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Category Archives: gold bugs
Idaho Gold?
Three years ago, it was hailed as a second coming and the dawn of a new age. Hidden underneath was an appeal to the primal instincts of goldphiles everywhere.
On February 13, 2021, Idaho Bill H0007 was passed by 51-19. The bill states, “Amends existing law to provide that idle moneys may be invested in physical gold and silver in certain instances.” What is most important about this bill is the timing.
It was introduced just after the runup in the price of gold from the late 2015 low.
Whoever the legislator is that proposed such a law is keenly aware of the foibles of followers of gold but also doesn’t have the acumen to know when such a law, in the best interests of the citizens, should have been proposed (2015 or 1999).
The law (found here in PDF format) itself reads as a mockery of the concept of gold as money, go on, read it and laugh…
The costs of maintaining a facility that is either in state, or in an adjacent state, while the price of gold goes nowhere in the face of mounting inflation really begs the question, to whose benefit is this charade?
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May 22, 2022 Gold PMI
Gold Market Review: March 2020
In our last Gold Stock Indicator, published October 28, 2018, we offered up $1,755.41 as the extreme upside resistance level for gold. When the same level is drawn to the most recent price, we find that gold has struggled at the $1,755.41 resistance line.
It is one thing to struggle but it is an entirely different situation to collapse below the last remaining upside resistance level. Ordinarily, the price action above the descending $1,755.41 line would have assured us of a rise to the previous peak. Now, with the latest collapse, the price of gold is slated to bounce at the descending $1,615.82 level. That descending line is the equivalent of the $1,343.75 price.
Looking at the Philadelphia Gold and Silver Mining Stock Index (XAU) leads us believe that the $1,343.75 level in gold, although a very extreme level on the downside, could be a realistic target.
Notice that the XAU index could not exceed the upside resistance target of 166.09 AND the prior peak set in August 2016. That is a significant hurdle that should have been breached on the upside. Instead, the failure puts emphasis on the downside target.
The XAU index stands to re-test the 133.80 level which is the equivalent of 52.00. It should be noted that the XAU is the leading indicator for the direction that the price of gold should go. If you didn’t notice the rise in gold stocks from the late-2015 low then you shouldn’t notice it now.
The latest upside action of double digit percentage increases is a warning of more downside risk rather than a resurgence to the 2010 peak at 228.76 (our April 2011 call that the XAU would decline -66% [it lost -83%] found here).
Gold Stocks: Hedge Free
We have been quoted here on many occasions saying that when the general equity market takes a dive of –10% or more, so too does gold stocks by a greater margin. Our point, gold stocks are not a hedge from general market drops.
In our September 24, 2014 article titled “Gold Stocks: Risks and Remedies” we highlighted the numerous instances from 1939 to 2011 of when the Dow declined by more than -10% and showed how either the Barron’s Gold Mining Index or the Philadelphia Gold & Silver Stock Index declined by a greater percentage.
In the recent decline of the DJIA from January 26, 2018 to February 8, 2018, the index declined –10.36%. So how much did the Philadelphia Gold & Silver Stock Index (XAU) decline? The XAU declined –11.57%.
In the chart above, we have excluded the decline of –14.75% from January 24, 2018 to February 9, 2018 in the XAU index. Add this to the growing list of instances of when the DJIA declines more than –10% and gold stocks also decline by a greater percentage.
Posted in DJIA, gold, gold bugs, Gold Stock Indicator, XAU
Wanted: Real Gold Experts
Experts on the topic of gold are a dime a dozen. However, few, if any, are actually experts at all. With the ability to be quoted day in and day out, there is little or no accountability when it comes to accuracy of claims. Of course the “expert” will not provide the gaping (and ongoing) lapses in their analysis and the published website touting them won’t bother to define what makes them an expert. All that seems to matter when qualifying as an expert on gold or gold stocks is that they are loud, speak often, never fail in their love of gold, make exaggerated claims, and go to the many headlining confabs arranged by the industry.
So what is a “real gold expert?” A real gold expert is someone who appreciates the good and bad of gold whiled able and willing to make the call, buy OR sell (no hold recommendations allowed). A gold expert that we have been working hard to get more information on is Alden Rice Wells. We know that Wells was bullish on gold stocks in the 1960’s in his Monetary Reports newsletter (PO Box 401, Exeter, NH, 03822) and was a contributor in the Inflation $urvival Letter (410 First Street S.E., Washington D.C., 2003) in the mid-1970’s.
