Entering text into the input field will update the search result below

Gold's Momentum Selloff

Adam Hamilton profile picture
Adam Hamilton


  • Gold’s vexing selloff in recent months was totally momentum-driven. It had nothing to do with fundamentals, which remain strong for gold.
  • Extreme gold-futures selling erupted in early January after a key technical level failed, hammering gold lower. That plummeting scared American stock traders, who started dumping major-gold-ETF shares.
  • Both gold-futures and gold-ETF-share selling cascaded since. The good news is the gold-futures selling that ignited this is finite and is likely nearing exhaustion. After that, gold should rally hard.

Gold has suffered unrelenting selling in the last couple months, hammering it and its miners' stocks much lower. Those outsized anomalous losses have left sentiment in tatters, with overpowering bearishness universal. Gold's thrashing had nothing to do with fundamentals, it was driven by cascading momentum selling in gold futures and gold-ETF shares. But such dumping is finite, increasingly likely to exhaust itself.

Last summer, gold rocketed 40.0% higher out of last March's COVID-19-lockdown-spawned stock panic. That massive upleg left this metal extraordinarily overbought, guaranteeing a correction to rebalance both sentiment and technicals. That came right on schedule, with gold dropping 13.9% over 3.8 months into the end of November. That healthy selloff was in line with this bull's precedent, leaving gold sufficiently oversold.

Gold's three prior corrections during this secular bull had averaged 14.3% losses over 4.1 months. And that was skewed big, with two of those earlier selloffs seriously exacerbated by unique anomalous events. So the odds swung around to favor gold's next bull upleg getting underway. Indeed it soon started marching higher in a strong uptrend, carrying gold up 9.8% by early January. Then gold went pear-shaped!

On Friday January 8th, gold was blitzed with extreme gold-futures selling. That shattered its uptrend, blasting gold 3.5% lower that day alone! That was pure technical selling, which accelerated after gold's psychologically-heavy $1,900 level failed overnight. From there it has been all downhill, with gold falling 12.0% by the middle of this week. That extended its total correction to 16.8%, challenging the worst of this bull.

What the heck happened? Gold investment demand should be strong if not massive given today's super-bullish backdrop. The Fed's printing presses are spinning like crazy, with it monetizing a colossal $120b per month of US Treasuries and mortgage-backed securities. Over the past year, the Fed's total balance

This article was written by

Adam Hamilton profile picture
A lifelong student of the markets, speculator, and investor, decades of experience have forged Adam into a hardcore contrarian. He believes in buying low when others are afraid, then later selling high when others are brave. He founded the financial-market research company Zeal LLC, and continues to write acclaimed weekly and monthly subscription newsletters.

Analyst’s Disclosure: I/we 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. I have no business relationship with any company whose stock is mentioned in this article.

I own extensive long positions in gold stocks and silver stocks, which have been recommended to our newsletter subscribers.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.