I was putting the finishing touches on today’s newsletter when I looked up and gold was up over two percent at $1,309.40 and the dollar dove below support at 80 and currently resides at 79.97. Let’s see the follow up on Thursday and Friday before we get too excited.
Today, I want to talk about something that doesn’t matter – the daily price of gold. Most newsletter writers sell their “information.” They justify the cost by offering price and timing information. Not that its bad in itself, but when it comes to gold, it is misleading.
Let’s start with the writers that have the best record of predicting gold’s short-term price and timing it accurately? I’d put Ed Steer/Ted Butler at the top. They predict, accurately I might add, that gold and silver will rise, or fall, when JPMorgan wants it to. They predict that gold and silver will rise as high or fall as low as JPMorgan can push the markets, when it suits them. Now these are predictions I can live with.
Larry, “I called it right” Edelson wrote that gold would bottom in the $1,000-$1,100 area – and then rebound – and the NEW BULL MARKET will commence, moving up toward the $5000 range and higher.
He’s likely right – at least about where the price of gold is headed. He understands that the bull market is not over, or maybe not. He states that the “NEW BULL MARKET leg will be higher…” This is not a new bull market! We are nearing the end of a correction of the same bull market that started 12 years ago. The bull market will resume, but it’s definitely not a NEW BULL MARKET!
His “first week in October” has come and gone. His charts let him down. His latest comments (kind of a retraction, without actually saying it) are still long-term bullish, but the timeframe has been extended until January. So much for the accuracy of anyone’s charts and graphs. Playing the gold-timing game is for gamblers and speculators. Gold is not an investment to time, to buy and sell. Oh, you can do it, but it is a mistake. Gold is MONEY and it is a long-term hold, an insurance policy. Do you sell your life insurance policy because your doctor told you that you would live another 15 years? I doubt it. You know the phrase – “The past is no guaranty of the future.” And that is even truer with gold and silver since, as I believe, they are heavily manipulated and NOT allowed to move in a logical, rational and PREDICTABLE short-term pattern.
Here are the highlights of what Edelson wrote:
I love gold. I love its history. I love the role it’s had in many monetary systems. I love the beauty of gold. I love the versatile uses of gold.
I love gold coins. I love objects made of gold. I love gold’s role in new technologies.
But gold is not the end-all, be-all of the investment world. Nor is it the world’s savior. It is not even a very good hedge against inflation.
The hate mail will pour in again. I’m sure of it. But I have my reasons for giving you the truth, and nothing but the truth, about gold. As despised as I’ll be for the facts I give you today, you need to know the truth.
Consider the following:
At the depths of the depression in 1929, an ounce of gold sold for $20. The Dow Industrials
was at 40.
An ounce of gold today is roughly $1,300. It has increased 65 times over.
But the Dow Industrials stands at about 15,000. That’s 375 times more than it was in 1929.
And that means since 1930, the Dow has outperformed gold 5.8 times over.
In 1980, gold sold for $850 an ounce. The Dow Industrials was at 824.6. Since then, gold has increased 1.5 times over, and the Dow 18 times.
Now, on the flip side of the coin, since the year 2000, gold’s gained more than 400 percent.
But the Dow Industrials are up a meager 29 percent.
As you know from my previous columns, I expected a cycle low to form by Oct. 3. We got that low right on cue at $1,276.90, one day early, on Oct. 2.
But that low did not break the prior low at $1,178. That means the interim bear market is not over yet, and that gold will likely bounce around I a tight trading range for the next couple of months, then do a swan dive heading into January of next year, where I expect gold will move below $1,178 – and likely bottom around the $1,035 level or just slightly lower, under $1,000.
And then I WILL TELL YOU TO “back up the truck” on gold. For, you see, during gold’s ensuing new bull market leg higher, it will finally play catch-up with inflation, it will also rise as European and U.S. governments fall from their perches into a heap of rubble – and gold will begin an ascent that will take it to well over $5,000 an ounce.
TIMING, in life and in the markets, is everything. Gold is not immune to that law. And it’s just not time for gold to shine again.
