Has gold's next bull run begun?

Recently it looked as if gold was set to bottom and might turn around soon. The turn may be here already. Also: What caused Facebook's face plant?

By Bill_Fleckenstein May 25, 2012 4:52PM

I rarely revisit a topic so soon after I write about it, but given how much time I spend focused on precious metals, the trading in that sector over the past handful of sessions seems to be calling for me to make an exception.

 

In my May 18 column, "Gold's fortunes will turn around soon," I discussed the recent correction in gold and gold mining stocks, concluding, "At some point the stage will be set (if it isn't already) for an unbelievably explosive rally to the upside in metals. I think, given how stretched everything has become, that day is close, but that could mean a matter of weeks or it could be a few days."

 

Low and behold?

In fact, signs of stabilization were appearing even as I wrote that. In a column on my subscription site, FleckensteinCapital.com, the day before my MSN Money article appeared, I speculated about whether the previous day's lows for precious metals might be "it."

 

The action in the miners the next day -- i.e., the day the column was published -- was strong but not definitive. Still, I felt there was some chance it would turn out to be "the" low for the year, while expecting that some part of the range between $1,580 and $1,540 an ounce for gold could be retested once or twice.

 

The key questions in my mind at that point were when, and from where, the first pullback would come, as well as how deep might it be.

 

We soon found out, as gold dropped from $1,600 to $1,533 in just a few days.

 

The following Monday's trading was sort of tepid as the world apparently focused on Facebook (FB) (more on that below).

 

Tuesday was negative, as the metals went on a nerve-testing roller-coaster ride. First, they staged a pretty decent turnaround, led by silver, which declined about 1.5% overnight but quickly turned that loss into a similar-sized rally. That didn't stick, however, and silver lost 1% on the day. Gold turned a roughly 1.5% loss into a tiny loss, then that fizzled, and it ended up losing over 1% on the day. However, gold mining stocks, amazingly,  behaved pretty well.


The next day's trading brought a giant, stunning reversal to the upside in gold stocks, even as other metals were tanking, then reversed, making it seem very likely that their collective low on May 16 will not be broken. 


Thus the stage remains set for more rallies.

 

The price of peace of mind

What a precious-metals bull would like to see is silver, gold and the miners all ratchet up "a level" together on decent volume. We've seen better behavior from the miners (finally), but gold and silver need to start acting like the miners are beginning to (if you can believe I said that) if they really want to convince us that the whole complex has turned the corner.

 

If May 16 was the low, of course, it means folks will have to pay up a bit to capture this idea going forward. However, given how depressed the metals complex has been, paying up a little bit and being a bit more confident in one's risk assessment is not an insane strategy, especially with regard to mining stocks. When markets or sectors have been bludgeoned as the metals and the miners have, any subsequent rally will also have pullbacks, so it's not necessary to leap to a decision at the very first sign of strength. 

 

Wall Street can't quite find the 'Like' button

I would be remiss if I didn't touch on news that eclipsed all the machinations in precious metals, that of course being the Facebook initial public offering. As everyone knows, its first day of trading was marred by the Nasdaq's ($COMPX) "technical difficulties," and I had to chuckle over the irony of a Nasdaq company with a New York Stock Exchange (two-letter) symbol having a communication breakdown on the "exchange of the future" (as the Nasdaq bills itself).

 

Since that was sorted out, the actual trading, despite all the hysteria and hype, has been a catastrophe. As almost everyone knows, after having been priced at $38 and opening at $42, it has plunged, prompting a flurry of lawsuits.

 

This should have been the easiest deal in the world to price, as the company had been trading in quasi-public fashion for more than a year. Yet the underwriters and the company got greedy, turning what should have been a slam dunk into a disaster.

 

It is mind-boggling to me how the valuation and size of the deal were increased, as well as the number of shares that will become free-trading in the not-too-distant future. If there was ever an IPO set up to experience indigestion right out of the gate, it has been this one, and that is exactly what has happened. 

 

So while the Nasdaq glitches caused some problems, Facebook became "Facebomb" because of greed and arrogance.

 

At the time of publication, Bill Fleckenstein owned gold, silver, and precious-metals mining stocks.

