Gold and Silver Outlook 9-30-2014

“Turn out the lights, the party’s over” used to be a song sung by Don Meredith during Monday Night Football games back in the day when a team was appeared like it was going to lose the game. Some may think the lights are being dimmed and the party’s over for gold and silver after the beat down they have had, but as the article I wrote for the blog today states that, Gold Is Not In a Bear Market.  Check out the article and you’ll see why when this decline in prices ends, we will enter the 3rd stage and what it will bring.

Scores of -100 for Gold and the Miners; Silver Bounces off the Lows at -90

Gold, silver and miners all took it on the chin again today. Gold came within about $10 of its 2013 low and GDX within $1 of its 52 week low with Gold and GDX scoring -100 while silver bounced 19 cents at the end of the day coming in with a still bearish score of -90. I still think we might get a tradeable bounce off of these levels, especially if we get a lower open tomorrow morning. The risk versus reward for traders might be upon us soon with a stop placed just under the 114.46 level for GLD. Might need a little more patience to go long for a trade though. This by no means negates my thoughts about still hitting lower lows for gold which so far has been occurring weekly.

From the trading desk:

The DXY index, a broad based barometer of the USD versus a basket of currencies, moved over 86 and reached fresh four year highs today.  The USD has been on a tear higher and has posted a record-breaking 11 weeks of successive gains on expectations of Federal Reserve rate hikes.   All of this USD strength has yet again translated into weakness for the precious metals.  Gold is trading at a nine month low and will finish September with its worst monthly loss since June of 2013.  Support is coming in at the psychological level of $1,200 and then at the double bottom of $1,190, a level gold hasn’t been below since 2010.

Gold has been battered recently but there are several things to consider before jumping all-in on the short side.  The average cash cost to pull gold out of the ground for a miner is about $1,250/oz.  The longer gold stays around its current price means that low – mid grade mines will be shutdown and supply will be cut off.  Interestingly enough, silver’s average cost of production is around $10/toz.  So from a strictly production assessment, silver has WAY more room to the downside.

US Mint gold eagle sales for the month of September reached 55,500 ounces.  This was the second highest month of sales for the year and was more than double the sales for the month of August.  The drop in price in gold has also brought Asian physical demand back to the market in a meaningful way.  The President of the China Gold Association even said that China will aim for 8,500 metric tons of reserves.  Lastly, the latest CFTC data shows that hedge funds cut their bullish gold positions to the lowest level since January.  The one sided view of funds being bearish and banks all having a negative outlook for gold make it a ripe environment for a short covering rally.

More from Dennis Gartman

I met Dennis Gartman a few years back at an investment conference and he told the audience he is wrong 80% of the time. For this he charges around $5,000 a year for his investment advice. The key he said is he cuts his losers and lets his winners ride. CNBC always puts on their shows a guy who readily admits he is wrong 80% of the time. Nice job if you can get it. So please take what I post from him with a grain of salt. He is however confirming what I wrote in today’s article I referenced in the first paragraph above.

Until such time as the “Gold Bugs” finally give up and exit their trades, the next bull market in gold will not begin. The market “wants” to take out the true-believers in gold before gold goes higher. It shall be either boredom or despair that shall take the “Bugs” out; We hope for the former; we fear the latter.

9-30-14 GLD Chart

9-30-14 GLD Chart

9-30-14 SLV Chart

9-30-14 SLV Chart

9-30-14 GDX Chart

9-30-14 GDX Chart



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About Doug Eberhardt

Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534


Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.

All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.