-- Posted Thursday, 3 May 2007 | Digg This Article
Is gold showing signs of volatility right now? You bet it is. And the closer and the longer gold is over 650 and climbing you will continue to see volatility. Often times extreme up and down swings. Does this signal the end of the gold bull market? No.
The fundamentals and the momentum are still in place.
It amazes me that no one seems to have learned a thing from the great general bull market from 1980 to 2000. How well I remember the doomsayers constantly shouting the note of alarm louder and louder. And with every shout of warning the market climbed steadily higher until its peak of today. How many would loved to have bought a Wal-Mart, a Home Depot, Dell or any of a ton of stocks that rocketed higher during this time? Anyway, as I always say…you snooze – you lose.
Concerned if the bull is still intact? Observe the price swing below. Yes, there will be very significant oscillations but always you will see the mighty gold bull leaping twice as fast to regain its forward momentum.
A great deal of resistance as there are many who wish to hold gold down. But long term gold will rise higher still. I suppose with gold battling to climb higher it is time for a closer examination to determine if this is simply a rally or part of a long term price movement. Many investors right now are concerned that we may be at a peak and its time to sell. Well, is this a peak?
I don’t attempt to predict short term oscillating movements. And to my understanding no analyst or financial guru can claim 100% accuracy in determining without error the exact short term movements of any commodity or stock.
But you are personally concerned whether your precious metals presently represent a pot of gold or are soon to become worthless lumps of coal. Yes, there is a strong resistance level around 700. And 700 is the “ceiling” at the present moment and for ceilings to be broken there must be a constant hammering away until that ceiling is breached. That is what we are witnessing now. Gold is hammering and hammering at 700 to rise above this level. But the forward momentum rests in gold’s ultimate favor. The fundamentals are just too powerful for gold to be forever held back
So, what do you plan for? Long term or short term? As I previously stated I think a good witness is the general bull market that existed from 1980 to 2000. This bull market made many rich but there were many dips and valleys along the way. If you believe in a longer term higher trend then your thoughts must remain focused on the actual fundamentals behind gold. That said I am still a strong advocate of selling at least a portion of your gains as they are climbing to the moon and above. At least get your original capital out and then reinvest that capital in another promising play. Nothing wrong with a little bit of good sense and good judgment.
"The dollar has been the main thing behind gold's move this afternoon, and U.S. gasoline stocks fell," a London-based trader said. "If the dollar falls to new record lows, we could see gold trying the $690 level again." “Gold on Monday matched a 11-month high of $693.60 set last week, but stalled on market nerves about breaching the psychological $700 level.” “Analysts expect gold to be firmly underpinned by strong physical buying interest over the next few days.” "Physical demand is likely to remain strong, but the market needs a catalyst to move prices much higher." Click
Let’s read part of that above text again.
“…the market needs a catalyst to move prices much higher.”
And that catalyst is just around the corner. China all by itself will eventually drive the price of gold higher. Read the interesting text below.
“Also supportive were comments by a Chinese central bank official, who said the country should put its $1.202 trillion of foreign exchange reserves to better use by ploughing more money into gold, oil and metals.” “(The) comments have potential importance for gold," HSBC said in a research note.” Click
And what are the central banks presently up to? Actually, they are divided between buying and selling.
Hello David,
“I think gold does have a future, but prospective buyers need to be made more aware of the ongoing, determined efforts by central banks to suppress the price.”
DRF
OK, DRF. Let’s see what the central banks are up to.
Eric Roseman – “Get ready for central banks to ‘talk down’ gold,” cautions resource expert Eric Roseman in his Commodity Trend Alert -- who nevertheless remains bullish….” “Gold prices, in a secular long-term bull market since 2001, continue to impress even the greatest of skeptics. You've got to be impressed with this price action lately, even as major economy central banks continue to sell their hoard. “As the latter group sell, the emerging market central banks are buying. That's the case with Russia, China, and several other countries over the last three years. If I was running a central bank, you can bet your last fiat dollar I'd be selling paper money for gold!” “The next big resistance level for gold is $700 and thereafter, we've got to close above $730 an ounce. It's going to get bumpy. I think we'll close above $700 an ounce this year and probably over $850 by December 2008, if not sooner.” “However, central banks are going to start talking down bullion very soon.” Click
Did you read the text above? Yes, the central banks are talking down gold all the while the emerging market central banks are BUYING gold! And read more interesting news below from financial analyst, Eric Roseman.
Eric Roseman – “We’ve got some monumental gains coming our way for the precious metals.” “Make sure you own some of the best and largest names in the business at these distressed prices ahead of next historical rally.” Click
And again, what is little ole’ China doing to bolster the gold market? Read below and find out.
