Monday, November 16, 2009

Emini Futures Trading - Monday November 16th, 2009 / Gold Bull Market Not Yet Manic


Gold Bull Market Not Yet Manic

Jack Adamo, 11.13.09, 06:00 PM EST

Bull markets begin with attractive fundamentals and then momentum slowly takes over until utter insanity prevails. We're not there yet.

"The hardest thing in investing is to ride a bull market all the way to the end."
--Richard Russell 

The "R-Man" is 85 years old and has been writing about the market since the 1950s. The reason he gives for the above statement is that the psychological pressure to lock in your gains when you face a rough patch is very strong. Few people have the strength of conviction to weather such tough times.
Gold has been acting very strongly. Depending on whether a gold bug or traditional financial writer is telling it, agreement is wide that we are due for a correction, minor or sharp. The more I hear that, the more convinced I am that the correction is further out, and will be smaller than we expect. Central banks are now holding back or even buying gold to replace their rotting dollar reserves. For years they've been dumping their gold to buy dollars. They've wised up. 

There have been numerous gut-wrenching corrections on gold's journey in price from a low of $256 back in early 2001 through its recent run past $1,100, but gold has continued to rise inexorably. Each time it pulls back, the media give reasons why it was just a bubble and it's deflating. They're wrong.
Look at the strength in gold just this year.

Gold is simply the inverse of the dollar, which is worth less and less every year. The dollar has its short-term reversals, but that's all they are, just as gold's pullbacks are short-term corrections.

What is the top for gold? I don't know. But I know it isn't there yet. How do I know? Because the vast majority of the public still doesn't take the metal's rise seriously. What happened to tech stocks will happen to gold. What happened to oil will happen to gold. What happened to housing will happen to gold. It will have a parabolic move. And since it's a much more liquid asset than housing, the move will be more like oil in 2007–08 when it jumped from $80 to almost $150 a barrel, or tech stocks in 1999–2000, when the Nasdaq 100 jumped 88%.

When gold is near a top, it will be all over the mainstream media, not just the financial media. People will say that buying gold is a no-brainer, and we'll probably hear numbers like $8,000 an ounce or more. Miniature gold bullion will be sold in fancy department stores here, as it is now in England, or even in vending machines, as it is in Germany. We're nowhere near the end yet. So, I'm going to bite the bullet on any corrections, and increase our gold positions now. They will be for the long haul, until and unless I see one of my own indicators say it's time to get out for a while--or for good. I don't expect that to happen soon.

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