Embrace the Sell-Off in Gold


Now that everyone is thoroughly confused by the market, it’s time to take a step back and see what’s going on. We are at a pivotal point where the market can turn either way.

The market has rallied more or less nonstop for the past 2 weeks so we are due for a little breather. I opened up some short positions that I plan to hold as a short term trade. But on a longer term time frame, I would be buying the dips. Let everyone else get beared up.

I would advise my readers to not get too caught up in death crosses, head and shoulder patterns, and other such technical indicators that have so-so track records of success. The thing to drill into your mind as a point of focus is the spread between bond rates and dividend rates for blue chips. That’s it. Capital is very opportunistic; it will go where the value is. As such, stocks are likely going higher.

Gold

Another morning sell-off courtesy of weak hands liquidating. Once gold took out $1180, we went to $1165 in a heartbeat. The next level of support lies between $1145 and $1155. By this point, you should start seeing experts on CNBC predicting $500 dollar gold. When this happens, buy all the gold shares you can get your hands on.

Everyone knows the basics about investing. We’re all supposed to invest for the long run and buy based on value. We should be “greedy when others are fearful and fearful when others are greedy.” Simple right? But how many people can execute in real-time? How many can control their emotions and buy when the time comes? Well since 90% of non-index investors lose money, I suspect not many.

I know for a fact that gold bulls are getting nervous right about now. Many want to throw in the towel and wait for a better entry point. Heck, Dennis Gartman just went from gold bull to gold bear. To me this makes no sense whatsoever. We are much, much closer to a bottom than a top right now. To me, the current sell-off in gold is reminiscent of the sell-off in stocks 3 weeks ago. While bears were blindly and recklessly going short, the smart money was sitting patiently with their fingers hovering over the “buy” button.
$1160 is cheap. I remember last year when I said $1000 would look cheap in 6 months. It was a crazy statement at the time, but how many of you wouldn’t back up the truck at $1000 right now? I added gold shares at $1160, and I will add more if we hit $1145. I am going to continue to build my position in anticipation of the moon shot in gold that will be “unexpected.”