“Curtis Hesler, editor of The Professional Timing Service, believes that the recently announced Chinese investment fund will have a significant impact on commodities. The fund, he explains, was developed in order for China to diversify its reserves. He notes, "The great Chinese reserve fund has now been established, and it is a whopper; they have announced that they will hold $650 billion of their reserves at ready. Further, he adds, "They will also invest $200 billion to $250 billion a year that they expect to receive hereafter. That is a lot of money!" “So, what will they buy? According to Hesler, "They will certainly spend a lion's share on raw materials and other commodities." “The advisor forecasts, "This money will likely be the engine that will fuel the next major leg in the commodity bull market. China has every intention of being a significant player on the global scene; and to do that, they will need to increase their gold reserves." “Already bullish on gold, the development of the China investment fund for its reserves is an added demand factor supporting his optimistic stance. He notes that some resource experts are estimating that China will need to accumulate 2,000 to 3,000 tons of gold toward this goal.” “As a long-term investor, Hesler argues for patience and suggests that investors should accumulate positions during periods of price weakness. Long-term, however, he says, "I firmly expect to see gold eventually hit $1,600. That will put the mining stocks through the roof." Click
Are you afraid to step out and dream? That’s OK, just go back to your dead end job Monday morning and be bored the rest of your life.
“A life spent in a dead end, joyless job with evenings spent in front of a television set and weekends spent “passing the time” will feel like hell on earth because it is.” Gary Thomas, SM
Ever been to the Carl Sandburg house? Actually, have you even ever heard of Carl Sandburg? His 240 acre farm and retirement sanctuary, a national park now, is close to my home and a wonderful place to go for a breath of fresh air. Located in the mountains, with forest, mountain streams and all that comes with these surroundings. Anyway, go to a place like this to think about your dead end job and you will better be able to put your life and your personal dreams in perspective. Maybe you will even be encouraged to take your life in your hands and become bold enough to take a chance with your life and dare to dream and feel a passion for something else.
“The German philosopher Martin Heidegger argues that our passions tune us into the world. Tune us into the world…Think about that for a moment.” Gary Thomas, SM
While there are many solid fundamentals affecting a longer term strong gold price one of the top three fundamentals in gold’s favor is clearly the bugaboo “inflation.” And how goes the present government fight to keep inflation low and off the radar screens?
“Inflation is the Federal Reserve's biggest challenge, according to a USA TODAY survey of 53 top economists…” “Fully 59% of the economists pegged inflation as the Fed's main problem…” "Your hands are tied," says Ken Mayland of ClearView Economics. He expects the second quarter of the year to be equally slow, but says the economy could then pick up steam, driving inflation pressure.” "The window is closing on the chance for the Fed to cut rates. We're running out of time…” “Rich Yamarone of Argus Research says inflation, including higher food inflation, is a threat.” "The people that I talk to, the CEOs, are telling me that they're facing higher prices…” Click
The way I see it gold and the resource stocks have no direction to eventually go except up. And the below text represents additional powerful fundamentals driving gold stronger.
April 27 2007, “The euro surged to a record high versus the dollar Friday after a weak reading on economic growth in the United States unnerved currency investors. The euro bought $1.3682, the highest since the currency was launched eight years ago, up from $1.3604 in the previous session.” “The dollar also weakened against the yen.” “A weaker-than-expected reading on economic growth hurt the dollar, as investors bet money would be moving to other places than the United States.” Click
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Let me get back now to the issue of gold jumping up and down in price because this is a concern of many. What is another important component putting tremendous support behind the longer term higher potential of the gold price in general?
“The price of gold will continue to climb as demand continues to strengthen while this demand is not being met by higher supply, says Lear Financial…” “Lear Financial claims that there is a "good chance" the price of gold this year in will exceed last year’s high of $725 per ounce and this upward trend is likely to continue into next year. "In China (the world’s third-largest gold consumer and fourth-largest gold producer) there is a long-term shortage of gold," says Lear Financial’s gold investment advisor, Kevin DeMeritt. China’s annual consumption is about 200 tons, while its production equals roughly 180 tons a year, said Lear. "It is difficult for China to maintain major long-term growth in gold production because of limited resources and production capability…” “Lear Financial reports that the discovery rate of major gold deposits has declined in each of the last eight years, while the demand for gold by investors and industry has increased.” "Investment demand, jewellery demands and high-tech industry demands continues to strengthen, but this stronger demand is not being met by worldwide gold producers thanks to declining production…”
Click
I know I am being repetitive and sounding maybe too optimistic, but I do believe the longer term fundamentals for gold are excellent and will drive the price higher over the longer term.
Email me. I want to hear from you if you have the time to write.
David Vaughn
Gold Letter, Inc.
David4054@charter.net
5-3-2007
The publisher and its affiliates, officers, directors and owner may actively trade in investments discussed in this newsletter. They may have positions in the securities recommended and may increase or decrease such positions without notice. The publisher is not a registered investment advisor. Subscribers should not view this publication as offering personalized legal, tax, accounting or investment-related advice. The news and editorial viewpoints, and other information on the investments discussed herein are obtained from sources deemed reliable, but their accuracy is not guaranteed. © Copyright 2007, Gold Letter Inc.
-- Posted Thursday, 3 May 2007 | Digg This Article
