Here’s a trend that’s repeated itself numerous times this year: Whenever gold prices rise, gold experts come out of the woodwork, telling their brainwashed followers to buy more bullion because gold prices are heading to the moon.
Over the past two years, that poisonous advice has been dead wrong.
Since 2011, there have been nine notable bull traps in gold. Furthermore, all the rallies in gold prices and gold ETFs (GLD) this year have been brief, fooling just enough people into believing that prices are still going up.
In fact, gold’s one-day rally of 4.1% on the Federal Reserve’s Sept. 18 statement that QE would continue, was just another classic bull trap.
A “bull trap” is defined as an inaccurate measure that shows a decreasing trend in the price of an asset or investment has reversed itself and is now heading upwards, when in fact the asset will resume its decline. Technicians also refer to a bull trap as a “false breakout.”
Just days ahead of the most recent bull trap in gold, we alerted our readers of the high profit opportunity. In our Sept. 15 Technical Forecast, we wrote: “Gold bears (shorters) should get a better entry price this week to initiate or add to precious metals shorts.”
That golden opportunity (pun intended) to boost short exposure to precious metals came like a gift from the heavens on the Sept. 18 one-day rally. And while gold bugs like Peter Schiff and James Turk were celebrating their one-day victory, we recognized that another bull trap had been set.
In our time-stamped ETF Weekly Pick to subscribers on Sept. 18, we explained: “Gold miners are a leveraged play on physical metals and if the next leg down in metals prices takes hold, as we suspect, miners should lead the way down. Buy the Direxion Daily Gold Miners Bear 3x Shares (DUST) around $24.60 with a price limit up to $25.25. DUST aims for triple opposite daily performance to mining stocks. A tandem options trade is to buy the GDX Oct 2013 25 put options around $40.”