Check out the following two charts. They fall into the category of “a picture is worth a thousand words.” Throughout this decade-long bull market, I have urged our readers to buy physical gold and sit on it, not trade it. I maintained that if you follow that simple advice, “you have already won.” That is the truth, you know.
Coincidentally, yesterday I wrote that I expect gold to hit at least $1800 by year’s end, which represents an increase of 18.3% from its close one year earlier. Do you think that is an uncommonly strong performance for gold? Actually, it’s just another “average” year in gold’s stealth bull market. “Stealth” because gold has flown beneath most everyone’s radar since the very beginning. But not mine, and hopefully not yours either. Have you participated in it? Have your “paper” investments kept up? You know, 18% per year gains, compounded, will double your money in just four years. Starting from the low of $252, in the year 2000 when the bull market commenced, if gold closes at $2000 in 2012, which is certainly possible (see graph 2), gold will indeed have averaged 18% per year, or three doubles in the 12-year bull run. And you didn’t have to trade it or time it along the way to make these returns!
In Technical Analysis, one of the strongest indicators is an upside breakout of a triangle formation. It almost always results in a strong and continued move up. What do we see here, in chart number 2? A breakout. Note that the triangle took a long time to develop – nearly a year, so the upside follow through should be huge, taking gold back to at least the point where the triangle first formed, which in this case is around $1900, the all-time high. This gives one reason to believe that a new all-time high could be reached yet this year, or shortly thereafter.
Two “Round Numbers” to watch for…
The US dollar is currently 80.23. When it tumbles below 80.0, that is significant and it could happen at any time.
For gold, the number is $1800. There is strong resistance there and gold may have its work cut out to close above the threshold and stay there, but it will happen. Keep your eyes on those key “round numbers.” The primary trend has the dollar heading down toward 70.00 and BELOW. For gold, the primary trend has gold moving toward $4350 and HIGHER.