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The Uptrend in Gold Is Broken, Next Stop Could Be $1000: Don Hays


Gold is getting a second look in many circles, which is probably no surprise considering the recent rebound in the dollar, the record run of stocks, and the never ending saga of sequesters and threatened service cuts emanating from Washington. This after the precious metal is in the throes of an 18-month sell-off from its all-time high of $1900 in the fall of 2011.

While many have argued that gold has finally found support at $1500, Don Hays, the founder and president of Hays Advisory in Nashville, is not one of them.

"We think of gold as nothing but a fear index," Hays says in the attached video. "It moves up when people are afraid."

Right now, while he and most other investors share short-term concerns about a toppish stock market, his expectations for gold are for a slight bounce, at best. Even then he foresees a bounce that would produce ''lower highs" before continuing with its downtrend.

"It's hard to imagine, but I can't see gold selling for much more than $1000 an ounce," this one-time NASA engineer predicts. "Not immediately, but in the next two to three years ."

There are a few basic reasons why Hays feels this way. First, he believes the ongoing bull market in stocks will continue to mature, thus draining the proverbial well of some much needed fear and pessimism. Secondly, gold's 12-year uptrend that began after the 9/11 attacks in 2001 has been broken. He wouldn't be surprised to see gold bounce a little from here and then fall again. "The third time it comes down to that support level [~$1500], it actually breaks through," Hays says.

Interestingly, a few weeks ago Hays Advisory also raised its cash allocation to 20% after its indicators suggested investors were getting a bit overconfident about stocks. He calls this a ''short-term defensive move" that's designed to prepare for a better entry point following an expected 5% to 6% slump in the S&P 500.