Is Gold Really a "Slam Dunk Sell"?

Jeffrey Currie, the head of Goldman Sachs’ commodities research division, says gold is a “slam dunk sell”. Speaking at a panel in London on Tuesday (October 8th), Currie said that once the U.S. budget battle comes to a conclusion, the American economy will improve. So, that would make gold what he termed a “slam dunk sell” towards Goldman’s price target of $1,050 per ounce (a 24% decline from today's price).

Should you follow the advice of this experienced veteran who hangs his hat at the greatest trading firm on the planet?

This week's "tape" action in gold actually looks bullish to me. And if you consider that the director of commodities research at the greatest trading firm in the world actually announced yesterday that gold is a "slam dunk sell", then this week's relatively positive price action suggests the very real possibility that gold is NOT a sell, but is in fact a SCREAMING BUY!

Gold futures bottomed out in late July just below $1,200/oz. Gold then rallied in July and August to trade briefly above $1,400/oz. And today the October 2013 Gold future is trading near $1,300/oz. Could the decline in Gold prices over the last six weeks be just a simple 50% retracement consolidation before another spectacular bull run? I think so!

In my computer trading system, daily chart buy signals were triggered at today's close in the Gold Miners ETF (symbol GDX), Goldcorp (symbol GG), and Yamaha Gold (AUY). GDX and GG are down about 26% since their late August peaks on only a 10% decline in the underlying gold futures price. Other gold/silver mining stocks have been equally punished over the last six weeks.

Bottom line: Is anything a "slam dunk" in the securities/commodities business? I am not sure why Mr. Currie from Goldman Sachs would hang his neck out so far on this call, but I am sure that his prediction is certainly NOT a "slam dunk". My own view is that gold/silver mining stocks are now favorably priced again and will be among the biggest winners immediately ahead and into early 2014. In the interest of full disclosure, I have now accumulated a modest 10% portfolio allocation in the following gold/silver mining shares near current levels: Goldcorp (GG), Primero Gold (PPP), Endeavour Silver (EXK), and First Majestic Silver (AG). My intention is to add to these positions over the very near term.