Black Friday for Gold, Too?

As many were running out shopping on Black Friday for what they viewed as the “deals of the year,” I sat in my office contemplating the precious metals. And, it made me think about human nature.

We have all seen the pictures of people not only standing on line at all hours of the day or night, but some even camped out for days as they await the opening of stores so they can grab what they believe to be the hottest deals of the season. In fact, I saw one story of someone waiting three hours to save $10 on a consumer product. Moreover, we even see crowds stampeding, often causing injuries to those unable to keep up with the crowd, as they make their way into the stores.

But, what really makes me cringe are the news stories of men and women getting into physical altercations while trying to make a purchase of some consumer good, which may likely not even last them as long as the contusions received during these altercations.

Yes, these people engage in sometimes dangerous activities just so they can save $50 on consumer products. Yet, does the common investor maintain the same perspective about their portfolio? If we are honest with ourselves, the answer is clearly “no.” For some reason, investors only clamor to buy an investment if the price is soaring to a topping point, not if the price is bottoming. Isn’t human nature funny that way? And, just last week, I questioned the same:

“Think about it. Gold now is on sale for almost 50% of what it was worth in 2011 and silver is running a 75% sale. Given that opportunity for anything else you buy, would you not jump on it, especially for something that depreciates, like clothing or a car? So why would you take a different approach with something that will likely appreciate over the next decade?”

Do we see people clamoring to buy gold now? No. But, amazingly, I am hearing more and more stories about people questioning whether they should be selling their gold.

In fact, I read this comment to one article, and have seen similar comments quite often of late: “There is no way this 4 year strong trend will reverse now.” Their ultimate point was that it is still “safe” to short gold, and one should not even consider buying it until it is at least $800. Several further comments supported this perspective. And, this was on a website where we normally see a heavy dose of gold bugs. So, even the bulls have now turned bearish. Yes, human nature is quite amazing.

Years ago, I set our targets for the downside in the GLD, with an ideal target at 98, and the potential for an over-emotional reaction low as far down as 75. And, right now, we are a stone’s throw from our ideal target. What is even more important is that we are nearing the end of our wave structure as we approach that 98 target. While it still does not preclude us seeing levels lower than our ideal target set years ago, it does tell us that attempting to short for much lower lows may not be advisable.

Ultimately, not much has changed from my analysis of last week. We are still in search of the lower targets in the complex. That means the 98 region in GLD, the 12.75-13.50 region in silver, and the 11.75-12.50 region in GDX are still being targeted. And, as long as GLD remains below 104.75, silver below 14.50 and GDX below 14.55 I still have those regions in my sight.

The question I am asked over and over is when will I confirm that the correction is finally behind us and the bull market is back? That confirmation is a multi-step process. First, we need to complete the downside wave structure, which is almost complete. From there, we will need to see a 5 wave structure off the lows, followed by a corrective 3 wave structure pullback, and then followed by a strong rally over the high of the first 5 waves off the low. That will confirm that the market has bottomed, and we can begin to aggressively trade the long side of the market for years to come.

See charts illustrating the wave counts on the GDX, GLD and YI at


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