Gold-Stock Sentiment Shifting

By Adam Hamilton – Re-Blogged From Gold Eagle

The gold miners’ stocks have been largely ignored and neglected for years. Speculators and investors wanted little to do with them for various reasons. But that apathetic sentiment is finally starting to shift thanks to last week’s stock-market plunge. Capital is starting to return to this battered sector as traders begin to realize how radically undervalued it is. Sentiment mean reversions can catapult gold stocks far higher.

Sentiment is defined as “a thought, view, or attitude, especially one based mainly on emotion instead of reason”. We humans are inherently-emotional creatures riddled with sentiment on almost everything. That’s especially true in our perceptions of the financial markets, which heavily influence if not dominate our trading decisions. We buy and sell stocks when it feels good, when markets appear to validate our outlooks.

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Record Gold/Silver Shorting

By Adam Hamilton – Re-Bloged From http://www.ZealLLC.com

The miserable summer for precious metals grinds on, with both gold and silver limping along near major lows.  Such dismal price action has exacerbated the extreme bearishness long plaguing this sector, sparking even more capitulation.  But this incredible weakness will be short-lived, as it was driven by American futures speculators’ record short selling.  That will soon reverse into guaranteed, proportional buying.

In all markets including precious metals, price is rightfully considered the most-important fundamental signal.  Prevailing price levels are set by free-market buying and selling until supply and demand meet.  And gold and silver prices are exceptionally weak, with these despised precious metals slumping down to challenge major new 5.2-year and 5.4-year lows this week.  So their fundamentals must be bearish, right?

The only fundamental factors that can drive prices near major secular lows are too much supply, too little demand, or some combination of the two.  And if the gold and silver markets are as oversupplied as their prices indicate, they’re likely to keep drifting lower indefinitely.  This popular bearish thesis is universally believed today, with virtually no dissent.  There aren’t many contrarians left to combat this overpowering groupthink.

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Investing’s Great Struggle

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

The great endeavor of investing can be distilled down into four simple words, buy low sell high.  They are so basic, so resoundingly clear, that even a child can understand this principle.  Yet still the great majority of investors never achieve significant success.  Even while full-well knowing the core idea of investing, they end up buying high and selling low.  That treacherous struggle of investing must be overcome.

It’s funny, as life is full of simple ideas that are incredibly challenging to put into practice.  Investing is certainly not unique in this regard.  Americans’ expanding waistlines are a great example.  The only way to lean up is some combination of eating less and exercising more.  We all know this basic truth, we all know what we ought to be doing on both fronts, yet it’s still really hard to execute.  Emotions are the reason.

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