• 6 hours $5 Million Gold Toilet Vanishes
  • 6 hours Gold On The Rise After Fed Rate Cut
  • 9 hours Oil Trader Loses $320 Million On Derivative Bets
  • 1 day S&P 500 Officially In An Earnings Recession
  • 1 day Miners Are Weathering The Trade War Storm
  • 2 days UK Credit Card Interest Rates Are Skyrocketing
  • 2 days From Frenzy To Flop, The Death Of This Year’s Most Hyped IPO
  • 2 days Are Smart TVs Spying On Us?
  • 3 days Is Fossil Fuel Divestment A Waste Of Time?
  • 3 days A Russian Billionaire’s Space Quest To Save Humanity
  • 3 days Markets Take Breather As Consolidation Continues
  • 3 days Economic Woes Weigh On Copper Prices
  • 4 days World's Largest IPO At Risk Following Drone Strikes
  • 4 days Gold Is Beating Buffett’s Berkshire Hathaway
  • 4 days What’s Behind The Silver Sell-Off?
  • 4 days The Retail Apocalypse Is Accelerating
  • 5 days The Top Tech Stocks Of The Year
  • 5 days America’s Workforce Elderly Workforce To Double By 2028
  • 5 days Toyota Tests Solar-Powered Prius
  • 6 days Why The Gold Rally Flatlined
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

John Rubino

John Rubino

John Rubino edits DollarCollapse.com and has authored or co-authored five books, including The Money Bubble: What To Do Before It Pops, Clean Money: Picking Winners…

Contact Author

  1. Home
  2. Markets
  3. Other

Are Gold Investors Finally Capitulating?

Sprott Asset Management's Rick Rule is one of the smartest guys in the resource investing world -- and one of the most reasonable -- which has made his interviews of the past few years a little disconcerting. Along with the obligatory positive thoughts on the long-term value of gold and silver and the resulting bright future for the best precious metals miners, he always points out that the sector hasn't yet endured a capitulation, where everyone just gives up and sells at any price, tanking prices and setting the stage for the next bull market.

Knowing that this kind of existential crisis is still out there has taken the fun out of buying ever-cheaper mining stocks, which of course has been Rule's point. Just because something is cheap doesn't mean it can't get a lot cheaper before its bear market is done.

Some representative quotes from late in 2014:

Complete Capitulation Hasn't Arrived: Rick Rule

Henry Bonner of Sprott's Thoughts spoke to Rick Rule, chairman of Sprott US Holdings, to find out whether gold stocks' recent problems are the result of capitulation "or just a particularly nasty sell-off."

As quoted in the market news:

In a complete capitulation, stocks melt down dramatically and some stocks just go 'no bid.' That hasn't happened yet, which means that we may be witnessing a very nasty sell-off, but not complete capitulation.

'For those of you fond of surf,' Rick explained at our San Diego office, 'capitulation is sort of like getting caught under a particularly big wave. You get pummeled and tumbled around under water. Capitulation in 2000 only lasted for about two weeks. Just like when you're stuck underwater and struggling to come back up, a short amount of time can seem like an eternity.'

The most important thing to do now? Prepare yourself psychologically.

'Abandon your 'hope stocks' - the ones where there is no catalyst, asset, or enough cash to do anything important. Get rid of the stocks you own that have no reason to go up, and get into ones that do,' Rick advises. In a complete sell-off, you may find that just a few investors will make the difference as to whether a particular stock survives, which means you must be willing to be one of those investors if the market gets much worse.

Which brings us to the last few days' crash in gold and silver prices. Both metals are now below the production cost of most miners, whose shares are cratering on the prospect of some truly horrendous operating results in the coming year. Which sounds a lot like what Rule is describing.

One vote in favor of a near-term bottom (followed by a nice run to record prices) comes from Ned Schmidt, publisher of the Value View Gold newsletter, who in a report titled $GOLD: Prelude to a Double notes that based on historical measures of investor sentiment and equity prices to gold we're just about there: "Last time the Street was as bearish on $Gold was 2007 when the price closed out the year at $830. $Gold went on to more than double."

 

Back to homepage

Leave a comment

Leave a comment