The Rookie Error
This is a translation of a newsletter dated 5th December.
All credit Maarten Verheyen
I popped into goud999 today and was very surprised to hear that a large number of investors have been selling their gold in recent weeks.
I spoke to another gold merchant elsewhere and he confirmed the same trend:
Investors are selling their gold in mass.
On the one hand it's somewhat understandable. Finally after 11 years gold is finally making new all time highs and this is a signal for many to basically dump their positions.
On the other hand, experienced, long term thinking investors know exactly where this will end (more than likely within a few months) these very same investors will be cursing and swearing at themselves for falling for that typical 'Rookie Error' (or Novice Blunder)
Just because an activa after eleven years makes an all time high does not mean that its peak has already been reached. That would be unprecedented.
A new high after a long period of consolidation is usually the signal start of a new bull market rally and definitely not the end of one!
Let's take the NASDAQ for example. This technology sector peaked in March of 2000 and it took another 15 year period to reach its following new record peak.
Stepping back into that tech sector was the last thing floating through the minds of retail investors in general. An all time peak had been achieved and it was obviously too late now to buy back into this sector, wasn't it?
Well those who did, tripled their investment within six years.
The earning potential of individual stocks were even greater. Nvidia price in 2015 was $5 (now $454), Tesla was about $12 (now $236) and Microsoft was around $40 (now $370).
New highs after a consolidation of 10-15 years sends a very powerful signal of what to expect in the very near term. It took significant force to break through those lines of resistance, that once broken will be very difficult to push back and hold down for another long term period again.
The sky then becomes the only limit
Everybody that bought back then profited and investors that didn't, started to develop that FOMO feeling, jumping, one for one, back on board that moving train.
This is exactly what we can expect during the following 12-24 months ahead.
When the markets opened on sunday night (european time) in Asia gold pulverised the resistance of $2,070 and reached a price of $2,150 per ounce.
A major outbreak or unprecedented surge. Those who have followed the gold markets closely in recent decades and are familiar with its price evolution know that at these specific moments ‘it's all hands on deck’ to push the gold price back down.
The last thing certain very powerful players in this space need is that Gold takes off, igniting a new and unprecedented bull market rally.
So it's perfectly expected that the price would drop back down. At this moment its price is at $2,020 per ounce (at the date and time of writing 5th dec. At current date and time of this translated copy the 14th of December according to goldprice.org its $2,030.62 per ounce)
We also have to constantly keep in mind who the major buyers are (the smart money holders) . They are not falling for this “Red Herring” . The Central Banks, China and Russia will continue to ‘buy and hold’ regardless of current market price fluctuations.
What can and seems to be working by a proportion of retail investors wont work on the likes of Putin and Xi that belong to another level and category of very powerful and influential players.
We are in a bull-market and during which every correction is a ‘buy/step in’ opportunity for those that missed the train at the station and an additional buying opportunity for those already on board.
Buy the dip!
Greetings
Maarten Verheyen
Disclaimer
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