Gold Bug Survivors Prepare to Capitalize
The comments below are an edited and abridged synopsis of an article by Gary Tanashian
It has been a classic washout in the gold stock sector but, if positioned correctly, opportunity is setting up.
The macro and sector fundamentals have been incomplete; the technicals have signaled a downtrend since mid-2020 with the exception of March/April 2022; sentiment, over-bullish in mid-2020 and April 2022, is now opposite and bullish on a contrarian basis; the sector is deeply oversold; CoT data for gold and silver are positive and very positive, respectively; Tanashian’s view of cyclical inflation (as opposed to stagflation) being terrible for gold stocks was correct, even as this view was lost in the din of opposing—and incorrect—opinions.
The fundamentals have not slammed into place during this cycle; rather, they are grinding into place, slowly and outside the limits of the average market participant’s patience—exactly why contrarian investing is so difficult. It is hard to have patience when it takes time for an opportunity to play out, especially when your viewpoint is not reinforced by a majority.
That is how markets often go: Manage risk > manage risk some more > manage risk for so long you almost lose sight of why you’re there and what your job is > and then prepare to capitalize.
Intact players should now be considering the big sentiment event on tap as the Fed, which was jerked into hawk mode by the bond market, prepares to render its big decision (on July 27 it will either hike the Fed Funds by .75% per 71% of CME traders or 1% per 29% of CME traders).
Meanwhile, the Gold Bugs index is heading toward a higher low than the 2018 low, which is all it needs to do to keep the volatile series of higher highs and higher lows (AKA a bull market) intact.
Tanashian presents a general monthly gold chart that should not only cause no concern for would-be buyers who are well prepared; it should stimulate greed while a majority of bugs are gripped in fear.