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Emotion Is the Death of Wealth

Silver and gold coins

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When everyone is bearish and ready to throw in the towel, that is precisely when to buy. But it goes against human nature. No matter how many times I have seen this, people never seem to learn. They're a slave to their emotions and can't think objectively: “Buy low, Sell high”.

Once you realize this and teach yourself to do the opposite of what your emotions are telling you to do, your trading and investing performance will improve dramatically. This goes for euphoria at new highs also.

Simply put, do the opposite of what you think you should when markets dump or soar to extreme levels of sentiment.

Here are a few similar, relevant examples when Silver was extremely bearish, just as it is now.

What happened next?

March 8, 2023: 20.15. Rose 30% to 26.23 on May 4, less than two months later.

Sept 1, 2022: 17.67. Rose 38% to 24.37 on Jan 13, 2023, four and a half months later.

Sept 29, 2021: 21.48. Rose 22% to 26.29 on Mar 8, 2022.

Nov 30, 2020: 22.59. Rose 30% to 29.42 on Feb 1, 2021, just two months later.

Mar 18, 2020: 11.77. Rose 250% to 29.26 on Aug 10, 2020, just five months later.

Think how bearish it was at 11.77.

Are we getting it yet?

Nov 13, 2018: 13.98. Rose 40% to 19.55 on Sep 4, 2019.

Dec 23, 2016: 15.76. Rose 17% to 18.51 on Apr 17, 2017.

Dec 14, 2015: 13.65. Rose 52% to 20.70 on Aug 2, 2016.

I could go on and on and on.

Data always wins over emotion. Always!

Sentiment is huge in precious metals because it is such an emotional sector. It's a superb contrarian signal. Yet no matter how many times people see this, they succumb to their emotions. This time won't be different.

In fact, I expect the rally to follow the low in Silver to be one of the biggest—at least 40%, perhaps much more. I can't make this any clearer. I just hope you see "reason".

At the same time, don’t try to catch a falling knife. Although we’re seeing positively divergent lower lows on the daily charts across the entire sector today (Thursday), this does not mean we can’t go even lower first.

The stops below the 200-day moving average and the green support trendline are like a magnet now. If they break, this will likely create a final flush and set us up for the rally to new record highs in Gold, back above $30 in Silver, and the Gold and Silver miners outperforming both metals.

But wait for a break of resistance first. That initial resistance is now at 23 in Silver, but the big level is 24.41. We need a close above there to signal the bottom is in and thrusters are engaged. It’s perfectly reasonable to leave a dollar or two on the table for confirmation that the low is in, especially given the upside to $50-60, my target for the peak of this rally in Silver.

In the meantime, targets on the downside remain 22 and 21, the latter being my preferred target for numerous reasons. The worst-case scenario is 19, imho. I’ll be lowering resistance levels to watch as Silver falls.

Don’t miss a golden opportunity.

Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.

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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.


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