Is Gold Garbage? [3 Must-See Charts]

The major averages chopped along this week.

But there was plenty of interesting (and profitable!) action taking place this week, including some lucrative new trading opportunities from some of the market’s most explosive stocks.

Let’s turn to the charts to see what’s in play right now:

1. Gold’s Grounded. Investors don’t care.

The stock market is improving. Small-caps are breaking out. Oil is screaming higher.

Gold, however, is stuck in a rut. The Midas metal tumbled below $1,300 earlier this week. It was gold’s first dive below the round number in 2018. Gold’s now in the red for the year — and it doesn’t look like conditions will improve for precious metals anytime soon.

Higher treasury yields and a red-hot U.S. dollar are helping to push gold lower. But it appears no one alerted investors to these important facts.

Investors dumped $3.1 billion into gold ETFs last month, according to the Wall Street Journal. That’s the biggest rush into gold funds since February 2017.

“ETF buyers and other bulls have turned to gold as a traditional haven play during turbulent political times, with the prospect of a trade war still looming, uncertainty swirling around North Korea and tensions in Syria and Iran flaring up,” the Wall Street Journal reports. “Some money managers are also using gold to hedge against a pickup in inflation signaled by recent consumer-price data.”

Spoiler alert: It’s not working.

Signs

Maybe folks need to wait for sellers to step in before getting too bulled up on gold.  According to the above chart, the last time gold-backed ETFs saw major outflows was back in July 2017. In true contrarian fashion, gold rallied $150 in just two months following the exodus.

2. Where have all the bears gone?

February’s sharp drop brought plenty of stock market bears out of the woodwork. But now that we’re halfway through the second quarter, they’re nowhere to be found.

According to the American Association of Individual Investors weekly survey, bearish sentiment dropped to 20%. That’s a steep decline off its April highs.

AAII

As the bears head for the hills, the bulls are start to reassert themselves.

“In this week’s sentiment survey from AAII, bullish sentiment ticked up to 36.68% from last week’s level of 33.51%,” Bespoke notes. “Believe it or not, that’s actually back above the average of 36.62% for the current bull market.”

Despite some back-and-forth action this week, stocks are clearly firming up as the major averages consolidate near two-month highs.

3. Bitcoin could use a boost…

Cryptocurrencies enjoyed a nice little comeback in April. But they’ve faded from recent highs despite a flurry of high-profile events.

“Alas, not even a trio of (rented) Lamborghinis, a 1,000-person yacht party and a performance by 46-year-old rapper Snoop Dogg could prevent the value of virtual currencies tracked by Coinmarketcap.com from sinking by $45 billion since May 11,” Blommberg reported from the Consensus 2018 conference. “Bitcoin, the most popular of the bunch, dropped 3.7 percent this week to $8,117.43 even as Arthur Hayes — the crypto exchange executive whose firm rented the Lamborghinis — predicted a surge to $50,000 by year-end.”

Bitcoin

Will bitcoin hit these bullish year-end targets? We’ll have to wait and see. At just over $8,000, bitcoin would need to see a surge similar to what we saw during the fourth quarter of 2017 to meet Hayes’ expectations.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Rude Awakening PRO and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing for 13 years. In 2018, Greg’s Rude Awakening PRO portfolio beat the S&P 500 by 14%.

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