When bad news is good news… This “dumb money” indicator signals higher gold prices ahead… Doug Casey – This is what it means to be a contrarian… In the mailbag: Is it hopeless to try to avoid the NSA’s tracking?
We’ll come back to that story later in the week. Today, we want to put an important market move on your radar – a turnaround in the gold market.
As we’ll show you, there are lots of contrarian signs pointing to a coming bull run in gold… and most folks are missing them.
The price of an ounce of gold peaked in January. Since then, it’s down 11%.
But it’s been even uglier for gold mining stocks. Here’s colleague E.B. Tucker, who heads up our Strategic Investor advisory…
It’s been a shocking situation out there for gold investors. If the gold market is on the floor, mining stocks are in the basement. Take the recent drawdowns for some of the big precious metal mining stocks. It looks as though they went down on a rope.
Take a look for yourself. Here are the drawdowns (peak-to-trough declines) since the start of July for some of the gold mining stocks E.B. has been tracking.
|2018 Performance of Gold Mining Stocks|
|Agnico Eagle Mines||47.74||34.55||-27.6%|
Gold bullion and gold stocks have been taking a beating. Now, the fund management industry is throwing in the towel on gold, too. E.B. again…
Fund managers are also turning their backs on precious metals. Last month, the Vanguard Group – one of the world’s largest investment firms – said it was shuttering its precious metals and mining fund, the $2.3 billion Vanguard Precious Metals and Mining Fund.
Vanguard is turning it into something completely different because it feels the need to get away from deeply out-of-favor precious metals miners.
Given all the bleak news, it may surprise you that E.B. – who used to co-manage a fund that invested millions of dollars into gold stocks – is bullish on gold right now. But as contrarian investors know, it’s when times are bleak that the really big money is to be made.
As Legacy Research cofounder Doug Casey explains it…
Risk is mostly a function of price. Everything else being equal, when prices are low, it’s less risky. Most people think the opposite – they only buy when there’s a “good track record.” Which means prices are high.
Instead, you want to go where other people don’t go. That’s where you get the bargains.
Everybody knows the old expression “buy low, sell high.” Well, when are the prices absolutely the lowest? When everybody else is afraid of the situation and, as the original Baron Rothschild put it, “blood is running in the streets.”
In the world of commodities trading, there’s the “smart money”… and there’s the “dumb money.”
Here’s how master trader Jeff Clark – one of Doug’s fellow cofounders here at Legacy – describes it…
Commercial traders are the smart money. They’re the banks, institutions, and merchants who have a vested interest in the underlying price of the commodity. Commercial traders are active in the futures markets where they trade contracts to hedge their risks and/or lock in a favorable price for the commodity.
Commercial traders are called the “smart money” because at major turning points, these traders are always right.
Then there’s the dumb money – mom and pop-style traders. This group almost always gets it wrong. They tend to hold record-sized “long” positions just as the price of an asset peaks and starts to decline. And they tend to hold record “short” positions – that is, they’re betting on lower prices ahead – right as prices bottom and start to rally.
Why is it important to know this? Jeff again…
At the end of May, the dumb money had amassed the largest short position in gold since the price of the metal bottomed in December 2015. Commercial traders were holding their smallest short position of the year.
Since then, gold has fallen more than $100 per ounce. The dumb money is making money on its downside bets. And the smart money looks stupid. I suspect that’s temporary.
I’ve traded gold and gold stocks for more than 35 years. I haven’t made money on every trade in the sector. But I can tell you, without any hesitation, that I have made far more money trading gold stocks than trading any other sector in the market. And much of those profits have come from following the smart money – and being patient enough for those trades to work out.
In tomorrow’s issue, you’ll see why Jeff’s patience is paying off…
We’ll be talking with Legacy Research’s globetrotting geologist, Dave Forest, about another contrarian buying indicator for gold – this time, from mining industry insiders.
Last week, we told you that the world’s first mass surveillance system is now online in China… and that our own government is already following suit.
Today, one of your fellow readers gives us the scoop from inside a secret U.S. surveillance program…
I spent eight years working biometrics data in Afghanistan. The military biometric identification system is used like fingerprints in the U.S., for gaining access to facilities and identifying perpetrators and witnesses of hostile or criminal actions.
All over the place, immigration queues are equipped with cameras that capture your iris, so you are not avoiding the inevitable if you travel.
I am pretty sure that my passport and I are recorded in multiple jurisdictions, which means the NSA knows a lot about me without even trying. I gave up trying to avoid tracking years ago… It is close to hopeless.
– Chuck G.
Meanwhile, another dear reader thinks we’re just crying wolf…
Your assessment of any threat from the “Deep State” is clearly overblown. Some real threats are:
GMO diddling of the food supply.
Contamination of air and drinking water by poorly controlled fracking, off-shore drilling, and other over-reaches to produce petroleum are serious threats to the livability of the planet.
The control of medicines by the pharmaceutical companies to treat symptoms of disease while purposely avoiding striving for cures to ensure that sales continue uninterrupted.
The absurd demand of politically correct applications to every problem versus actually solving problems regardless of whether certain segments of the population endorse them.
The overpopulation of the planet, particularly since the excess increases are mostly by the poorest and least-civilized portions of the population.
These are all greater threats than the ambiguous “Deep State” allegations.
– Ronald S.
Are you worried about Silicon Valley’s partnership with the national security faction of the Deep State to surveil us in cyberspace? Or is the threat to our personal liberty overblown?
Send your thoughts and comments to [email protected].
August 27, 2018