Gold is Monetary Value
We preface the post with a statement that has not changed since I began public writing nearly 10 years ago: Gold is not about price; gold is about value. This point was hammered home to me 11 years ago by a person who had much influence upon my viewpoint toward the financial system and its various diseased components at a time when I was ready to listen and understand.
So whether we are talking about 2013′s epic price crash or a new bull trend in 2014, the simple fact is that physical gold itself is a store of monetary value. That applied last year as the value was marked down by greed and confidence and it will apply this year as it is marked up in the face of a likely unwinding of those things. Humans, what funny and hyper kinetic animals.
Precious Metals Speculation
Ah, but this post is about the fun part, the speculative part where we humans can make gains from gaming the simple store of value and its wild little brother, silver. As asset market speculators we care about prices, right? How about the share prices of the completely blown to bits miners that dig the stuff out of the ground?
There is a reason we put so much effort (i.e. risk management) into not letting the declines of the last 2+ years hurt us, and that reason was to be fully intact for when it is time to speculate. Now, a bottoming process has been ongoing since last spring, believe it or not.
The Inverted Head & Shoulders scenario may or may not be the ultimate outcome of the weekly chart above, but NFTRH has been operating to its potential for months now as the grind in gold stocks has well, ground on. In fact, a grinding bottom would provide a better basis or platform for the rally (or baby cyclical bull) than the vertical thing that failed in 2012 off a 'W' bottom attempt.
Weekly MACD triggered up back in the summer and when it was confirmed by the slower TRIX we had our two most important bigger picture bottoming signals. These have kept us in the gold stocks game - whether substantially positioned or ready to be - since the TRIX signal. But again, the bottoming process has been a real grinder for the better part of a year now. Time flies when you're having fun!
Not; this bottom has been grinding peoples' nerves every step of the way and as noted to NFTRH subscribers along the way, this is a good thing. A grinding, painful and highly doubted bottom is a better bottom.
But it takes a new daily trend to even begin moving from a potential bull phase to an actual bull phase. Several weeks ago NFTRH was noting that a bull signal (for a rally at least) would be indicated by a rise above the 50 day moving averages in tandem with MACD going green (0+). While I personally positioned during the false breakdown below 200, it was advised in NFTRH that conservative investors and traders might wish to wait for the above noted signals. Check.
As to whether this is a new cyclical bull market or just a rally, the weekly chart above will eventually decide that question. There is no need to define it yet, because a bull phase is a bull phase as far as speculators are concerned. If it is a bull market, there will be plenty of time for late comers to jump in and mark it up later.
As for staying aboard the rally in the meantime, here is where the fundamentals will come into play, joining the technicals. During much of 2013 we were treated to much railing from within the gold 'community' that gold's fundamentals had never been better. But in reality, gold's fundamentals as NFTRH views them - which are beyond the scope of this post (ref: Gold Mining is Counter Cyclical), but are definitely not what you read in the mainstream financial media or hear touted by certain gold bug analyses - degraded consistently in 2013.
It can be argued (I for one have argued it) that these fundamentals were jimmied and rigged by all too cynical policy making, but just because something is rigged, you as a speculator, do not stand in front of it. In fact, as a speculator you put your dogma on a leash* and trade what is, not what your inner most convictions tell you should be. In other words, trade your brain not your heart.
The daily trend in the precious metals and in particular gold and silver stocks, which have led the metals as we would like to see in a real bull phase, has turned up. A new bull market is still a ways from being indicated, but for now we'll take a rally and realize that with the bearishness of the last 2+ years and the grind that the recent bottoming activity has been, a new cyclical bull market could also be in play.
Do not listen to the hype. The macro fundamentals have begun to improve for the gold sector and this will need to continue. We should manage these fundamentals every step of the way, as well as keep a running tab on the technicals. There will be hysterical rises and challenging declines going forward, but sector fundamentals and support parameters will successfully guide us.
* Paraphrasing the cool lyric from Boston rock band Volcano Suns "Put that dogma on a leash."
Additional disclosure: No positions were mentioned; long the precious metals.