My thoughts on why gold is up so much this year is basically that is was very oversold last year. The media will say this and that blah blah but the bottom line is that it was oversold and it was time for it to have a rally.
Fundamentally the world is lacking inflation. They keep stimulating just to hold back deflation. The US has some inflation though but is basically the only zone in the world that does. I would say that the mild inflation that the US has is decent reason enough to have allowed gold to get a rally SINCE gold was over sold and needed a correction upward. To a point that is and starting a week ago gold then was over-bought and inflation (which is mostly lacking) didn't justify any further rise I'd say.
The market had a very rocky start to the year and so people jumped to gold. With mild US inflation and gold being oversold from last year I can see how the 3 conditions put together (fear, gold oversold, US mild inflation) were able to cause gold to go up 20% so far this year. Is this still justified at this point in time? Perhaps but things don't go straight up.
DUST is the inverse of miners. Miners are very over-bought and over-valued. They now have gigantic P/E ratios. Bloomberg has a story out trying to say miners are undervalued in relation to their reserves historically. I say I don't care what they have in their reserves if I have to pay P/E ratios at 70 or 80. With gold now at this level forward P/Es of 40 or so. No thanks. The stocks are too expensive and I'm not paying that. If others want to pay up that's up to them. I'm not paying up.
The time to buy miners was when they were over-sold. That was a few months ago. The time to sell them is when they are over-bought and over-valued, that would be now.
DUST and JDST are now oversold. The chart is clear as day that they are, just as charts should gold and miners were oversold last year. People seem to hate DUST. I say good, I like that. I like buying stuff that the herd hates because the herd and the media will flip on a dime, they always do. I see articles out now saying gold is going to $8000. I love seeing things like that. When the media starts pumping then the turn is near.
Mostly though the chart now shows DUST and JDST oversold. People jumped into them too early before they were actually over sold and before gold and miners were actually over-bought. In my view starting about a week maybe 2 ago DUST and JDST got to what I consider truly over-sold.
I don't know if gold will now be in a bull cycle. I don't really care. I do know miners are over-valued. I know they are over-bought. I know the inverse ETFs are over-sold. I know that there isn't enough inflation fundamentally to justify gold rising further. I know much of the world is fighting off deflation. I know the market looks better then earlier this year and there is less fear. I know miners have been on a massive run in this young year. I also know they have had no correction or even decent pullback. I know they are overdue for one.
This may sound kind of strange but I'm not so much a bear on gold. I'm a bear on miners right here at this point in time. They need a correction. The rise they are having without any correction is not sustainable, not fundamentally sound now at this point, and not backed up by a whole lot. The 3 reasons above I gave yes, but what, miners are balloons now and just go up up up and never correct? No that isn't how it works.
Matter of fact since there were no corrections or really pullbacks miners have gap ups all over the place. GDX has a gap at about $15. That is not good. Again, I'm not against gold or even a gold bear. Longer term I like gold but miners need a correction really bad and in many ways it just screams at me.
This is a crazy ETF so if I were asked I'd say DUST has a good chance at a little run as miners correct from their very expensive price and over-bought conditions and gaps fill. Flip it, trade it, whatever pleases you but I am confident DUST turns bullish pretty soon.
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