Gold Crash Coming?

Despite all the bullishness about gold and silver and the mining industry, I’ve maintained for quite some time the view that this first leg up will be dramatically retraced with a crash heading into October.

To say I’ve become unpopular because of my view would be an understatement.  Every gold bug and analyst I know is more bullish than ever.

And according to the Commitment of Traders (COT) reports from the Commodity Futures Trading Commission (CFTC) — bullish sentiment in the precious metals is at record highs. That typically means that the slightest fright could set off an avalanche of selling in the gold and silver markets.

Thus far, gold’s traded in a range from $1,320 to roughly $1,365. On Friday, gold was pushing above my weekly buy signal at $1,363.50.

Friday morning’s strong employment data, however, sent the dollar soaring, the euro plunging and gold down more than $26 for the day. Silver down more than $0.71 for the day, a whopping 3.53% decline.

Here’s the artificial intelligence chart for gold, showing you gold’s probable path heading into October (silver’s is similar) …

The fact that gold — despite many attempts — has been unable to close above $1,363.50 on a weekly closing basis indicates that’s the roof and support still lives at the $1,320 level.

More importantly, gold is following the AI models to the tee.

Look, I am as bullish long-term as anyone is. But no bull market goes straight up.  Strong long-term bull markets stair-step higher, taking one step up — then pulling back 50-65% — then taking another step higher. This is what you want to see.

It’s also why I’ve been steadfast and refused to jump on a wave with the majority of bullish gold and silver surfers who are about to be thrown off the wave’s crest and even worse, get smashed amongst the coral or the rocks below.

There is a time to buy, there is a time to sell, and there is a time to be on the sidelines like a tiger stalking its prey.

Stalking the precious metals is what I have recommended, and I’m convinced it is the right strategy — because even some of my most loyal followers have wanted my head over the last several weeks …

Proving to me that the majority are going to get caught as the wave turns down and lose or give back a majority of their “lucky” gains as they typically do.

Same for the mining sector. It had its first leg up and now it needs to pull back and refresh.

Keep your eyes on gold and silver.

So keep your eyes on gold and silver. As long as gold is unable to close above $1,363.50 on a Friday closing basis — October futures contract — then gold should follow the path seen in the AI forecast chart above into a low in early October. That low should come in around $1,250 – $1,275.

Assuming that’s the course of action and major support holds, I’ll be screaming from the rooftops to buy gold, silver and select mining companies.

So what should you do if you haven’t listened to me or if you followed one of the hundreds of analysts who refused to do anything but be bullish and promote precious metals and miners with reckless abandon?

If it were me, I would hedge my holdings with inverse ETFs. For gold I would consider ProShares UltraShort Gold, symbol GLL.  For silver I would consider ProShares UltraShort Silver ETF, symbol ZSL. Careful though, this is a double-leveraged ETF, seeking to deliver twice (2x or 200%) the inverse (or opposite) return of the daily performance of silver bullion in U.S. dollars.

And for mining shares, I would consider Direxion Daily Gold Miners Index Bear 3x Shares ETF, symbol DUST. Carefully here too, as DUST is a triple-leveraged ETF, seeking to deliver three-times (or 300%) the inverse (or opposite) return of the daily performance of the NYSE Arca Gold Miners Index in U.S. dollars.

Meanwhile, the U.S. stock markets continue to struggle, with the majority of stocks deep in the red for the year and with only a handful keeping the Dow Industrials and the S&P 500 at record highs. It won’t last.

Yes, long term, the stock market is headed to Dow 31,000. But that does not mean — like gold and silver — that a sharp, sudden decline can’t occur. It will.

If you’re loaded up with stocks and it were me, I would consider hedging with an inverse ETF such as ProShares Short S&P500 ETF, symbol SH.

These are mere suggestions. Members of my newsletter and trading services of course get specific recommendations, timing, buy prices and sell prices.

Lastly, keep your eye on crude oil. There should be one more decline before its new bull market really starts to take off.

Stay tuned and stay safe!

