I'm tired of hearing "Inflation is coming!" and "Gold is going to soar!" over the last 18 months... only to see nothing happen.
The inflation argument makes some sense... In the second half of 2008, the bond market essentially froze – so the government started on a binge of "printing" money to help unstick it. As the economy sank, the money-printing continued.
That much new money should have caused the price of gold to soar. But something wasn't quite right...
Gold didn't soar. And it still hasn't. Back in March 2008, when the storied Wall Street firm Bear Stearns went belly up, Gold poked its head above $1,000 per ounce for two days... Then strangely, that was it for gold.
No matter how bad the credit crisis got... no matter how much closer the world got to the Next Great Depression... gold still didn't soar. Gold didn't do anything really, except go to sleep.
For almost two years now, gold has been hovering between about $800 and $1,000 per ounce. It's been a year and a half since gold last closed over $1,000. Quietly, I've been getting worried...
If the Credit Crisis couldn't push gold over $1,000... and if the prospect of the Next Great Depression couldn't push it over $1,000... then what would happen when the economy started to return to "normal"? Would gold crash? It sure could.
And now it seems that "normal" is returning...
In the last few months, the world has come back from the abyss. I've repeatedly said the U.S. recession is over. The crazy fears that the world was ending are behind us for now.
But a funny thing has happened... gold is quietly moving up.
Now this is important – incredibly important. You see, this is exactly the way a REAL bull market works...
In a real bull market, the asset (in this case, gold) hits a new high as optimism over that asset peaks (that was back in March 2008). Then the optimism fades... and so does the price of the asset.
Next, the asset just meanders along, letting people give up on it... But it's just plotting its next move higher. It's shaking off all the nonbelievers before it breaks through to a new high.
My friend Jason Goepfert (of www.sentimentrader.com) is the best in the business at analyzing investor sentiment. So I looked at his recent work to find out if gold is at a peak in optimism (which would mean gold should top out soon) or if we still have farther to go.
Jason says his gold sentiment indicators are "not showing any excessive optimism just yet." In short... we still have farther to go.
If gold closes above $1,000 per ounce a few times in the next few sessions, it could finally hold above the $1,000 level.
People simply haven't been buying gold "hand over fist" lately. But if gold closes over $1,000 a few times, they will. Gold will be all over the news, and the average investor (who hasn't bought yet) will finally start to get in. He'll sell his stocks that have soared but have recently run out of gas... and move his money over to gold.
We could be on the brink of a big move in the price of gold... the next leg up in the gold bull market.
In the last 18 months, the way gold was acting, I wasn't so sure if it was coming. But with this week's action, with gold inching up over $995, I believe a new leg higher in the bull market is here.
We'll know if it's for real in the next few days. If it is, make sure you own some.
Big news for gold stocks: The GDX is on the verge of breaking out to a new 52-week high.
Like all assets, the "golds" had a historically brutal year in 2008. The big gold stock fund (GDX) lost 64% of its value in just four months. This enormous drop led us to tag the fund as one of the top "rebound" assets of 2009. The GDX has enjoyed an 85% gain since our writeup.
After reaching a high of $44.55 on June 2, the GDX took a long summer vacation to consolidate its gains. But in the last few weeks – without much fanfare – the fund has crept back to that old high. It now sits on the doorstep of $45 per share.
Before you get too excited, realize markets often stage a "fakeout before the breakout" in order to throw off latecomers. But as you can see from today's chart, each dip in GDX has served as a nice place to buy. This time should be no different. As the great trader Ed Seykota might say, it's a bull market in gold stocks.
Super-Safe 11% Income Right Here By Dr. Steve SjuggerudWednesday, September 2, 2009
Municipal bonds are ignored by investors, they're selling at once in a lifetime values, and they're in an uptrend... Hated, cheap, and in an uptrend – that's exactly what we look for in an investment.
This Popular Trade Is a Comfort Trap By Tom DysonTuesday, September 1, 2009
The majority of investors flock to comfort trades. So by taking comfort trades, you end up on the same side of the trade as the crowd. And that's always where the losses are...