What stands out about Alden Rice Wells? After being a big proponent of gold and gold stocks through the 1960’s and early 1970’s, Wells warned that gold and gold stocks were going to crash in May 1974. The following excerpt is from Richard Russell’s Dow Theory Letters dated May 31, 1974:
"Several subscribers have asked us to comment on the recent recommendations of Alden Rice Wells, one of the original gold bugs, that silver and gold holdings be liquidated in anticipation of a crash, or depression (Richard Russell. Dow Theory Letters. May 31, 1974. Letter 599. page 6.).”
This is the performance of the Barron’s Gold Mining Index leading up to and after Wells’ recommendation to sell gold.
In the same period of time that Wells made the call for a crash in precious metals, gold declined –33% and silver declined –25%. This is what we would consider an expert opinion on the topic of precious metals.
What do investors need in a precious metal expert? A bullish perspective when it is time to be bullish and a bearish perspective when it is time to be bearish. Where are the experts today?
Gold Stock Indicator: August 2017
Gold and gold stocks are really dragging it out. There may be a recovery on the horizon but you wouldn’t know it from the lackluster performance in the face of Bitcoin going parabolic and daily geopolitical machinations.
Gold Stock Indicator: February 2017
Since our January 2017 posting on gold and precious metals stocks, the price of gold has increased +3.48% while at the same time precious stocks have declined –5.87%. There are some contradictions in the movement of each indicator which we will interpret below.
Gold Stock Indicator: October 2016
Since May 2016, gold and gold stocks, as represented by the Philadelphia Gold and Silver Stock Index (XAU), are managing to give us the most structurally significant pattern that a tea leaf reader could ever want.
Everything becomes easy with the pattern that has evolved. According to Dow Theory, this is what is expected at this time in this excerpt from a 1939 series of articles in Barron’s that later became the book “Making the Dow Theory Work” by Sparta Fritz Jr. and A.M. Shumate:
Gold Stock Indicator: End of July 2016
In the month of July 2016, gold increased +1.60% and gold stocks increased +12.94%.
Gold Stock Indicator: July 2016
The gold market is off and running. There are many reasons for the current rise in the price of gold but it is all after the fact and may only be guessing at best. It is important to note that “Brexit” has occurred six months from the respective lows in gold and gold precious metal stocks with each rising as much as 28% and 165%, respectively. To our minds, giving credit to the turmoil in the UK for the increase of precious metals is somewhat misplaced and could lead to more wrong conclusions than a single “right” one.
All that we’re considering is the price action and that alone is giving us food for thought. Below is the performance for gold and gold stocks from April 1, 2016 to July 1, 2016.
Since our posting on June 5, 2016, the price of gold has increased by +8.02% and the gold stock index has increased by +15.09%.
Gold Stock Indicator: June 2016
If you like a rising market then you definitely want the price of gold and gold stocks to increase above the level of $1,294 and 92.85, respectively. Otherwise, there will be a big blowoff in the gold market and sizable downside risk.
Good News, Bad News
Gold Stock Indicator: April 2016
Since our March 2016 posting, the price of gold has decreased by –5.00% while the Philadelphia Gold and Silver Stock Index (XAU) has increased +4.45%.
Gold Stock Indicator: March 2016
Since our February 12, 2016 posting, the price of gold has increased by +3.04% while the Philadelphia Gold and Silver Stock Index has increased +10.07%.
There is the mistaken view that in order to verify the trend in the precious metals market based on Dow’s Theory, investors should compare the price of gold with the price of silver. In fact, this is incorrect.
Gold Stock Indicator: February 12, 2016
Gold and gold stocks have made a turnaround in the declining trend that has persisted over the last several years. The reactions to a dramatic rise or fall in commodity prices is usually equal in violence and magnitude. Gold has increased +15.59% while gold stock has increased +27.90% since our last posting.
There is a lot of excitement in the gold investing community as there is the belief that this may be the long awaited bull market in gold which has been attributed by some by the advent of negative interest rate policies in major economies like Japan. We remain hesitant to believe that all is well in the gold sector as this is the third year in a row that gold has started strong. The last two years (2014 & 2015) both ended in the loss column for the year, in spite of the early gains.
The above chart shows exactly how gold garnered early gains. For 2014, gold ended the year at a loss of –1.55% while the XAU index declined –21.11%. For 2015, gold fell –9.55% and gold stocks fell –35.89%. The early gains for 2016 are nice but new investors should accept what may come if there is a repeat of the last two years.