Everyone seems to think gold has bottomed, but the fact of the matter is this: Nothing could be further from the truth.
Yes, gold has rallied off its lows. Yes, gold could stage one more rally, as high as $1,365 according to my models. And yes, miners could rally a tad more.
But the key question remains: Has gold really bottomed? Is it in a new bull market now, headed to new record highs?
FIRST, consider this chart of gold:
As you can clearly see, gold’s rally since December is very minor and more importantly, gold is now having trouble at the first levels of major overhead resistance at the $1,300 to $1,325 level.
If gold were to manage to break through that level, then additional strong resistance will be found at $1,365, where I have a system monthly buy signal.
Only a month-end close above $1,365 would gold indicate a possible pause in trend, and even then, it would not indicate a new bull market; merely a very strong bounce.
However, at this time, it is extremely doubtful that gold could manage a close above $1,365.
Instead, although the current rally could continue, the gold market is setting up a trap, one that will suck in unsuspecting investors, only to chew them up and spit them out when the next down leg forms, which will take gold below $1,000.
The picture is the same for silver, platinum and palladium, as well as the mining sector. Though the current rally could continue a bit longer, the rallies are sucker traps.
SECOND, consider the cycles in gold, per this chart.
Based on over a billion calculations of time series data for gold, this chart clearly shows that — while gold can indeed rally a tad more into mid-February … ultimately this rally will fail and gold will plunge to new lows in May.
Keep in mind this cycle chart measures the TIMING for gold’s next move. It is NOT an exact indication of price.
It’s telling me loud and clear to expect a February peak in gold followed by a full four-month bear market …
One that will likely take gold to new lows, which would be retested in June, syncing up nicely with my longer-term models.
THIRD, consider the sorry state of affairs Europe is in. Europe is crashing, the single currency experiment is a massive failure.
The European Central Bank’s latest printing efforts will change nothing, and instead, will merely accelerate the capital flight out of Europe, and hence, Europe’s collapse.
Moreover, Greece’s latest election — ushering in an anti-austerity party — is likely to soon lead Greece to exit the euro, setting off a domino effect as other European Union countries that are suffering begin to see the light of day — and that the only way out of their suffering is to leave the euro behind.
FOURTH, consider deflation. It is almost everywhere now, negatively impacting all commodity prices. Nearly every commodity on the board is set for further declines in the weeks and months ahead, among the weakest being oil, which should plunge to the $30 level later this year.
FIFTH, the dollar. Though short-term its rally is a bit long in the tooth, the dollar’s massive breakout cannot be underestimated. At an 11-year high against the euro, and at a 12-year high basis the Dollar Index …
The dollar remains poised for further gains in the months ahead as the euro crumbles further.
Do NOT get long the gold market right now.
Or any precious metals. Or any miners.
Do NOT fall for the pitches that claim precious metals are in a new bull market.
Do NOT buy mining shares. They have not yet bottomed either.
Keep in mind that most of the analysts who believe gold has bottomed have something to sell you; namely gold and silver bullion or rare coins. Do you think those analysts sales prospects are all that good if they told you gold prices are headed lower?
Hardly. Which is precisely why they are so biased, jumping on almost every up move to declare the bottom is in. They want to sell you something. Period.
I have no hidden agendas. I call it like I see it. Gold has NOT yet bottomed, Period.
Instead, realize what the current rally is: Nothing more than a bear market bounce.
A trap that will lead to devastating losses for those who get caught in it.
Stay tuned and best wishes,