Gold has produced a positive year-end gains for the past 11 Years!
Last day of the year gold prices:
2000 = $274.00
2001 = $279.00
2002 = $348.00
2003 = $416.00
2004 = $439.00
2005 = $519.00
2006 = $638.00
2007 = $838.00
2008 = $889.00
2009 = $1097.00
2010 = $1420.00
2011 = $1566.00
“A trend in motion will remain in motion until it is stopped.”
During the 12-year history of gold’s amazing bull market, gold traded below its 200-day moving average (DMA) only about 5% of the time, and each time it turned out to be a prime buying opportunity.
The last time gold traded below its 200DMA was during in the fall of 2008. As soon as the price climbed back above the 200DMA, it more than doubled, rising from $900 to $1,900. The current fundamentals for gold are bullish enough for a repeat performance. Just make sure you are buying gold and not a ‘paper or digital substitute’ for gold.
Richard Russell is right. It will be increasingly difficult to increase your wealth. You should focus on preserving what you already have. Most of my readers express disappointment when gold and silver are not moving constantly UP. Markets do not work that way. But when you think of gold as “money,” rather than as an “investment,” it becomes clear that gold’s role is to preserve wealth, and if at the same time, it happens to increase it, that’s a bonus. In a perfect world, gold simply maintains buying power and a rise in its price indicates that the dollar is losing buying power. Although the price of gold is not strictly the result of a rise or fall of the dollar, it will move up rapidly when the dollar starts to decline.
Over the course of 600 years, five dynasties in China had implemented paper money and all five had made frequent use of the printing press in an attempt to solve problems. Economic catastrophe and political chaos inevitably followed. Time and time again officials looked to paper money for instant liquidity and the immediate transfer of wealth. But its ostensible virtues could not withstand its tragic legacy; those who held it as a store of value found that in time all they held were worthless pieces of paper. (Ralph T. Foster, Author of Fiat Paper Money – the History and Evolution of our Currency – P 29).
Our friends at GATA have always maintained that the key to the price of gold is the ability of the physical market to overpower the antics of The Gold Cartel, not what the dollar does. There is a significant supply/demand gap and the cap on gold only works if the Gold Cartel can source (usually from central banks) enough extra gold to balance the annual supply/demand deficits. As long as China and India continue to consume huge amounts of physical gold, the price will remain stable or rise. That is a trend that I do not expect to change. The euro is falling and that is the main factor in the rise in the dollar, and it acts as a brake on the price of gold, but the more the euro falls against the dollar, the more the price of gold rises in euro (since it is denominated in dollars) and that leads to an increase in gold purchases in Europe. So on the one hand, the falling euro and rising dollar is a negative for gold but on the other it is also a positive.
If you think “short-term” or try and trade the gold market, you will encounter volatility and disappointment. Moves of $100 a day, or more, will become common. Trading gold is not for the faint of heart or the amateur trader. Why not just buy it, put it away and forget about it and when you look back in two or three years, it will be clear that you did it the right way. Buying gold is not spending your money, it is saving it in the safest way possible.
Buying gold is a form of saving. Buying mining shares is a form of investing – or speculating. Buying silver is a combination of investing and speculating. Silver’s price swings are frightening, but if you can stand the volatility, the rewards will be tremendous.
My portfolio “mix” has changed dramatically in the last 12 months. I have lowered the percentage of mining shares from 50% to 10%. I now own as much gold as I do silver. If the silver-to-gold-ratio rises to 60 to 1 I will sell some gold and use the proceeds to increase my silver holdings. 60 to 1 is way too high. Even the current 54.66 to 1 ratio is too high.
Gold’s 200-DMA is $1,627. Since gold has been above its 200-day moving average for virtually the entire 11-year bull market, it is a key number to watch. Gold soared through its 200-day moving average on Tuesday and if it can hold on above that level, there is a strong probability that the bull market is back on track.
The 200-day moving average for silver is around $36. At $30 an ounce, silver is dirt-cheap! Its 54 to 1 ratio to gold is on the high side. I expect the ratio to re-test the 40 to 1 and even 30 to 1 level in the next year or two. My next purchase(s) will be silver, or better yet, platinum. I already have a very strong position in gold and silver. Platinum is way undervalued relative to the price of gold. I have been in this business since 1983 and have never seen platinum trading so far BELOW the price of gold. Platinum usually trades above the price of gold.
As you can see, from the chart below, gold is up $40 in the last 48-hours and it is pulling away from its 200DMA. Ranting Andy was spot-on when he pointed out that gold would not remain below this level for very long. Now, the technical funds and the momentum funds will move back into the long-side of the market and gold could move up nicely into the spring. Us gold bugs have had enough disappointment recently and are ready to replace frowns with smiles.