 

71Comments
May 26, 2012 4:11AM
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I'm hoping he's wrong because I like buying low and sitting tight for the long haul. I'm not buying silver so I can trade it in on worthless green backs when the price goes up. I am sitting on it for when silver or gold is the only currency that will buy anything. I might be wrong but I'm willing to take the gamble. I still believe that things are going to get A LOT worse in this country before they get better.
May 26, 2012 5:24PM
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Central Banks years ago never bought gold  and if you check them out recently ,the Central banks are now buying gold like crazy. The big question is why now, are they buying gold but not before? I also notice that Germany is the strongest EU country and when other EU countries will soon need more money bail-out (Spain and France are bigger ones) watch Germany go back to their old currency the Mark and leave the Euro money like a hot potatoes. Then the house of cards will start to fall apart, which then watch the USA get nervous and start the QE3 will come in to keep order so they could kick the can down the road further and destroy our kids future.
May 26, 2012 10:56PM
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Continue to play the Lefty game if you like.
I cashed out and bought gold, In April of 2008 as soon as I saw we were going to elect a quasi socialist, either Clinton or Obama.There it stays until Obama is an esoteric historical footnote.
There is only one way to have a stable and prosperous market , have a stable and prosperous economy.
That is not possible with the handouters running the world.
Reality has arrived, with it's hand out, expecting payback.
Expect to see the market(s) hammered in the next 8 to 9 months, in a fashion that will make 2008 look like a high school prom.

May 27, 2012 1:09AM
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Facebook stock price  start from  45, 44, 43, 42, 41, 40, 39, 38, 37, 36, 35, 34, 33, 32, 31  ...   and  keep  going  down,  down again,  and  can not be turned around to go up the hill
May 28, 2012 7:33AM
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Gold is not an investment, it is a place to store wealth.  We have become brainswashed into thinking we have to invest because you cant let money sit in a savings account.  By sitting it loses value do to inflation. Its not a bet against the dollar or economy its a way to protect your wealth.  The value of the dollar is what you are considering.  True gold bugs are not interested in its daily price, only the price when it is liquidated back to dollars.  Itis similar to house, it is only worth what you sell it for on any given day
May 26, 2012 11:53AM
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After the Memorial holiday weekend, come back on Tuesday May 29, 2012.  Facebook stock price will drop down even more
May 27, 2012 7:25AM
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The only thing USA has over everyone else is that they could start up QE3 then QE4 and so on. As long as the countries accept our money in the world you will always see QE? When one big country decided to challenging our money and not accept it is when the USA will start the down turn. Until then, who's knows when the economy will drop in the USA,as long the pass the QE3 and more. But each time they pass the QE3 or more the bubble will get bigger and bigger until it like a dead star ,it starts to collapse on us then war and everything else is going to so bad, I can't image what kind of people we become after the great fall when food,gas and money is going to be scarce People describe it as MAD MAX film. So the big question is when is the world not accepting our money when everything will start? It will be in our history books as the mighty nation of the United States once proud and strong is now like any nation who was number 1 in history is now collapse.Prey for help,soon! maybe ET will come to bail us out (2012).,HA!HA! or maybe someone will be able to get free energy to us.Maybe there's is hope?
May 26, 2012 3:01PM
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Precious metals have been considered a safe haven to protect the investor's purchasing power. As currency loses value, the price of gold rises. But in a worse case scenario, you can't eat gold. Many investors cashed out some of their gold, to purchase commodities that can be directly consumed and/or bartered and traded. Most gold investors are individuals who are trying to secure the future of their family. If the mood of these investors swings away from the pessimistic worse case scenario, they will begin to move back into precious metals, driving demand up again. Like any other commodity, supply and demand drives the value.
May 26, 2012 9:27AM
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Bill must be stuck with some high priced gold.
May 26, 2012 6:04AM
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I believe you will not see gold and silver to climb, until JP Morgan is finish with their silver long position clients, that JP Morgan end up selling all their silver in the market. JP Morgan lost 2 billion probably more is because I believe they settle some of their silver clients ,when they offer them $50.00 dollars a ounce of silver, when the market was around $35.00 dollars a ounce. Some of the long term contract silver owner did settle because they bought their silver around $5.00-$20.00 dollars a ounce of silver in the past market prices,  making JP Morgan lost billions on the contracts. The rest of the silver owners that bought the silver around 25.00- 40,00 dollars a ounce refused to sell their long position contracts and demanded physical silver. But we already knew that JP Morgan sold their silver to the market and they won't be able to get that much silver (it take over 5 years if JP bought all the silver each year), so with the pressure from our Gov. forcing JP Morgan to settle their contracts before they recount the inventory and revalue the silver. So now JP Morgan is in trouble with the rest of the silver owners so JP Morgan started to scare them ,mostly the silver owners to sell their contracts back to JP Morgan by lowering the prices. So now you all will see the final showdown in the JP Morgan scam and you will see how much lower the silver and gold will go down until JP Morgan bought back all the silver contracts with the other banks too buying back. So if you own physical silver hold on to it ,even if it drop alot more,because after a little more time JP Morgan and the other banks will have to let go of the control of silver and gold market and silver will be recount and revalue probably start it around $850.00 dollars a ounce. That's what I believe is happening.
May 26, 2012 11:49AM
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with china slowing down-europe in choas-and the united states slow growth more money is going to be printed and all these countries are going to need gold and silver to back their currencies-with this in mind the metal processors and mining companies are in for a boom period-if by any chance all the problems come to a head at the same time-i would say the sky is the limit for precious metals and other hard commodities.....
May 28, 2012 8:44AM
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gold will go up up because the world wants it and there is less and less being mined. the easiest stuff has been taken. the number one buyer is india which gold is considered sacred purity the goverment was trying to tax it and the sellers refused to sell for several months the y lifted it and the india people are back buying it. the only problem is india economy is in a slow economical period but the people still buy secound is china they are building a vast gold reserve to back there money they will soon overtake india as the leading buyer also japan is now in the mode of buying it and also the middle east loves it so your talking about 4 billion people the united states is a producer but it's population of 350 million people buy some but everybody thinks united states controls the price there wrong it's a world hedge and will continue to rise since the united states is printing out billions and billions of dollars we are in debt by 15 trillion and the euro is also been m****duced to bring down the value to make loans less value one of these days and soon gold will go to 3,000 an ounce it will get to at least 2,000 by the end of 2013 which will be a rise of over 30 percent in a year and a half, buy BRD a great little company that soon will break out and you should see a 200 percent gain by the end of 2013
May 28, 2012 10:53AM
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silver  should always be included in the gold discussion  ie. gold/silver   because if you monitor both metals  they  perform in  much the same manner  .... not a huge difference accept in price per ounce   and a little color difference  and specific gravity...  but way more uses  for silver  so  watch it outperform  gold  over the coming months............
May 28, 2012 8:28PM
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Gold was at $350 when all the pundits criticized Glenn Beck for recommending it as a safety net, poo pooing it as doomsday advice. No wonder most Wall Street traders fair no better than the average citizen on the stock market.

