Over the past few months I’ve been looking at gold and particularly the gold mining stocks for signs of a bottom. To be clear, I don’t own either… yet.

But here’s why I’m intrigued by the opportunity:

  1. Central banks are competing to devalue their currencies. The longer this goes on the more likely gold will benefit.
  2. Gold miners are extremely cheap relative to gold.
  3. This might just be the most hated asset class in the world right now.

The reasons I haven’t taken a position yet are:

  1. If we are, in fact, currently experiencing a global deflation this is not good for gold (or oil, copper, etc.).
  2. The trend is super-fugly.

So basically, I’m waiting for the chart to confirm or deny the above. As it stands, the long-term uptrend broke last month:

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So unless we see a major reversal soon (or at least some sort of attempt to form a bottom) I’ll have to assume deflation trumps money printing. However, if gold can manage to find a bottom it could end up being a helluva trade. Stay tuned.