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It's Still Not Time to Buy Gold Yet

By Dr. Steve Sjuggerud
Thursday, December 1, 2016

"I personally sold all my gold and gold stocks yesterday," I told a crowd of 500 gold bugs at the Sprott Natural Resource Symposium in Vancouver at the end of July.
 
The crowd was shocked...
 
But my timing was nearly perfect.
 
Gold is down 12% since the beginning of August. And gold stocks – as measured by the VanEck Vectors Junior Gold Miners Fund (GDXJ) – are down more than 30%. That's a serious fall in just four months.
 
Since then, I've checked in with you about once a month to tell you if it's time to get back in... And now, at last, we're seeing signs of a change for the first time in four months. Today, I'll tell you the two things we need to see going forward...
 
The reason I sold was simple: By some measures, investors were more optimistic on gold than they'd ever been. In short, there was nobody left to buy. And when there's nobody left to buy, the price can't go higher.
 
After I sold, I figured this optimism would start wearing off... particularly as the price of gold and gold stocks started to fall.
 
It didn't...
 
Investors were stubborn. They bought on the dips. They averaged down. They bought more. And more. Month after month, they refused to give up on gold.
 
The thing is, I can't buy gold until these folks give up.
 
So every time I checked in with you here in DailyWealth, I couldn't say "buy gold" – yet. We weren't even close.
 
But now – finally – these investors are starting to give up...
 
Here's just one example... Investors are pulling out of one major gold fund. It's the kind of move we haven't seen in the past three years. As Bloomberg reported on Tuesday...
 
Outflows from the SPDR Gold Shares exchange-traded fund (GLD) – far and away the largest exchange-traded commodity fund by assets – have totaled nearly $1.4 billion over the five sessions ending Friday, marking the highest withdrawals over such a period since 2013.

This is just one sign. There are many other signs that investors are giving up.
 
Here are two of the most important things we're seeing...
 
1.   The shares outstanding of the main gold-stock exchange-traded funds are going down, and
 
2.  The bullish bets on gold futures are also going down.

Does this mean that it's finally time to buy gold and gold stocks?
 
No. Not yet.
 
Hey, don't shoot the messenger here... I'm just calling it like I see it.
 
We need to see two things before gold and gold stocks are a strong buy again...
 
1.   Gold and gold stocks need to move from "loved" to "hated" (or ignored). That process is underway, finally, but we are not there yet.
 
2.   Gold and gold stocks need to end their downtrends and start new uptrends. Again, we are not there yet.

If you're a fan of gold, I'm sorry to be the bearer of bad news. But at least we are seeing some signs of a "buy" signal for the first time in four months.
 
More aggressive traders might dip their toes in as gold is getting more attractive, but I can't give the signal just yet. I'll let you know when it's time to buy...
 
Good investing,
 
Steve




Further Reading:

Steve has been watching the trend in gold carefully over the past four months. And gold is quickly moving from "loved" toward "hated" again. Be sure to read Steve's previous essays on the this unfolding trend here and here.
 
Meanwhile, another metal – copper – just staged a massive, short-term breakout. As Brett Eversole wrote recently, "Copper doesn't just outperform after these extremes... It absolutely soars." Read the essay for the best way make the trade: Copper Has 40%-Plus Upside... Starting Now.

Market Notes


A SIGN THAT THE U.S. ECONOMY IS HEALTHY

One manufacturer is soaring... and that's good for America.
 
Over the past few years, we've featured dozens of charts that show the U.S. economy is doing better than the pessimists would have you think. Many of these charts come from our "real world" economic indicators... like the share price of Harley-Davidson and Pool Corp. Another stock worth mentioning here is Thor Industries (THO)...
 
Thor is America's largest recreational vehicle (RV) manufacturer. Like motorcycles and backyard swimming pools, RVs are a "want," not a "need." RV sales rise and fall with America's ability to spend extra cash on road trips.
 
As you can see from the following chart, Thor shares have doubled this year alone, hitting a new all-time high this week. The U.S. economy will eventually enter another recession. But if stocks like Thor are hitting new highs, it's a clear sign we aren't in one right now...
 

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