When we are dazzled by the shine of the gold bull, we should be watching all gold shares and silver instead. The gold stocks will give us a bigger clue if we keep checking it up against gold. 30:1 was expensive with 84.67:1 being on the cheap side in late 2015. Today we are at a 63.7:1 Gold/GDX ratio, which is the cheapest GDX has been all year. This is a good thing but GDX, should still get much cheaper. I work about 20 ratios that I call my “Ratio Pool”, which are all in-house generated numbers. My weekly Market Vane report is outside data, which reports only the percentage of bulls present. This still has some ways to go, as at 35%-40% bulls, still leaves to many bulls around. Low would be below 20% bulls or lower.
The hedge funds, non-commercials and speculators are all the same. The mass media thinks they are the smart money, which actually is the emotional dumb money. We can be gaurenteed that they will always get themselves in one trap or another, as they added more to their short positions in last weeks COT report. The bigger the hedge fund trap becomes, the bigger the ensuing rally will be, as they will be forced to close all their short positions, before they lose too much money. If we are lucky the commercials may even turn a bit net long in the process, which they have not done since the 1999 bottom.
The first leg down could still take all of 2018 to play out, but then it may also take all of 2019 for the counter rally to complete. This would make 2020 and 2021 two very bearish years, if we were to hit a major bottom by about 2021. Nobody is telling you that gold stocks and the general market could all end up getting closer together by the end of this year, as gold and the markets are at Cycle degree wave 3 peaks. This happened on a smaller scale with the 2008 crash, but now the entire world is sitting on some stage of a Death Cross!
Deflation is coming if we like it or not and the declining gold price is the biggest clue that deflation is on it’s way. Gold is already down over $700 since the 2011 mania peak. Every myth that gold investors have invented will not work, as gold will never protect you from deflation. The only way precious metals will protect you from impending inflation is when it is crushed in price, like what gold was in late 1999-2000. Gold assets do swing in both directions, but in the long run they will never hit zero like any crypto or paper based asset can. The gold market has about a 7.8 Trillion US dollar capital base, which is big enough for any trader to make a very good living with.