Have you ever walked on the street and noticed others looking up to the sky? What did that cause you to do? Of course, you probably looked up.

And, assume what was in the sky was a strange looking plane which caught the first onlookers eye. That first onlooker would be able to watch that plane the longest as it passes through the sky. As the up-looking crowd becomes larger, the more people take notice of the others looking up, the larger the crowd gets. In fact, it is often the last moments which see the largest additions to the crowd, as the entire street may be looking up at that point. As more and more begin to look up, the ones who look up last (and are often the largest part of the crowd) will have the shortest view of the plane, if they are even able to see the plane at all, as the plane will begin to move out of range of the human eye.

This is no different than how market sentiment works and this is exactly how the top to the metals was created back in 2011. As the shiny metal continued higher and higher, more and more “onlookers” began looking up with all those around them. I mean, if everyone is looking up, then clearly there must be something to look at, right? Unfortunately, the majority that only began looking up in 2011 were left looking up while the plane was no more than a speck in the sky.

Compare this to when a market is hitting bottom, as there are almost no investors that are looking up at that time. The plane has not yet come into sight. But, one or two people on the street began to hear the plane’s engine, and began looking towards the sky. They are akin to the first investors that begin to look up, and start to buy. As others walk by them, and see them looking up, they begin to follow their lead.

You see, when market sentiment reaches an extreme while everyone was looking down, that is usually the point at which some will eventually begin to look up, and recognize it is a buying opportunity. But, that initial phase often sees the smallest numbers begin to buy. Yet, it is enough to begin to turn the tide in the opposite direction, since there is almost no one left to sell at that point.

So, look around you now. Read most of the popular articles on the metals. Hear what most people are saying about the metals. Do you hear people mostly looking down or up?

At the point in time when most begin to look down, which, based upon the last article I posted on KITCO suggests that time is now, then we are nearing the long term bottom in the metals, in the same way that we hit the long term high when everyone was looking for that plane.

Now, if the majority of the market is now beginning to look down, does it mean you should be looking down with them? Is that how one should be using market sentiment? Well, not if you want to use it to beat the market. The worst thing you could do now is get caught up in the herd as they are driven to the slaughterhouse.

Rather, as the majority of investors are looking down, that is the point in time when a longer term investor should begin looking the other way, especially when many of the other indications we are watching suggest that the next drop in the metals can complete this 4+ year correction. So, instead of calling the current sentiment in metals “wrong,” as some analysts have done, try to really understand what that means to you as an investor. Do you hear the engine of the plane in the sky yet?

If you would like to learn more about how we track sentiment to stay on the correct side of the metals trade, come on in for a two-week free trial at Elliottwavetrader.net.

Chennai, Oct 11: With demand for gold increasing in the country, majority of gold from Dubai and Singapore are being smuggled into India due to the price differentiation, a senior Directorate of Revenue Intelligence official said.DRI authorities over the recent past have seized several kilos of gold in Southern cities and last week 31.75 kg of gold valued at Rs 8.43 crore was seized at Madurai airport in Tamil Nadu.The officials said due to the attraction towards purchase of gold in India, gold from Dubai and Singapore has become “attractive” for smugglers to buy and transport it to the country.

Gold smugglers or couriers of “smuggling gang” disguise themselves as genuine passengers to escape customs officials, he said.”Dubai and Singapore are the major supply centres for gold market and most of the travellers in South India come from these two places via air, while majority of gold from Sri Lanka is smuggled through the sea route,” he said.The rise in gold smuggling was due to increase in import duty and restrictions on the procurement of gold, making it an “attractive” option, the official, who did not wish to be named, said.(Also Read: Dubai exchange gold, rupee segment register substantial growth)

“Increase in import duty of 10 per cent on gold brought through legal channels and restrictions in procurement has made its smuggling attractive, thereby witnessing an increase in gold smuggling,” he said.The official said differences in exchange rate and the import duties across countries make gold a preferred metal for smuggling compared to other goods.Giving an example, he said “there is a price difference of about Rs five lakh per kilogram of gold purchased in India as against in Dubai after paying the customs duty.”
“With the price differentiation of Rs 2.30 lakh per kg along with an additional 10 per cent customs duty, there will be Rs five lakh price difference between the gold in Dubai and India for legally importing it,” he said.According to him, it is for these reasons smugglers take up various methods to evade paying customs duty during smuggling.”Any passenger who brings gold into the country is required to declare the gold to Customs at the airport and pay customs duty in foreign exchange, a facility mainly provided for passengers returning after working for sometime,” he said.

Modified Date: October 11, 2015 2:48 PM