The decline in gold prices over the past year has been telling, and unless gold prices turn higher soon those signals will remain clear:
No additional stimulus anytime soon.
The printing presses have essentially been turned off here in the United States, and there have been no new infusions planned for Europe either. What was already in place (ESM) may still be allocated, but no new additions to the bailout fund overseas have been made (those are already priced in).
The aggressive declines in GLD and SLV, the most widely followed gold and silver ETFs on the market, are a telling sign. SPDR Gold Shares (GLD) is down 17% from its high last year, and iShares Silver Trust (SLV) is down 45%. Gold bugs are still adamant that gold prices will increase, but I could never find a viable way to trade gold.
Clearly, precious metals can tell us something about the economy, but they are very hard to trade because they move in lock step with nothing. Too many variables = too many possible mistakes = avoid gold and silver.
Do not stop looking at them.
These ETFs can still tell us something. Gold and silver are telling us that the likelihood of another round of Fed easing is slim, and that dashes the hopes of many would-be bulls on Wall Street. The stimulus needle has been the lifeblood of the U.S. economy for about four years now, and we know what they say happens when we take the needle away. Instead, they are talking about higher taxes and lower spending come year end, and that is exact opposite of stimulus.
Headwinds are coming, stimulus looks unlikely at the current moment, and the short side of this market looks very opportunistic. Unless gold and silver turn higher, consider the likelihood of new stimulus programs slim for the time being.