They Can’t Both Be Right

If you’re looking for an example of a rationality-challenged market… look no further than gold.

To the average spectator, gold seems schizophrenic. For about 10 years – from 2001 to 2011 – gold was a one-way trade: Up. Gold bugs got all the positive-feedback they needed to justify buying more and more of the shiny yellow metal.

Then came 2011… and since then, gold is still a one-way trade: Down.

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Between the start of 2010 and August 2011 a single gold futures contract increased in value by $72,000. That’s one contract! You need only about $10,000 in margin to buy one gold contract! But that gain quickly evaporated from September 2011 onward.

Of course, markets reverse all the time. They go up, then down, then up again. But a reversal this sharp is a real eye-opener.

Casual gold buyers have bailed. They clearly don’t have deep enough pockets to sustain positions through the carnage.

Even much of the smart money – hedge funds and institutional traders – have given up on their bullish gold projections.

But there are still the gold bugs. These are what I call “thesis-driven” investors… they place bets based on theoretical cause-and-effect relationships. The mantra has been:

Money printing = gold gains.

And they’ve been proven wrong for over two years now.

Central banks around the world are printing. Yet, gold is tanking.

Somebody’s wrong. It’s either the gold market… or the gold bugs.

After all, they can’t both be right. That’d be COMPLETELY irrational.

What You Need to Know About the Safe-Asset Slaughter!

You’re not going to believe what’s on the horizon…

The final bubble of the recent financial crisis is about to burst. When it pops – it could be as soon as November 2014 – millions of Americans will be financially devastated… But others will have the opportunity to get much richer.

This controversial video reveals how you can end up on the winning side of the coming carnage…

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Categories: Markets

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.