If you own gold from much lower levels, as I do and my subscribers do as well, then hold that
gold. It’s great insurance. But don’t back up the truck on new purchases yet. WAIT UNTIL I
TELL YOU TO DO SO.
–Money and Markets, October 7, 2013
I can hardly wait to comment on this. I’ll start at the top and work my way through his article.
First, he assumes the role of a “self-appointed expert.” There are not “experts” in gold, although some have a better track record than others. I’d put my money on Jim Sinclair and Richard Russell, but you can pick your own gurus.
Then he says gold is not a good hedge against inflation. In the last bull market in the 1970s, inflation was the force driving gold and silver. Inflation was the result of the failure of the U.S. dollar. Gold (and silver) were the big winners during the inflationary 70s.
Foreigners had stopped buying our bonds and they were dumping dollar assets. As the dollar plunged, especially against the German Mark, inflation set in and prices rose. It got so bad that price and wage controls were implemented. Gold and silver were becoming fashionable.
Which inflation numbers is Larry talking about – the BLS or John Williams’ real inflation numbers? While it is true that my definition of inflation, Williams’ numbers which currently run around nine percent, should be accompanied by a higher gold price, that assumes that there are no outside forces holding it back. Bill Holter, Andy Hoffman and I have written about the manipulation on a daily basis, for years. The topic is not new to our readers. There is no need to repeat it here, again.
We are getting very close to the time when the dollar’s near the 70-year run as the world’s reserve currency comes to an end. Once the dollar starts falling, there will be nothing holding gold and silver back.
I expect more from Edelson, since he crowned himself as THE gold “expert.” What surprises and disappoints me is that the arguments he presents here, usually come from Wall Street and the anti-gold crowd.
He uses gold vs. the Dow from 1929 but conveniently forgets to mention that the price of gold was FIXED at $20.67 an ounce at the time, and then “revalued” to $35 an ounce in 1933, a price that was in effect for nearly another 40 years. Gold was not allowed to float, but the Dow was. The comparison is flawed and terribly biased against gold.
Then he compounds the myth by using the gold vs. the Dow timeframe with a starting point of 1980. In 1980 reached an all-time high of $850 and that was the end of a decade-long bull market. The Dow was in the 800-range from 1975 through 1981 and then took off as interest rates came tumbling down. You couldn’t pick a more unfavorable starting point (the end of one bull market and the beginning of another) to use as a “fair” comparison.
Why didn’t Edelson start the gold vs. Dow comparison in August of 1971? That’s when Nixon ended the gold standard and stopped “officially” fixing the price of gold. Gold was a touch over $42/ounce at the time. No, instead Edelson uses 1980 as his starting point. By then, gold had already increased by more than 20 times! Using the 1971 starting point, in spite of constant manipulation, gold has increased by 31 times and the Dow is up 18 times.
I didn’t pick an “arbitrary” starting point to favor gold. It was the first time that the price of gold was allowed to float in a relatively free market. That is the only logical starting point. Using 1980, the top of a decade-long bull market, is as anti-gold biased as one can get. No gold “expert” would use the numbers Larry is using. That’s the crap I used to hear from Backwoods Jack and his Wall Street clan. Frankly, I am very surprised. Here I thought Edelson was one of the “good guys.”
Larry is like so many “newsletter advisors.” They tell you that they can predict the short-term price of gold and silver. No, they can’t. Worse yet, Edelson subtly reprograms your mindset to make you think of gold as an investment, when that is not its purpose; gold is money and your insurance against not only inflation, but dollar debasement, political turmoil, and war, to mention but a few.
I don’t claim to have a crystal ball. But neither do I buy and sell. I still have all of my precious metals and they are resting quietly (mostly off shore in a safe and private storage facility) waiting for their time to come. And when will that be? When Sinclair’s Great Reset arrives, or when I need the funds to live off of or to survive.
Most of our readers own their gold at or below the current price. Sure, there was a correction, but unless I am forgetting something, housing corrected, the Dow had its ups and downs, and nothing goes up or down forever. It’s just fashionable to pick on gold and silver now, but that will change. In the near future, they will make headlines, in the most positive of ways. Today’s bears will be tomorrows cheer leaders. That is something you can bank on.