Gold is taking a beating. As we go to press, it's off $200 over the last week, $250 over the last month, $300 over two months ago, and $400 over six months ago. Fear has clearly taken the driver's seat, pushing greed completely aside... at least for now.
Why? The reasons given by most analysts are nonsensical:
- Gold is selling off because those ever-so-ethical and smart guys at Goldman Sachs say it's heading lower. That this is patently silly hasn’t stopped it from becoming a self-fulfilling prophecy, for a time.
- Gold is selling off because some technical analysts say that's what should happen when certain support levels are breached. To the degree people believed this, regarding $1550, or $1450, it too became a self-fulfilling prophecy. But this is only a fancy form of momentum-chasing that exacerbates the situation; it does not cause it, nor explain it.
- Gold is selling off with broader markets because surprisingly weak retail sales and consumer confidence numbers from the U.S., as well as weaker-than-expected numbers from China, have whacked stocks and commodities alike – but that should have been bullish for the safe-haven metal. That some economic data coming in weaker than expected is given as a reason for gold to drop just shows how few people understand gold at all.
- Gold is selling off because of the now-denied news about Cyprus selling gold holdings to help bail itself out. Even if this were true, it would have no bearing on the fundamentals of the gold market, and would soon be nothing more than a wrinkle that was fairly easily ironed out.
- Gold is selling off because of manipulation. If that were so, it would not change the underlying realities and would eventually have to be unwound.
- Gold is selling because more and more people fear the peak was $1,900 in 2011, and it's all downhill from here. That – again – is momentum.
What this is all saying is that gold is selling off for the wrong reasons, mostly amounting to speculative momentum-chasing. Simply put: this is panic.
I've yet to see any convincing argument as to why gold had to drop or should go lower. To put it another way, I've yet to be convinced that the Keynesians are right, governments of the world have cured what ails the global economy with their virtual printing presses, and the next boom is a done deal.
That doesn't mean gold can't or won't go lower – just that if it does, the fundamentals say it's a buying opportunity. I know that some analysts are saying that having retreated more than 20%, gold has entered “official” bear market territory, and that signals a long wait for recovery, but experience has shown that when gold sells off for the wrong reasons, it usually bounces back. Strongly. Remember the second half of the 1970s gold bull market.
It was precisely with times like this in mind that we prepared our Downturn Millionaires webinar – emphasis on the word “downturn.” It’s still available online, if you missed it. Unless you can persuade yourself that governments around the world can print money forever with no adverse consequences, nothing has changed, except for our opportunities.
We've done everything we can to prepare our readers for this sort of volatility. We've even recommended gold puts some weeks ago, as a sort of insurance against this sort of retreat, and that advice has just paid off in spades.
I truly hope all our readers are ready for the opportunity that is now shaping up, and won't hesitate when they see their desired price targets come within grasp.
Personally, I will be buying this week.
I won't go "all in," but I will buy or average down on my favorite companies. And if the current retreat sparks an episode of true market capitulation and these same shares go on sale even more deeply in the months ahead, I'll look to buy larger blocks at absolute bargain-basement prices. They’ll be so cheap, I’ll be able to buy more with less.
Why not wait for that before buying? Because there's no good reason for the market to have sold off as much as it already has, and it could easily reverse itself. And when greed takes the wheel back from fear, I do not want to be left behind.
Let me be as clear as I can: the current drop may not be The Bottom, but stink bids filled during this retreat should: A) be great values; and B) offer a shot at very significant near-term gains.
So, yes, I see bear markets as buyers' markets. I've long said that the best time to buy is when there's blood in the streets, and that's what's shaping up; I plan to bid under market over the course of this week and get the best prices possible. Then I'll wait and see what comes next.
I encourage all contrarians with courage to join me in taking advantage of this opportunity.