Although our long-term outlook for precious metals remains bullish, we doubt that gold is ready to leap beyond the $1000 barrier the next time it touches it — especially if this occurs within the next few weeks.  However, with today’s commentary by our friend Chuck Cohen, we skip ahead to the not-so-distant future, when junior mining shares are likely to make dot-com mania seem relatively subdued in comparison. Here’s Chuck with a rousing forecast for gold and gold stocks:

Can you remember back in what seems now like ancient history–1998-2000, when making money in stocks seemed absurdly easy. Stocks only went up, some of them to ridiculous levels. Testimonies of instant millionaires were everywhere. CNBC was on in every barbershop. Even Shaq and Jose Conseco were dishing out advice.  But then it was over, with almost everyone being taken to the cleaners. Even though we associate this period with pain and loss, we tend to forget that this fantastic move went on for almost eight years. There were actually some who foresaw the move, and for those who got aboard in the early 1990s, fortunes were made.  What if you had a shot at buying an equivalent opportunity, perhaps even far greater than that of the dot-com era?

A Big Move Is Developing Thrust

At this moment, a once-in-history rise is revving up. It is coming in gold, specifically in the gold mining shares. The fundamentals are in place for the rise–unlimited creation of paper currencies out of every central bank in the world, the exploding claims upon the U.S. dollar, declining mining gold production, a dearth of large discoveries in recent years, a virtual cessation of central bank selling and a world-wide manipulation of the metal, particularly over the past eight years, that has produced an incalculable naked short position in the metal. As a friend of mine who knows the metals world has maintained: “The central financial issue of our time will be ‘what is money?’ ”

Why am I so confident, when probably no one you know owns gold, let alone the mining shares?  It can be seen in the following charts of the Nasdaq from the early 1980s until 2000, and in gold from 1971 until 1980.

The Secret of Major Cycles: Parabolic Power

Little-known in an era obsessed with short-term trading is that most major stock market cycles tend to move parabolically. The cycle begins unnoticed by most people. Corrections are sharp and violent, and they scare those who might be drawn in. But then, the slope of the rise moves up gradually until it reaches a certain point where it then begins to accelerate. This happens because, as the price rises, it draws in more and more people who excitedly chase it. By the time a top is reached, fundamentals are completely disregarded; then, as we saw both for gold in 1980, and dot-com stocks in 2000, the reversal arrives and a bear market ensues.  The key is to recognize that such a trend is in effect and to be prepared to take advantage of it .

Why do I bring this up?  Because at this very moment, we are in the relatively early stages of a massive bull market in gold, with very few recognizing it or positioned for the move. If you think I am exaggerating, then I must ask you, who do you know on CNBC or Bloomberg who is strongly advocating the gold market? Which quoted economists?  See what I mean?

Gold is now in its second cycle. In the first, from 1971-1980, gold rose from $37 to over $800. Then for the next 20 years, gold hibernated while the stock market took over in its parabolic cycle. This was not a coincidence, since gold and stocks are basically in opposition to each other. That explains why stocks have performed so poorly since the 2000 top while gold has moved from about $250 to $900.

And what about now? All we hear about gold are the people who are cashing in by selling their old jewelry while the price appears to be so high. But isn’t it strange that if we are in a bubble as many believe, we haven’t see ads everywhere telling people to buy gold, not to sell it? Remember again how it was in 2000, when brokerage-house ads were everywhere on TV.

I believe that the impending move in gold, and even more so in the gold mining shares, will be the greatest and most speculative cycle in the history of markets. As I mentioned above, the fundamentals are firmly in place. Over the past couple of years the world has undergone a radical shift.  Many nations have turned from holding paper currency and debt and have turned more and more to gold. It is happening in nations such as China, Russia, India and those in the Middle East. In the midst of increasing uncertainty, the price of the metal is now resting on the launching pad, and the shares of the junior exploration companies are sitting awaiting for lift off.

The Coming Explosion in Gold and Gold Mining Shares

How do you play this historic move to maximize the move here? Obviously, the physical metal is the safest way to own gold, but in this article I want to point out the way that has the greatest potential for you. It is the equivalent of owning some of those high tech companies that went up 100 to 1000 times in the 1990s. These are the junior or exploration companies. Right now there is a deficit of gold being mined while the world-wide bailouts have infused many trillions of dollars, with very likely much, much more on the way.  As the price of bullion shoots up here, because of their market capitalization relative to its reserves and because their cost structure is declining sharply, many of these companies will have unbelievable runs.

If you want any more information or recommendations on a professional or fee basis, please feel free to contact me at ikiecohen@msn.com. Chuck Cohen

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Rick's Picks publishes a daily trading newsletter for gold, stock, commodity, and mini-index traders 240 times per year. Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers' initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Thursday, 21 May 2009 | Digg This Article