Best wishes,

Larry

P.S. Position Yourself for Amazing Profits … To help you get ready to take full advantage of the bull market of a lifetime, I want to send you a complete Dow 31,000 Preparedness Kit — four distinct free reports! The first free report spells out step-by-step what you must do now to position yourself for amazing profits (and protection) over the coming years. Click here to download now!

Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader. Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

Comments 57

frank August 10, 2016

Larry you tell then as you see them i like it like that..keep that steam engine rolling

Andy August 10, 2016

Dear Larry I have respect for you but; I follow metals all day and have made a lot on gold (real gold in my hand)on paper but not selling. And keep on buying but although make my own decisions I love reading your opinion and others. Amazing some say going to 10k (if it did you couldn't exchange it for money) I happen to live in China after retiring from my first thirty year job and found myself flying for an airline an owning restaurants here and love it.

Robert August 11, 2016

Hope you don't try taking your gold out of China. You won't own it anymore.

Lyle Parkins August 10, 2016

Been buying silver. Think I should sell?

Steve N August 10, 2016

Larry, I think the boat has sailed. Buying back my calls, not rolling.

JFS August 10, 2016

Hi Larry, I'm a happy member of your GMM service and the portfolio of stocks that you suggested are up nicely! Keep up the good work! Best regards, Joyce St.James

Mary Burton August 10, 2016

Thank you I needed that information about gold and silver Harry Dent says one thing Bill Holder says something else.I'm sure that Silver will go down some more but later it will change.

anthony g August 10, 2016

Larry , you and Mike Larson are on the same page with this market. I hope that it pays off for your readers, and subscribers.

Marketpundit August 10, 2016

I would not advise the use of inverse leveraged etfs to inexperienced or not daily traders. Inverse leveraged etfs are tricky. Such instruments are great for speculation purposes. Gains and losses are quite substantial with such etfs. If you get caught on the wrong side of the trade the losses can be devastating and psychologically unbearable. If one has never traded such instruments in the past, please do your homework first. By the way, ther is a good article on inversed etfs provided on this web site. Please try looking it up. Safe trades every one!

Jim Smith August 10, 2016

Larry, I respect your opinion and appreciate the contrarian advice that you are providing (the overwhelming Bullishness is bothering me too) That said, why the heck would I ever risk investing in something like DUST? One of my portfolios is already up 100%+ Wouldn't it make more sense to just reduce my positions and to wait and see what happens? Thanks

Peter August 10, 2016

well Larry, I think you are correct. Possibly you have missed a couple of opportunities to trade up in gold miners but your analysis so far is spot on, albeit a little early or late.

Frances August 10, 2016

Hi Larry I am with you all the way, you are consistently on the ball, it takes some conviction to hold your head when all others are heading the opposite way. I always look to your analysis if doubts enter my head and then rest easy, Keep it up Frances

john August 10, 2016

Larry Hope u are right? I have sold my Mining shares but they keep going up>Up more than 10% since I sold? J

Nels August 10, 2016

Bears make money, bulls make money and pigs get slaughtered. Out way before the top beats being in even a little after the top. Since you sold, you haven't lost a penny.

Jake541 August 10, 2016

John, I sold 50% of my gold/silver portfolio two days ago, so it has been a bit strange for me to watch it continue the rest to increase in value. I plan on cutting exposure further either tomorrow or Friday

Will August 10, 2016

Hi Larry. $1,250 to $1,275 is about a $100 correction, or about

Andrew August 10, 2016

Larry, For a less than 10% correction ( base on your $1250 low from $1363 high ) and if one is long term bull, isn't it better to hold on to current position , and with a longer term target of $5000 ( 366% upside ) or more isn't it wiser to add more if the price really come nearer to your target level of 1250?? regards

Will August 10, 2016

Hi Larry. $1,250 to $1,275 is about a $100 correction from the current price, or about a 7.5% correction in the price of gold; which is below a lot of stop orders, especially in a bull market. The leverage of this on any pullback to mining stocks may be more but would still not be excessive enough to offset some of the recent good news coming into my In Basket. I agree that pullbacks are needed to sustain the bull and I see that happening, but my personal feeling is that your readers may not be wanting to risk timing and the extent of these pullbacks to lose gains from possible upwards movements. This is a risk vs reward situation and now may be a good opportunity to make any portfolio adjustment deemed necessary. My idea is to buy and hold a mix of the best of the best of the juniors, and sleep well in my night when the US and Canada are open.

