After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting — Jesse Livermore

Even though I am bullish on gold in the long term, I wonder about this metals market we have today.

Some are comparing it to 2008. We have the lowest speculative net long positions since 2008 they say, so that is super-bullish, they say. Maybe so.

They then say that the chart pattern looks like 2006 or 2008, which it does.

HOWEVER, 2008 was a disaster for the stock market, oil and just about everything else, except the US dollar and US Treasuries. The Dow Jones and S&P 500 took more than a 50% crash from Oct 2007 to Nov 2008/Mar 2009 double bottom. Gold took about a 34% correction from $1030 to $680 or so.

Compare now: Stock market down about 10%, a correction but nothing that much. Gold already down twice as much by 20% from $1920 to $1560 as of today. Leverage = 2x on the downside this time. If we get a real stock market crash of 40-50%, then what happens in gold?

Furthermore, gold’s reaction to uncertainty has been very poor recently. In 2002-2003 with falling stock market and Iraq war in preparation, gold rallied, same in early 2008 when stocks were already starting their trip into the tank. When certainty came, the bull runs in gold ended, ie on the very day the troops moved into Iraq and the very day that Bear Stearns was collapsing and was rescued. Even at the start of the Greek crisis in 2010-2011 and the US debt celiling uncertainy, gold rallied on the uncertainty.

Now we have lots of uncertainty in Europe, all over the place, never been more. And gold is in the tank. This seems a bad sign to me. It’s a different reaction to events altogether. Perhaps because now the Euro problem seems to be systemic, it is a big plus for the US dollar and a big minus for gold. Gold has rallied while there has been belief in the Euro as a strong currency, even at the start of the Greek crisis. Now it’s looking different.

I have heard nonsense from the usual goldbug promoters in the last week that gold is behaving well in this current market conditions as it manages to bounce limply off the $1530 low YET AGAIN, but wth a fall twice that of the stock market, it’s actually behaving like a real stinker!!

Also remember about Jesse Livermore, he made most of his money on the downside by going short! He didn’t make it by sticking to an obsession and being long all the time.

Good comments Roger. Chatter I’ve been hearing is market heads down from June 4 to 25th then a 10 week rally to early August. We’ll see. I just take it day by day and trade what is in front of us.

Rather than shorting stocks I’ve had good luck buying the 2x Inverse ETF’s. When the market goes down these inverse ETF’s go up. What’s nice I don’t have to vet out every single company but rather just buy the ETF which is like a mutual fund conglomerate of a bunch of individual companies all under one symbol for those not familiar with ETF’S.

I’m holding on to my precious metals ETF basket as insurance anyway. I don’t buy gold or silver bullion but have been buying older Mexican silver coins from the 1940’s to 1980’s when I visit Mexico which I do several time a year. Tequila, tacos and Mexican coins:)

Friday AM, June 1st.
TR:

AU and AG up nicely today.

Banks now required to purchase Government debt presumably because no one else wants it and this is off the books so it won’t show up during stress tests and won’t be counted against them.

Who is in charge of the asylum?

PS to the above: Not sure if the above yet an actuality or whether it is a proposal at this stage. Drudge has an article on this.