Being A Gold Bull Is Now Far Too Easy - Don’t Be Deceived

Easy choices lead to a hard life (or at least losses), and because gold’s downside move is delayed, it’s extremely easy to be bullish on gold right now.

It’s easy to get carried away by the day-to-day price action, and it’s even easier to feel the emotions that other market participants are feeling while looking at the same short-term price action. Right now, it’s tempting to be bullish on gold. It’s “easy” to be bullish on gold while looking at what happened in the last 1.5 months. But what’s easy is rarely profitable in the long run.

Let’s get beyond the day-to-day price swings. The Fed has been keeping the interest rates at ultra-low levels for many months, and it has just pledged to keep them low for a long time. The world is enduring a pandemic, and the amount of money that entered the system is truly astonishing. The savings available to investors skyrocketed. The USD Index has been beaten down from over 100 to about 90. And yet, gold is not at new highs. In fact, despite the 2020 attempt to rally above its 2011 high, gold’s price collapsed, and it invalidated the breakout above these all-important highs. It’s now trading just a few tens of dollars higher than it had been trading in 2013, right before the biggest slide of the recent years.

Something doesn’t add up with regard to gold’s bullish outlook, does it?

Exactly. Gold is not yet ready to soar, and if it wasn’t for the pandemic-based events and everything connected to them, it most likely wouldn’t have rallied to, let alone above its 2011 highs before declining profoundly. And what happens if a market is practically forced to rally, but it’s not really ready to do so? Well, it rallies… For a while. Or for a bit longer. But eventually, it slides once again. It does what it was supposed to do anyway - the only thing that changes is the time. Everything gets delayed, and the ultimate downside targets could increase, but overall, the big slide is not avoided.

Let’s say that again. Not avoided, but delayed.

And this is where we are right now. In the following part of the analysis, I’m going to show you how the situation in the USD Index is currently impacting the precious metals market, and how it’s likely to impact it in the following weeks and months.

Riding investors’ emotional roller coaster, the love-hate relationship between financial markets and the USD Index is quite absurd. However, with alternating emotions often changing like the seasons, the greenback’s latest stint in investors’ doghouse could be nearing its end. Case in point: with the most speculative names in the stock market enduring a springtime massacre, beneath the surface laughter has already turned into tears. And while gold, silver, and mining stocks have been buoyed by the intense emotional high that’s only visible on the surface, it’s only a matter of time before the veneer is lifted.

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Disclaimer: All essays, research and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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