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Gold as a leading indicator of 'the bottom'.

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In March - October 2008, gold was slowly crushed under the weight of an economic recession in full swing and sold off approximately 25% from the highs in February 2008. As counter-intuitive as that may sound to gold bugs, it is clearly shown that gold did not begin to perform well until near the lows of the Great Recession. As we approached that time, gold clearly behaved as a leading indicator that the bottom of the market was in, after a sharp divergence from selling into a bull run beginning November 2008 and lasting through August of 2011. Importantly, gold rose steadily from November 2008 to February of 2009, divergent from the market at the time. I remember this time well, and remember that people could not yet process that the bleeding in the markets was over. They were correct for a few months, but essentially, the bottom was near and the bleeding was soon to stop.

I believe what we are seeing now in March of 2020 is the same thing. Not that the bottom is in, but that gold has begun a massive sell-off. For various reasons I believe that gold will continue to sell off, with radical swings in either direction over time, but with an overall downward trend in spite of incredible physical demand. For gold bugs, this is an excellent chance to metaphorically back up the truck on physical (miners to be discussed later), which based on recent premiums over spot on physical deliveries from APMEX is floating in the 4.95% range for gold (March 14, 2020) and an amazing 25.9% premium over silver (March 14, 2020).

So, with extremely high demand on physical gold and silver combined with a rapid drop in equities markets, I am looking specifically for a reversal in the downtrend of gold (and less so silver, with gold as leading indicator of silver prices) to last not less than two full months before the beginning of what I believe will be a bull run in the gold market the likes of which the world has never seen. Exactly when that bottom occurs is anyone's guess, and the variables going on in the world right now are astonishing. What I am looking for again, is a major trend reversal that 'sticks'.

註釋

Quick GOLD Update: Looks like the price of gold is beginning to decouple from the paper price as of Saturday, March 14, 2020.

Premiums over spot are incredible right now, and physical demand is soaring as mentioned above. Dealers are starting to sell out, including APMEX Sold Out of 1,000 oz. silver COMEX deliverable bars and the US Mint announcing that it had sold out of silver Eagles as of this past Thursday (see link below). Reports from the street confirm that coin shops are wiped clean, although I *cannot* verify this at this time.

This could potentially be the beginning of what I am terming the Great Divergence, where the spot price of precious metals no longer reflects the actual street physical price by a wide enough margin to break the pricing mechanism we currently use to determine cost over spot.

I don't know if this decoupling will continue, however if the markets continue to falter and the physical demand remains incredibly high, we could be in the beginning phases of the Great Decoupling.

apmex.com/product/81/1000-oz-silver-bar-comex-deliverable

zerohedge.com/commodities/price-physical-gold-decouples-paper-gold