Many traders wonder if these eye-popping gains are merely the product of fleeting sentiment that could reverse anytime, or are supported by strong underlying fundamentals.
The gold miners’ stocks are rocketing higher again, multiplying wealth for smart contrarian traders who bought them low in recent months. But after such a blistering surge, traders are naturally wondering how much farther gold stocks can run.
Recent years have seen countless claims that gold and silver prices have to head far lower, implying demand is low or supply is high. But the actual data continues to prove this false, showing precious-metals bearishness is rooted in sentiment and not fundamentals.
The Federal Reserve finally mustered the courage to end its radical zero-interest-rate-policy experiment this week. Its quarter-point rate hike announced on the seventh anniversary of ZIRP kicks off the long road to normalization.
Yesterday’s Fed decision was one of the most anticipated ever, with much potential to really change the global financial-market dynamics going forward.
Extreme declines have led investors and speculators to assume that much of this sector won’t survive lower prevailing gold prices. But nothing could be farther from the truth.
As fear-blinded traders rushed for the gold-stock exits, they claimed their selling was rational because gold miners’ very existence was threatened by such low gold prices. But that’s a total fallacy, this sector has no problem weathering sub-$1200 gold.
Gold stocks suffered a full-blown panic this past week! This exceedingly-rare magnitude of selloff was triggered by extreme futures shorting intentionally executed to force a flash crash in gold.
