Trading Signals & Analysis

Gold’s Decline: What’s Next?

by Larry Edelson |

Just last week — in one of my strongest warnings yet — I told you that gold’s decline wasn’t over. I received a lot of flak for that one. After all, many of the very best analysts in the world and some of the top hedge fund managers were all very bullish on gold.

But gold did indeed slide. Quite a bit, falling from as high as roughly $1,257 last Monday to as low as $1,206 on Friday.

So what’s next for gold? For silver? For the other precious metals? For mining shares?

My answer: After a brief bounce, still lower for all of them.

Why? Three chief reasons:

First is the degree of the slide into June 21 shown on this chart. It’s very sharp, very steep.



Click image for larger view

It’s my latest artificial-intelligence forecast chart of gold. You can clearly see that not only is gold following the green forecast line to a tee, but that there is also no bottom in sight until around June 21.

Second is the fact that gold has now closed well below an important support level at $1,226.

That’s bearish for gold heading into June. On a bounce, we may see a retest of the $1,226 level, but then gold would head to new lows in late June.

Third is the fact that the latest Commitment of Traders (COT) report shows yet again another record high of speculative long positions in the gold market. Do not underestimate this. It is extremely bearish.

At a record number of long positions in gold — even more long positions than when gold went over $1,900 in September 2011 — this is indeed a very bearish sign. It means that despite the recent selloff in gold, the longs have not yet been spooked enough into a panic.

That panic will soon come, probably in June, and it will likely push gold down to the major support levels at $1,160 to $1,140.

Ditto for silver and the other precious metals, as well as for most mining shares.

So what should you do if you didn’t listen to me and you got caught in this rally and in mining shares … and you are now facing the potential for steep losses?

A. You can sweat it out and hold your positions and hope you come out the other side okay.

B. You can hedge using inverse ETFs for gold, silver or miners, such as GLL, ZSL,
and DUST. Or …

C. You can exit your positions on a bounce … and get back in when the metals and miners bottom in the latter part of June.

If it were me, I’d choose "C."  But that’s just me.

Meanwhile, I am overjoyed with the decline in the precious metals. And so are my subscribers. I forewarned them of this decline and I have them fully prepared now to capitalize on it as the decline comes to a close in the latter part of June.

In fact, they’re going to be positioned in such a way that I expect them to make a lifetime of profits — a few times over — in just the next three to five years, as gold works its way back up to its destiny of over $5,000 an ounce.

Thing is, most investors won’t participate. Many will get burned because of the recent pullback, and they won’t come back into the metals market, if at all, until it’s too late.

Others won’t be buyers because — as I’ve said all along — the new bull market in precious metals and miners won’t be built on the backbone of inflation …

But instead, on the backbone of governments gone madly insane, authoritarian, and bankrupt.

For evidence, all you have to do is scan the globe and you’ll clearly see the trouble the world is in. From the Middle East and Russia to the Far East and Europe. And from Europe to the United States.

The handwriting is on the wall. All you have to do is time your investments right.

Best wishes, as always …

Larry

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