 

I put so little faith in the would be "analysts", they're always surprised by the unemployment numbers, the durable goods orders and any other so called market indicators.

May 29, 2012 7:34AM
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Bill

 

I hope you read these comments. I find often the comments are as interesting as your article. Often people who can just barely write do so. Then you have some solid supporters, and solid detractors, total screwballs and most interesting is some people politicize Golds action as though it is a conspiracy by the Republicans or Democrats.

 

Gold is just metal, it doesn't think or act it just sits there and responds when people, Governments or Banks buy or sell it. It's price is simply relfected by supply and demand and everything else is just Bull.

 

The more dollars, euros, yuan or any other fiat money is printed the more wise people purchase Gold. 

 

 

May 26, 2012 4:31PM
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I fully understand the value of the two previous statements.....And the reasonings behind the Chinese and Indians obtaining and holding Yellow......Usually ceremonial or dowery holdings ?

And it makes sense about their currencies.

Lest we forget 3rd. World Elite...That give little/furnish to the lower class; But also hoard or purchase.

In case of Political strife...

Central Banks are interesting to watch and keep and eye on.......But by the time their actions are well known, I'm still holding the bag...Either of gold(miners) or money to buy with.

 

All these actions have repercussions on Gold; The knack is to be aware and react in a timely fashion. 

May 28, 2012 2:22AM
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Gold is all that is safe right now!
May 27, 2012 9:05PM
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Yup, read  those same comparisons and projections on FB, made me really wonder; Are these azzholes (underwriters) out to suck the last drops of blood out of us??

 

The intent and interest I had on it, decided to cancel on the last price raise........

I may have been a very lucky person.?

 

Unfortunately there are several zuckers, running around now; Wondering what to do.?

May 29, 2012 12:51PM
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   Don't wait to buy gold and silver; just buy gold and silver and wait.

 

 

May 27, 2012 5:19PM
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Behind the doors......Thought FB opened at 43 went to 45 then started it's decline ? Eventually back under the IPO of 38 per?

 

Good article, kitco with Frank Holmes...About Gold being our friend 5000 years (?).

Appears we might be posturing for a 1-2 month bullish run on gold....

Interesting read, if you want ?

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ABOUT BILL FLECKENSTEIN

Image: Bill Fleckenstein, MSN money

This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital.com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.

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