Driven by the collapse of key commodities oil and copper, the damage in the commodity space has been huge. Since the 2011 top, the CRB index, a proxy for the commodity complex, has lost 45% of its value. Year-on-year, the index is 37% lower.
The good news for commodities is that they are hitting a secular bottom, as indicated by the red bar on the chart above. The 4 decade low is only 7% below today’s level. This seems an area which is setting up for opportunities in the coming months.
What about gold’s secular trend? The most interesting trend on the longer term gold chart is the deceleration of gold’s decline. Although the trend remains down, with a clear formation of lower lows, the decline is slowing. Also note that the lows have occurred in an orderly manner, not comparable to the aggressive declines of April and June of 2013. This indicates selling pressure is fading and that gold is bottoming.
Note on gold’s chart that the wedge is now ripe to change its trend. The quality of the wedge is high, with at least 3 tests at each side of the pattern. We wouldn’t be surprised at all if gold would start a secular breakout later this year.
With gold’s bear market, the gold mining industry has been slaughtered. That brings opportunities to investors. The miners that survive this deep crisis will outperform once the tide turns in precious metals. Although a trend change takes time, we believe that opportunities are manifesting in gold, silver and miners. This is the time to be looking into the gold mining space for serious long term opportunities!