Gold - Sentiment Suggesting A Bottom Approaching

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 |  Includes: AGOL, DGL, DGLD, DGP, DGZ, DZZ, GLD, GLDI, GLL, IAU, PHYS, SGOL, UBG, UGL, UGLD
by: Avi Gilburt

I see article after article by many analysts, some of whom rarely having analyzed gold in the past, most now claiming that gold is dead. But, every article gives "reasons" as to why gold will go up, or counter "reasons" as to why gold will go down. We have all read them, and know all the reasons well by now.

In fact, the most common reason as to why gold should have rallied - QE-Infinity - has shown just how these "reasons" are truly not reliable, and I addressed this issue over the last two weeks.

But, let me ask you a question, and I want you to be brutally honest with yourself when you consider this question: Do markets move based upon reason or logic?

How many times have you seen the market move in the exact opposite manner in which you had assumed it would after some news event?

Well, we have all been there, and the most glaring example over the last year has been how the metals reacted after QE-Infinity was announced. Rather than going to the moon, as almost everyone had assumed was a 1000% certainty, they began their larger decline. So, clearly, it must be something else other than "reason" which moves metals.

Therefore, you can continue to read article after article that will give you reasons as to why the metals will do one thing or another, but I can assure you that reason or logic is not what moves the metals. If so, logicians would be the best market analysts out there. But, are people clamoring to hear when logicians say about the markets? Not the last time I checked.

But, what all these "reasons" do is simply make investors feel comfortable and validated about their perspective on the markets. So, everyone gravitates to the articles they like based upon their own preconceived notions about what a market will do. They then point to that authors' article, and say to themselves, "you, see, I am right, and this is the reason I am right." And, if the author brings up good points to back up their perspective, they congratulate him for writing an excellent article.

So, for the last two years I have been writing on Seeking Alpha, I have been imploring the readership to ignore such "reasons," and many have scoffed. But these reasons only cause you to fall in love with a story, which often has nothing to do with the actual movement of the metals. Again, I point towards QE-Infinity and how that had everyone looking the wrong way, yet, so certain they were correct.

In my most recent silver article, I briefly discuss the underpinnings of how I analyze the metals based upon Elliott Wave analysis and Fibonacci mathematics. You can feel free to read it to get the general idea of my perspective of following sentiment evidenced by patterns.

Last week, I noted that as long as we remained under the resistance region of $139GLD, then we can see it make one more low before we attack the $144/$146 resistance region, and even as high as the 149 region before a final drop is seen to complete this 2 year correction. So, again, while anecdotal sentiment seems to be getting to the point where it is hard to believe it can get any worse, I still think one more low is out there before we see a bigger bounce in GLD. But, gold bulls will have to be a bit more patient, as it will likely take several more months before a more significant bottom is seen in the metals, at least based upon my sentiment analysis. But, we should still see a nice size bounce up to the $144-$149 region before that larger bottom is made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.