Jake541 August 10, 2016

Will, I appreciate Larry's advise but I agree with you. I reduced my exposure to the miners as I do think that 1280-1290 is plausible in the short-term However Larry himself admits that Long could start rocketing up to $1400-$1500 real quick therefore its best to always have "some" exposure whilst in a gold/silver miner bull market Reduce but don't wipe out current positions

Doug S August 10, 2016

I really appreciate a WEEKLY update and chart for gold, the Dow, and oil. Please continue these updates as they are crucial to stay on top of now!!! Thanks again, Larry! I sure hope your forecasts are correct!

Cyprian Parmar August 10, 2016

Counting on your research & wisdom! I'm doomed if you're wrong...

Gary Cusenza August 10, 2016

I have been in GDX for a long time and was buying as it was going down. My cost basis is $20 per share. I remember when GDX was at a high of $65 per share. I consider $31 where it is now a fairly modest value. I have the feeling in the future it will exceed $65. Also I have some NUGT and JNug which will be splitting 10/1 later in August. Despite what you say I am hanging in.

george stewart August 10, 2016

Larry- if the low is only going to be $100.00 or so below current levels, what would be wrong with getting in at this point- just in case some dramatic development, like a terrorist attack, should trigger an unexpected rise in the price? If it really is going to rise to $5,000.00 or so, getting in here wouldn't seem to be a bad move. Thanks so much for you excellent advice all along! Sincerely, George Stewart

milton watters August 10, 2016

why cant you leave a couple of recommends from people who only trade ASX...then i sign up.....

Ray Maes August 10, 2016

I would like advice whether to continue buying metals or hold on to what I have an see if it goes up.....I hear it could go up quiet a bit. And one last thing is Silver better to have than Gold? Please let me know your advice, thank you.........R

Todd S. August 10, 2016

I'm hoping you'll see this, Ray. Larry and Mike Larson are understandably pretty busy, and so often can't get back to answer questions in these forums. There's unfortunately no "one size fits all" answer to your questions; each answer really depends on your personal circumstances. That being said ... The choice to continue buying metals or not depends on your current financial situation. If you have some loose cash that you can deplete and still maintain a healthy cash reserve, then the answer might be "yes", even despite Larry's near-term bearishness. In some investments, dollar-cost averaging can be a good practice, if you're planning to hold your position for the intermediate- to long-term. Larry's near-term prediction may or may not be right, but I'm mindful how history shows almost no one can consistently time markets; I'm a bit skeptical about his prediction of a near-term drop in the prices of metals. Even if that does happen, dollar cost averaging can help you take advantage of it. Whether silver is better than gold again depends on your situation. I don't think anyone can reliably predict which will do better, pricewise - there are too many variables to take into account. Silver, though, is of course more affordable, and if you're looking for something to use to trade in an emergency situation, it'll be more widely accepted; it's really hard to buy a week's groceries and ask the grocer to provide change from your gold coin worth thousands of dollars. Silver also has secondary usage as an industrial commodity which might support some baseline value for it, while the same is generally not true of gold. Gold is more portable, though; if you had to get on a plane with a pocketful of change, you could carry more wealth in gold than in silver. Like so many things, the answer depends upon your objectives.

Jamie Dimon August 10, 2016

Larry, I very much appreciate that you have the guts to firmly stick to your forecasts ! I do not want to sell my Junior miners, because of the high spreads and taxation of profits (26,4% in Germany), which can make repeated selling and re-buying of a stock rather unattractive. Hedging might be the right thing to do. To me gold looks pretty strong and I would not expect a deep drop of its price, rather some consolidation in a range between 1307 and 1352 US$ within the next couple weeks. Again thanks for sharing your insights with us !

