The relative performance of long and short-term bonds vs. the S&P500 index for the last 5 years.
As one can see, even short-term bonds, the safest theoretically assets one can buy, have outperformed the S&P500 stock index.
One can really see what side has the best argument and solution. But both sides see that the current system is totally flawed to put it mildly. However, it will not work to replace a currently flawed system with another system that may even be worse.
I let you be the judge whose side has the best logics and solution the current political system.
Picture from: GreaterBostonTeaParty.com
I call this signal “Buy The Dip” and it gives us a good buying point. But no buying signal is ever good without a proper exit strategy. But if you are being long-term bullish on gold like I am, you should widen that stop loss. So please remember to always define your exit signal before you take on a trade or investment.
A wider stop loss means you also need to take a smaller position on your trade. But I hope most readers already have gold in their long-term portfolio as insurance as I have written about before.
The last local low point was $1,535 so that will be my stop loss unless sentiment changes.
[Edit: Added the following paragraph on Nov 1st]
Mark Hulbert who is tracking sentiment in his Financial Digest wrote on the 25th of October that “[…] gold market exposure among the short-term gold market timers […] dropped to its lowest level in two and one-half years — minus 13%.” This will really help to give the positive signal above a kick-start.
According to Hulbert at MarketWatch, “that huge two-day drop in late August did scare a lot of erstwhile bulls into becoming almost stubbornly bearish — which, from a contrarian point of view, is bullish. As a result, even though gold bullion is now back within shouting distance of its August highs, gold market sentiment remains remarkable subdued.”
They write that the average recommended gold market exposure among a subset of the shortest-term gold market timers currently stands at 40.3%. While it stood at a much higher 67% in late July.
So even though gold has climbed $300 and 18% since July portfolio managers are more negative (or less positive) now. Since the typical pattern is for gold timers to become more bullish as the market rises, and vice versa, this development is bullish from a contrarian point of view.