The past 18 months has not been kind to Gold investors. Gold topped out in August 2011 when positive sentiment was at its extreme. At the same time sentiment for the stock market was in the dumps after the S and P 500 had plummeted roughly 18% in as little as 1 month. Since then the S&P 500 has risen roughly 30% and is now registering positive sentiment levels only seen 3 other times in history while Gold has declined roughly 16% in the same time frame.
Oh what a difference a year and a half makes. Imagine where we will be in the next year and a half now that the stock market is at extreme positive sentiments and according to last week’s report issued by The World Gold Council investor interest in Gold has declined year over year.
For those that have attended our events or read our past missives you’ll be familiar with our love for selling assets at strong positive sentiments and buying at depressed levels of sentiments. After all, the whole point to investing is buying low and selling high and there tends to be a correlation between sentiment and asset prices as most of us tend to extrapolate a current trend into the future.
Remember in 2006 when you couldn’t find anyone that believed real estate prices would go down? Gold reached that level of sentiment in August of 2011 and has now spent the last 18 months testing the patience of anyone that has the shiny metal in their portfolio.
With prices of Gold coming down hard in the past few weeks and sentiment for the yellow metal reaching low levels the time to buy Gold may be just around the corner.
As you can see in this one year chart of GLD the shiny metal is coming into a support zone where investors can start to place some buy orders within.
Since discipline is more important than conviction we would also like to give you a visual of a longer term picture of GLD. While we are entering a support zone and the text book tells you to buy at support it is also important to look at the bigger picture to help anticipate any potential surprises to your buy thesis.
For this we offer a 3 year chart of GLD. The thing to pay extra attention to is the break and successful bearish back test of the red trend line. This break and subsequent retest and inability for Gold to hurdle back above this long term uptrend line is what helped us warn investors back in September that Gold was not done correcting in price. This should also serve as a warning sign that the secular bull market in Gold is treading on thin ice and using stop loss orders just under the support zone would be prudent.
It’s amazing to think that with all the printing presses running at full steam by all the different central banks throughout the world that Gold has not been able to react positively. Maybe the next 18 months will be better for buyers of Gold. The charts and sentiment levels seem to say so.
The opinions expressed are those of Colby McFadden and Quiver Financial as of 2/19/13 and are subject to change due to market and other conditions. This is not a recommendation or solicitation of any kind. Always consult your own advisor to determine whether an investment is suitable for your personal situation. Securities offered through Newport Coast Securities member FINRA/SIPC. Advisory services offered through Newport Coast Securities. Colby McFadden is a registered rep and investment advisor representative of Newport Coast Securities.
The opinions expressed are those of Colby Mcfadden and Quiver Financial as of 3-22-13 and are subject to change due to market and /or other conditions. This is not a solicitation or recommendation of any investment or security. Consult your own financial representative prior to making any investment decisions. Colby Mcfadden is a registered rep with Newport Coast Securities and this publication is not to be construed as market research or analysis. Securities offered through Newport Coast Securities member Finra/SIPC. Advisory services offered through Newport Coast Securities and Registered Investment Advisory.