$1,000 gold™ August 10, 2016

i like what larry has to say today. what he says is exactly my thinking too. our thoughts don't always converge like this. i'm still holding my short positions on gold. the end of 2011 i said the gold bull was over and it would go below $1,000. my thinking has not changed one iota the entire time. three digit gold is coming.

$1,000 gold™ August 10, 2016

lower gold means higher stocks. we should get one more decent up wave out of this stock bull before a recession sets in. then i'll be long gold again.

Justin August 10, 2016

And of course the precious metals rallied strongly at the opening on the morning you published this. However, Gold has made a seedling top of what could eventually become a waterfall (inverse parabola) formation. Completion of that would initiate a strong short-term buy signal, likely an intermediate buy signal, and if we are indeed in a long-term major bull market, definitely another entry point to establish long-term positions. And Silver might be making a short-term head-and-shoulders top, which suggests likely downside action.

James August 10, 2016

A lot of economic growth can lead to a faster pace of life which can lead to more stress caused by over work and traffic congestion. I bet the traffic congestion in Tokyo at rush hour is like an out of world experience.

DJ Spag August 10, 2016

As a long term holder of physical gold,silver I find this artical actually encouraging. But then I was a buyer in 2003-05 thus I am doing well, even with this 'October correction' coming. Larry's writings serve as a good guide.

Dave August 10, 2016

You put a lot of credence on the fact that of unprecedented bullishness with gold but isn't there the opposite.....couldn't one just as credibly say there is unprecedented short selling?? Second you mention the strong jobs number but over 100,000 of these jobs have been created only in the imaginations of the BLS people as the are the Birth/Death jobs that have to do with the creation or death of small businesses. We know for a fact that for the last few years more small businesses have gone out than have been created.

Pete August 10, 2016

Larry you keep saying the DOW crash is coming, but what if those stocks deep in the red started to catch up to the leaders. Usually the better ones go first then the small ones gain. You seem to see it opposite this. Even Armstrong has more optimistic predictions.

David C. August 10, 2016

Larry, I agree with several of the posts, your analysis has been excellent and the only thing that has happened is that we have missed a possible profit in this rally, nobody has lost real money following your conservative approach and advice. However, like a lot of others, I am confused, your forecast of a low in Gold around $1,250 doesn't seem to agree with the headline of a "Crash in Gold and Silver into a low in October". It is either a "Crash" or a pullback of 7%-8%, which you yourself have said is not worth trading, For me, as I have posted before, I am selling PUTs on your recommended Gold and Silver picks at Strike prices that will get the stocks put to me at or below the price levels you suggest. In the meantime I am earning decent income from the premiums.

Dave August 10, 2016

Don't sell your metals and miners just yet. G20 meets early Sept and by late Sept, we could see the dollar as reserve currency replaced by SDRs (Special Drawing Rights) which could likely mean a weaker dollar and inflation. The instability of all this may also be a return to metals as a safe haven as world money seeks to find stability.

Fred jarow August 10, 2016

I understand your analysis but I am not in total agreement With your thoughts---up a little down a little trying to guess the market totally a challenge What I am doing is a little more on the simple side EX.. buy smaller amounts on the way up and on the wAy down! So you will never miss The possible big score...you will also sleep better I have the same type of position in oil Bottom line I have a price goal on both items and if I am only Half right will I be happy

Roger August 10, 2016

Larry, I think you are a very sound sage, I understand your charts, but we have never had negative interest rates. record low bond yeilds and banks, particulary in Europe teatering on the edge. Your war cycles are hotting up and a lot of people like me want to keep gold as an insurance. Where else can you put your money. maybe the stock market defensives andinverted ETF's but I am keeping a core holding in bullion and mining shares. If they go down short term I cn take that and buy more. But there is no safe place to keep your money at the moment, that's why I am in gold and some shares and cash. If all hell breaks loose, gold will rocket and investors will be scrambling for cover.

