Should we be worried now that the Wall Street Journal has “discovered” the bull market in gold?  Relax. This bull market has years to go. It’s so powerful, in fact, that it will easily be able to shrug off yesterday’s front-page headline in the Journal, “Gold Vaults to New High,” and continue into the ozone. With the price of gold up 353% since 2000, the Journal was bound to notice the bull market sooner or later.  A related headline on page two further qualified gold’s leap to new record highs as being related to “global worries.”  This is true as far as it goes, but it overlooks the fact that gold has risen even in years when we weren’t so worried. And that is what we like most about the bull market in bullion: Whatever investment “story” has been out there over the last decade, gold as an asset class has led the pack.  It has flourished during periods when investors were worried about inflation, but also when they were worried about deflation.  The rally has weathered good economic times and bad, high and low unemployment, and a secular decline in interest rates. Gold has performed well when corporate bonds were in favor, and when they were not. Its price has risen when muni bonds and Treasurys were all the rage, and when both have been out of favor. If hell or high water lie ahead, we expect that neither will diminish gold’s allure.

There’s Midas to Consider

All of which makes it difficult to put the knock on the stuff. Not that we can blame the Journal and its ilk for trying. For how could they not when Gold’s price has quintupled off the lows? But the arguments that skeptics are trotting out are so feeble that gold bulls should only laugh. For instance, a broker at J.P. Morgan was quoted as saying that “a change in investor attitudes could cause a significant correction in gold prices.” This from a spokesman for a firm which, in its role as bullion banker, makes huge profits by lending out gold promiscuously. Under the circumstances, we’re surprised the broker didn’t try to pull out all the stops with some cautionary tales concerning the fate of King Midas. And Tilly Masterson.  So, besides the supposedly scary fact of gold’s decade-long run-up, what other reasons are there to be cautious? For one, silver has been acting pretty frisky, and this can be a sign that gold’s rally is in its final stages. While it is true that silver’s price has climbed 50% this year, from $14.74 per ounce in February to a recent $22.07, it’s possible the rally is just warming up and that a blow-off top might lie as far above as $50 or even $100. If so, gold at yesterday’s $1310 settlement price may yet prove to be the best investment bargain of 2010-12.

Whatever the case, we’re encouraged to see that these good times for precious metals are bringing out the nervous Nellies. Imagine how nervous they’ll be when gold and silver are enjoying very good times…then great times – and, finally, spectacular times. We may be ready to part with some coins and ingots ourselves at that point, but if we’re reading the signs correctly, that day could still be a few years off.

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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. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  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 © 2010, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Thursday, 30 September 2010 | Digg This Article