Every now and then, I am able to round up some uncommonly outstanding articles. Today is one of those days. Please make it a point to read Andy Hoffman’s “Rant” and the Jeff Nielsen article. They are not to be missed! (Of all the people I follow, my views are most closely aligned with Andy’s. We both see current events in the economy and the metals “through the same prism.”)
Let’s take a look at how gold has behaved in the past 60 days. The following chart is very useful.
Twice in the last two months, gold has dropped briefly below $1490, and quickly rebounded above $1540. Both times gold tried to penetrate $1550 it was pushed back down. If you believe Larry Edelson, gold will plunge below support at $1490 again, and continue falling. Well, I’m not so sure. Earlier this spring, he wrote about the pending collapse in gold – it never arrived. He may be wrong this time too. My guess is that gold will penetrate the resistance (JPMorgan and the bullion banks) at $1550 and continue up toward and beyond the all-time high close of $1565.70, set near the end of April. Here we are, halfway through the summer season, and gold is within a percent of its all-time high. What is so surprising is that while gold has more than held it’s own, the dollar has risen from near 72 to over 75.6, a gain of over four percent. The “gold bears” expect a rising dollar to be bad for gold, since gold is denominated in dollars. So far, the summer doldrums have not materialized – not even with the help of a falling dollar, but it’s early yet and it still could happen – OR maybe not. Cactus Jack would say “David, you are covering your arse and speaking out of both sides of your mouth.” Cactus did get some things right.
It is foolish to predict short-term market moves. You win some and you lose some. So I am hedging my bet by telling you it could go either way. But nailing the big picture is a different matter. I tell you with absolute certainty, we are still in a gold and silver bull market and it has a long, long way yet to go. This is a young, energetic bull we are dealing with, with plenty of snort and vigor left in him.
Lately, the old-timers with the big reputations are making some outlandishly bullish predictions. Jim Dines, “The Original Gold Bug,” says silver is mis-understood, and it will reach anywhere from $300 to $500 an ounce. His track record in all the metals (he also was the first to predict the bull markets in Uranium and Rare Earths) is pretty amazing and spans 40 years. It is not wise to dismiss his predictions. Jim Sinclair, “Mr. Gold,” a moniker attached to his name in the last bull market in the 70s, has upped his gold target from $1650 to much, much higher and he even mentions $12,000 as a possible top. He also says, “God help us if it does hit $12,000.” How certain is Sinclair that this could happen? His answer is, “The Fat Lady Has Already Sung.”
I don’t know if they will be right (their past track record says they will) but I do know that silver under $50 and gold under $2000 is dirt-cheap.
Susan and I were at the gym on Sunday morning and we ran into a friend of hers whose family owns dozens of fast food restaurants. Susan said, “Business must be booming for low-price restaurants like yours.”
She said, “Actually not. Business is good but our costs are rising so fast we are making less money.”
And who says there is no inflation?