paper markets, might be interesting for one of your grad students to take a look.
Are you still bullish on the Dow?
We are very much past the stage of trying to invest for profit. That should have been done 10 years ago. We should now be purchasing physical as a storehouse of purchasing power for retirement and future generations. Until and unless the government quits spending more than it takes in, the purchasing value of the dollar will continue to decline. Gold is now a store house, a standard, an insurance policy and a hedge against losses in purchasing power of the fiat of the realm.
I think the conspiracy theories are not to be taken seriously, the thing that isand will be helping gold, are the massive queues for physica, l from turkey to dubai, to china, to mumba, even the mints can't keep up with demand.
The reason gold went up is becasue people fear what will happen to paper money with all the dillution we see and that will continue in ernest for months to come and more will join the printing party, once the US$ has lost the myth of being a safe haven, then it's decline wil see the inflation rate start to climb and you might see the Fed finally take its foot off the QE pump.
but by then, the increase in interest rates will be making the amount charged on their massive debts crippling.
They have painted themselves into a corner and the only thing left, that is tangible and people worldwide will trust in is physical gold, not the shonky ETF's.
This is what the smart money has been dumping. not gold!
The market has moved on to physical and the author of this peice is not noticing this very important fact.