Gold has just completed its first weekly decline in 12 weeks. To all the gold bugs out there, let me assure you that this is a positive sign. We need to flush out all latecomers and weak hands. We need bearish sentiment to reappear in a bit way- right in time for a monster rally. We need to hear about how a slowing global economy is going to pressure jewelry demand, and in turn, pressure the price of gold. In short, we need the dumb money to get a little bolder with their calls.
In all honesty, I am more excited than I’ve been in months; my favorite time to invest is when prices are declining. I’ve learned over the years to be patient with my entries and to let corrections come to me. If I miss out on adding in a correction, it’s not the end of the world- I already have a position. But adding on the first sign of weakness after 12 straight weeks of strength is just not wise; the odds are not in your favor. Don’t get to trigger happy here.
Gold miners have experienced a healthy correction and no doubt bargain hunters are starting to step in. I am still sitting this out on the sidelines awaiting more corrective activity. Not only am I hesitant to add to positions leading up to the G-20 meetings, but the corrective action in gold looks likely to continue. We are not quite oversold yet on a technical basis. I feel a lot more comfortable adding when stocks start reversing from oversold conditions. In terms of sentiment, I haven’t seen to0 many videos heralding the end of the gold bull run recently, so I am hesitant to call a bottom. I’m not being facetious when I say that I will buy when gold top callers come out of the woodwork. The predictions of gold bubble experts reflect the thinking of the dumb money. Trust me, you should fade the dumb money at every opportunity.
The gold market is fluid and variables are constantly in flux, which means my plans can change at any time. I may start buying gold stocks next week, even though I don’t plan on doing so. When I was buying gold stocks with both hands in February, the sentiment amongst investors was much different. Gold bears were bold in their top calling. Gold bulls were selling in panic. People on leverage were getting absolutely demolished and liquidating their positions. This is the type of sentiment that is pervasive at bottoms. Am I seeing any of these conditions now? Not at all.
Hopefully there will be another correction of size that will allow us all to enter at cheaper prices. Have the courage to add and you will be rewarded. Then it will be time to sit back and watch the gold bull market take care of the rest.
