A Case Study In The Hypocrisy Of Gold Promoters

Sunday, November 20, 2016


Gold is a safe haven.  Gold will protect you during stock market volatility.  Gold will skyrocket when the stock market crashes.

Yes, I know.  We have all heard the same diatribe for years.  In fact, we have all heard the same diatribe for decades.  Gold will be our savior when the stock market crashes.  Each week, we are presented with more analysis about why and how the stock market crash is upon us.  And, we all know the culprits presenting this to us weekly.  They are promoters and sellers of gold, as well as analysts who are certain of the inverse correlation between gold and the stock market.  Fear is their driver. 

In the past, I have presented many articles explaining that anyone who views gold as having an inverse correlation to the stock market is simply not looking at history.

So, allow me to show you why only expecting an inverse correlation between equities and metals is just outright wrong.

If one reviews the May 2008-March 2009 decline in the equity market, we see that the metals experienced significant declines within that time period. In fact, gold lost a little more than 30% during that time period. So, here we have a period of time where the metals were moving in the same direction as the equity markets, and clearly not acting like a supposed "safe haven." But gold also found a bottom and began to rally four months before the equity markets, after which time, they began to rally together for two years.  Yes, you heard me right.  They then rallied together for two years.  Not much of an inverse correlation here, is there?

If you need further evidence, consider this additional fact. Back in 2008, the folks at Elliott Wave International published a study that showed that in 10 out of 11 recessionary periods since 1945 gold experienced a negative total return.  There is not much inverse correlation here either, is there?.

For further evidence that one should not assume the two markets move inversely, one simply has to look back to the period of time between 2003-2008. During those 5 years, the metals rallied alongside the equity markets. And, no, this is not a misprint. 

So, clearly, these analysts and promoters that have been calling for you to buy metals to protect yourself from an impending stock market crash are not burdened by the facts of history.

But, I have a more important question for you to ponder.  Of late, as the market has strongly rallied, with many making new all-time highs and looking to continue a break out from a long-term consolidation, these same promoters and analysts are putting out strong buys on gold.  Now, please help me with this one.  If their primary thesis this entire time has been that people should buy gold because the stock market is going to crash or is crashing, how can they honestly suggest that you buy gold as the stock markets are breaking out to new highs?  What happened to buying to protect yourself from the impending crash they have been warning about and certain of for years?

This is the dishonesty and hypocrisy within the analyst and promoter “gang” with which I take strong umbrage.  Why not just be honest and say “buy gold,” and forget about all the reasons.  They are proving that all their “reasons” are simply meaningless and they have lost much credibility based upon their perspectives. What ever happened to honesty?  Plain and simple honesty!?  What is wrong with recognizing that gold can rally WITH the equity market?  Why must they instill fear in order to suggest buying gold?  

One need only take an honest look at market history to see how wrong so many of these perspectives truly are.


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Avi Gilburt

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net); a live Trading Room featuring his intraday market analysis (including S&P500, metals, oil, USD & VXX); interactive member-analyst forum; and detailed library of Elliott Wave education. Visit his website:https://www.elliottwavetrader.net. You can contact Avi at info@elliottwavetrader.net.