Tim August 10, 2016

Larry-as a hedge, I bought SLW and GDXJ mid-2015. They are up 128.84% and 142.63% respectively. Should I sell now or wait until October? Thank you for your great service.

Don August 10, 2016

Thanks for this write-up Larry. Quick question: What do you see in the COTS report that looks like bullish sentiment? Thanks again!

Jon T August 10, 2016

Larry, I have followed you for a long time and usually your insight is incredible. Unfortunately I think your prediction for gold and your recent stock market predictions are dead wrong. As I tell everyone the future depends on the economy. Did you see the article on Deutsche Bank today? In my opinion the world is hanging by a thread. It won't take much to push us over the edge into something far worse than 2008-2009. All the money printing in the world won't help this time and interest rates have nowhere to go. I predict gold, silver, and Bitcoin will all be selling for multiples of their current price in a couple years. The bad debt problem is going to be a bigger problem than most economists can begin to imagine.

peter b. August 13, 2016

To Jon T...I don't know what part of Larry's 'insights' that your are referring to but Larry's advice follows everything that you wrote. There will be an "adjustment" before the PM's and stock market embark upon a strong multi year BULL market. Makes sense to me...nothing keeps going up indefinitely and a consolidation is in the works.

Eric August 10, 2016

There are weekly options traded on both DUST and NUGT. I have been selling puts on NUGT for high premiums. Sometimes the stock is put to me, but it always goes back up. Selling puts forces you to buy when the stock falls, helping you to buy low and sell high.

Lloyd August 10, 2016

Larry, I am certain you are right about there being a pull-back but not sure you are right about when. I was going to sell 1/2 of my gold and sliver miners on Thursday prior to the jobs report suspecting a big beat, but my day-job consumed my time that day and I never had a chance to pull the trigger. As suspected, the jobs report was a big beat (no surprise in an election year) and although gold and silver did pull back a bit, the miners hardly noticed and have continued their march higher since. Glad I did not sell but the price action Friday just seemed very abnormal. Those miners should have been obliterated. But they showed amazing resilience. I think that external events are impacting market prices in ways that render most technical analysis powerless to predict price action except in times where not much is going on. Fundamentals are out the door too since money has no place to go for yield and is inflating many stocks far above their intrinsic value. No question it will not end well but we don't know if that end is 2 days, 2 months, 2 years or 2 decades away. Negative interest rates and ZIRP have distorted the markets so much, anything is possible. Every day I tell myself to get out of the market and wait for a better entry point but every day I do nothing but watch my portfolio increase in value. It's kind of like saying "I will start to lose weight Monday after I gorge myself this weekend". The only catalyst that would create a correction of the magnitude you predict is if the Fed raises interest rates in September. Ordinarily I would say that is impossible, but if the administration is cooking the numbers to look good, raising rates .25% would be part of the script: "Look how well we are doing .. we better raise rates to to keep inflation in check". It is unlikely but I would not rule it out. Another possibility is that if Donald Trump's poll numbers keep falling there is no reason to hold back raising since Hillary won' t need the Fed's help. If markets tank, the 1% still votes for Hillary. Gold and miners would correct at least how much you are predicting, financials will go up, but so will the dollar and that will be the nail in the coffin for the S&P 500 when Q3 and Q4 earnings hit. HIgher interest rates will also slowdown share buybacks which have been inflating this market beyond believe. The fear of higher interest rates will also toast the bond market which will create a keyhole exit and create a self-fulfilling prophecy as the dumping of bonds actually raises interest rates (and the Fed won't have the ammunition to stop it). Higher interest rates combined with a softening real economy will trigger the end of the current credit cycle turning those high yield junk bond ETF's into burning houses with no exit and pulling the rug out of most of the financials who initially benefited from the interest rate hike. Could the Fed be that stupid? I don't know but the banks would benefit for a while until they have to up their reserves for bad loans due to the end of the credit cycle. The Fed is a group made up of big bankers all with strong ties to the industry. So doing something stupid to help banks at the expense of the American Sheeple is not out of the realm of possibility particularly if they believe there will be no political consequences. In all likelihood the failure of the gold market to correct soon will attract even more investors including institutions that have not been invested in gold and silver for years. Just a small increase in their participation will send prices up well beyond your buy point. Fear over political uncertainty, Brexit and the usual wall of worry items throws even more fuel on the fire. So what do I do? I think I will still sell half of my gold/silver miners and trim my equity positions but at least stay in the game in case none of this pans out and things continue to grind higher. The trend is your friend until the bend at the end and at the moment how ever ludicrous it is, the trend is still up. How far away is the bend at the end? I wish I knew. Nobody really does... we can only make guesses, educated or not.

