Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Price Correction Consistent with Bull Market Continuity

Commodities / Gold and Silver 2011 Jan 25, 2011 - 06:20 AM GMT

By: Midas_Letter

Commodities

Best Financial Markets Analysis ArticleWith technical indicators today suggesting gold could dip as low as US$1,322 an ounce in the current corrective phase, bears and bugs are deploying opinions in-line with their interests. The drop by nearly $100 in ten weeks is nothing new, nor is the strident tone growing in both camps. Its all consistent with the bull market in gold and silver that has been underway for the last decade.


In a pattern that is as clear as the four seasons, the tone in the media presages market sentiment, which segues into market action, then market re-action, classically followed by market price adjustments for over-reaction, which itself engenders a reversal of market sentiment, and a subsequent reversal in media tone. Metaphysical economic ping pong at its finest.

To detail and exact example would render this an unreadable article, because the micro-focus on step by step events could cause migraines. Far better to recognize the pattern from a 10,000 foot viewpoint without zeroing too closely on the details – you risk missing the core message and opportunity.

That is the classic problem with the mainstream financial press, which can only report what is happening right now. Drawing conclusions about future performance from current data departs the realm of journalism and enters that of opinion, and we know how common those are.

That being said, it is nothing short of remarkable how vast the quantity of high paid experts in vaunted positions yielding astronomical pay are so consistently wrong, and yet retain their overpaid posts.

In an article published by Bloomberg on October 23, 2006, after gold had lost 20% of its value after touching what at that point was a 26-year high of $732 an ounce. John Reade, a UBS analyst and one of the generally most incorrect predictors of metals prices in the last ten years stated then, “There seems little sign of investors and speculators wanting to rebuild long positions.”

Another analyst quoted, David Thurtell from BNP Paribas said, “`The inflation outlook is fairly benign. Investor demand will not be as strong as it has been.”

CIBC World Markets analyst Stephen Bonnyman said at the time that it expected metals prices to remain volatile. “Barring a major contraction in global economic growth, we see little risk of collapse in metals prices but expect a gradual decline from existing levels,” said analyst in a note to investors.

CIBC revised its price outlook for gold for 2006 to $580 an ounce from $675 an ounce, while the price for silver was unchanged at $12 an ounce.

Gold has corrected in price in excess of 20% no less than 46 times since the onset of the bull market in 2001. Each time, the analysts and money managers come marching out of the woodwork to proclaim and end to the bull market, only to be sent slinking back in silence as the price of gold powers to new highs.

What is most important in understanding the long term price direction of gold is not listening to analysts at banks whose opinion is a reflection, in general, of what has already happened as opposed to a thoughtful analysis of what is unfolding. It is the fundamental realities in the global economy that instigated the bull market in gold, and continues to drive it higher, in the macro sense.

The number one catalyst in the birth of the gold market was the broad perception that the U.S. was printing too much money relative to its GDP and tax base in order to finance its military and political ambitions in the middle east, where it has historically had a vested interest in maintaining instability thanks to that jurisdiction being the primary source of energy for the United States.

After World War 2, the U.S. learned that the most strategic resource in maintaining military superiority was control over fuel supply. From that point forward, it set about covertly destabilizing regimes in jurisdictions where the political climate was not conducive to its own interests, i.e. continuous supply of relatively inexpensive oil. Venezuela, Saudi Arabia, Iran, Iraq and Egypt have all seen the history of their political leadership influenced by the machinations of the CIA.

What the U.S. discovered subsequent to that period was that it could not afford to finance a mult-faceted military presence without going deep into debt, which it then proceeded to do with the blessing of economists of the era who espoused deficit spending as the path to economic prosperity.

The fast-forward result is $14.7 trillion U.S. dollars in debt held by the rest of the world who can now ill afford to either buy more or sell any lest they cause a panic for the exits. The only reliable hedge against the U.S. dollar devaluation strategy now underway by the Americans is the monetary metals.

China, the biggest holder of U.S. debt, is acutely aware of this, and this is one of the reasons why it has become the biggest producer of gold in the world. It will foil America’s attempts to dominate the world with the dollar by replacing it with the yuan backed by gold and silver, platinum and palladium.

This fundamental reality has not altered one iota since manifesting itself in the early part of the last decade. If anything, the willingness of the U.S. to debase the value of its currency and impoverish its general population is seen to be increasing, as it purchases an average of $75 Billion of its own treasurys with its own checkbook, i.e. the Federal Reserve.

These corrective windows are opportunities for those seeking to preserve net worth to buy gold, and for speculators to accumulate gold, silver, platinum and palladium producers and explorers.

The only global fundamental change that will alter the direction decisively of the price of monetary metals is a revaluation of the U.S. dollar on an official basis – a move for which the political power and moral integrity are both thoroughly absent.

I am not a gold bug. If the U.S. dollar were to be a correctly valued and unencumbered monetary unit, there would be no need to own gold and silver. But that is not the case, and so, in gold in silver we have no choice but to place our trust. For the long term, that will not change.

James West is the publisher of the highly influential and widely respected Midas Letter at midasletter.com. MidasLetter specializes in identifying emerging companies in gold and silver exploration at the beginning of their share price appreication curves, and regularly delivers 10 baggers (stocks that increase in value by at least a factor of 10) to his premium subscribers. Subscribe at http://www.midasletter.com/subscribe.php.

© 2011 Copyright Midas Letter - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Midas Letter Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in