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Gold Bottom

Peter Krauth profile picture
Peter Krauth


  • After 8 months of correcting, gold investors are wondering if the metal has finally bottomed.  Multiple indicators are suggesting that's the case.
  • Sentiment and selling are likely exhausted.  Long-term Treasuries and the dollar have likely put in an interim peak.
  • Gold and gold stocks' technical picture is positive, gold stocks are cheap relative to the broader market, and have never been more profitable.

Enthusiastic gold investors everywhere are wondering… has gold finally bottomed?

The short answer is… I think so.

That's because, from a number of perspectives, that seems the most likely scenario. Right now, most of the evidence points in that direction.

A dramatic rip higher from March to August last year caused gold to soar by 40% in just 5 months. It also allowed gold to establish a new nominal all-time record high at $2,070.

Since then gold has been retracing, giving up about half of those gains. Two major drivers led to this: sentiment and the dollar. At this point, however, it seems both factors may have run their course, setting up gold and gold stocks for a new rally.

Let's examine the current outlook to formulate what's most likely ahead.

Negative Gold Sentiment Exhausted

Markets ebb and flow, and gold is certainly no exception. The dramatic rise last spring and summer was likely driven by fear as the impact of the COVID-19 pandemic was being assessed.

One of gold's biggest attractions is obviously as a safe haven, a role it's played for thousands of years. And last year was an excellent example. But as the world grew accustomed to its new reality, that meant other drivers took center stage.

It was also natural for gold to start ebbing. Naturally, a large number of investors became enamored with gold and gold stocks as they chased them higher. That meant lots of buying near the early August peak. But that buying soon became exhausted.

Savvier investors then started to take profits while the late buyers eventually capitulated after buying high. Their lack of understanding, and lack of conviction, made them victims. It looks like that final capitulation happened in late March, as the sentiment pendulum swung to an extreme.

But fundamental

This article was written by

Peter Krauth profile picture
Peter Krauth is a former portfolio adviser and a 20-year veteran of the resource market, with special expertise in precious metals, mining and energy stocks. He is editor of two newsletters to help investors profit from metal market opportunities: Silver Stock Investor, www.silverstockinvestor.com and Gold Resource Investor, www.goldresourceinvestor.com. In those letters Peter writes about what he is buying and selling; he takes no pay from companies for coverage. Peter has contributed numerous articles to Kitco.com, BNN Bloomberg, the Financial Post, Seeking Alpha, Streetwise Reports, Investing.com, TalkMarkets and Barchart, and he holds a Master of Business Administration from McGill University.

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.

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