After no involvement with gold for a few years, I came back into the gold market in the spring of 2003 because it looked like gold had bottomed—it was just under $325 at the time—and the thought was that it could make a run towards key resistance at $400. That’s right – $400. While stepping aside for corrections in gold and silver along the way, I rode gold to its September 2011 highs…
The neon sign over my picture that flashed “GENIUS” would end up blowing a fuse and then fall and smack me in the head, a reminder of the infamous saying among pundits, “You’re only as good as your last call.”
I said a couple of weeks ago during an interview that we won’t see gold under $1,200 again in my lifetime, and at age 57, I’m not planning any exit soon from this earth. (But if I end up wrong my wife could force the issue.)
Because of some critical factors, I have never been more bullish on gold.
The first factor, IMHO, is the single biggest bullish factor and I doubt it will be found on top of most others’ lists, if mentioned at all. However, I believe it was the match that lit the fuse to a coming explosion in gold unlike any other since gold began free trading 40+ years ago, and those who know me throughout my 30-year career in and around Wall Street know I have never even remotely spoken like this.
After initially not allowed to see its own gold despite demanding to do so, Germany announced this year that it will seek to have 20% of its gold held by the U.S. returned to Germany. Now, that in itself didn’t make it my number one bullish reason; the fact that Germany was told it would take up to SEVEN YEARSto complete the task did!
Stop here. If you honestly can’t grasp the gravity of that it’s senseless for you to read any further. If you’re like me and smell a rat, read on.
There’s no *@#%^ it should take such a time frame except that you don’t have the gold to ship. People like members of GATA who have dared to suggest that official gold reserves are way overblown and much of that gold has been already lent out have been labeled kooks, goldbugs and tin-foil-hat wearers. What do I think of this?
Okay, let’s just say for a moment we kooks are right – that real metal for official purposes is scarce. What would need to take place? One would need to acquire massive amounts of gold quickly. How would one attempt to do so? Create a reason or reasons for those who own it to sell it. How? Use an old adage of “selling begets selling,” and do so at the worst possible time to create the view that prices could fall sharply.
This took place earlier this year and the number of bears increased as if Miracle-Gro was spread on them. Throw in the merry men of financial journalism who are little more than mouthpieces for the “Don’t Worry, Be Happy” crowd which controls Wall Street, and you literally create panic selling.
The story could have ended there and the Federal Reserve lives happily ever after while the German gold demand dies, but a funny thing happened on the way to the forum. Paper gold was sold hard and heavy but, instead of causing physical players of gold to fall in line, physical buyers screamed, “Feed me more!” People were willing to pay $100 or more above the current paper price of gold just to get some real metal. The Fed Chairman even went so far as to talk out of both sides of his mouth about “tapering” the Fed’s bond buying in hope of pushing gold lower.
When it comes to gold, it’s not just Denmark where something was rotten but right here in the U.S., and I think the jig is up. As the situation becomes known even to the “Talking Heads” on TOUT-TV, we shall see a rise in gold unlike any other. If not and we actually go the other way, look for me on a future segment of Divorce Court.
We need to get above two key resistance levels before my belief can have any real chance of success. For starters, we need to get above $1400 (Point A) and stay there in the not-too-distant future. The overwhelming number of bears can and will argue this area is just another selling opportunity, and until that is proven wrong, their friends in the financial media will continue to give them carte-blance coverage (We can back off $1.350 once or twice before a run to $1,400).
More importantly, the old key support in the $1,500 – $1,550 area (Point B) will be difficult to overcome and likely need several challenges before giving away to a run to new, all-time highs in 2014 and beyond.
Peter Grandich is the Managing Member of Grandich Publications, LLC (www.grandich.com).
The company publishes The Grandich Letter (first published in 1984) which covers the metals and mining industry, follows world markets and economies, and covers the Canadian markets from an American prospective.
Grandich also provides a variety of corporate finance and development services to publicly-held companies.
Peter Grandich is also the Managing Member of Trinity Financial, Sports & Entertainment Management Company, LLC (www.trinityfsem.com), a Registered Investment Advisor in the State of New Jersey. Trinity provides investment advisory services to individuals, small to mid-size businesses, professional athletes and entertainers.
Peter is a long-standing member of The New York Society of Security Analysts and The Society of Quantitative Analysts.
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