Denny August 11, 2016

Larry, Of all the analysts I follow (probably a dozen newsletters for informational purposes) of some of the best out there for years and watching their track record (which is good in many cases) you are the number 1 guy I watch. I don't know how you do it but with your study of cycles and projections you have a model that is second to none. Everyone is going to miss some calls but you seem to make the most right calls percentage wise. Stick to your guns. Keep up the good work. Also you are correct the bull out there has some pretty long horns right now. I guess the feeling is "we may be wrong a little in the short term but we want to be on board when the ship leaves the harbor and not underway". I personally believe this is going to be an unbelievable ride but I wonder if our society will be able to withstand what is coming. I don't think the US will look anything like it does today in 5 years. We could be under martial law in the worst case.

john August 11, 2016

The Mining shares I sold are now up 18% and look like they will keep going ?? Whqat will cause this forecasted change to gold and gold miners ??

Justin August 11, 2016

What about crude oil? Last year, before gold made its bottom in December, you predicted gold would make a bottom in December and commodities, particularly crude oil, would bottom early the next year in late January or early February; and, that is exactly what happened. Stand up and give yourself credit for that call! So, what's next for crude oil.

Al August 11, 2016

Larry, what will happen at the G20 meeting in Sept? ant damage to the US dollar out of this meeting? Thanks.

Harry August 12, 2016

Larry, will you be in China on Sept 4th when the G 20 switches to the New World Financial System. - rid of the Federal Reserves System on the planet at last. They needed better adult supervision. China will become head of the New world Financial System. Special Drawing Rights (SDR's) will replace the various currencies, now in use. The other three members will be US,GB, EU. Larry, what to accumulate until then? Gold and Silver will probably be in play. I thought of you. Thanks, Harry

Sam August 12, 2016

Back up da truk.

Andrew August 12, 2016

Hi. We are entering the 2 best month in gold so it will suprise me if gold break that $1320 support.

Lynn Peterson August 13, 2016

The seasonal trend for gold and silver is strongly up from now until October, especially in a bull market. They could go sideways for most of August, but September is a very strong month for both metals. So, instead of bottoming in the first week of October, as Larry predicts, the opposite will most likely happen.

Robert Augeri August 14, 2016

Personally when the economy tanks and I think it is coming soon because of our National Debt gold and other precious metals will become very sort after and sore Our National Debt is 19 and a half trillion dollar and rising. Before Obama leaves office it will be over 20 trillion dollars and anyone who thinks this will not have a negative effect upon what is going to happen better what up to reality. Not only will precious metals rise exponentially but other goods beside gold or silver will become precious.

James August 15, 2016

My question is, How can a $90 correction in gold produce an 80% correction in the mining stocks? I am not seeing how this gold correction into October will cause any sort of fantastic buying opportunity as compared to the January lows that we chose to sit on the sidelines and watch.

Jake541 August 17, 2016

Excellent point James

MO August 19, 2016

Hi Larry, I have a question concerning the Bitcoin. Do you have any insight on it?

Phoebe August 21, 2016

Hi Larry, Jim Rickards said that on 30 September 2016 a new kind of "world money" goes live and the price of gold will go up. Will gold crashes happen in October 2016? Best regards, Phoebe