Two years ago gold was $1,100 and silver was $16.18. The Dow was 10,725. Compare the performance of all three. Gold is UP 50%. Silver is UP 89%. The Dow is UP 17%.
Gold has now crossed above its 200-day MA (see chart below) and is heading towards its 50-day MA, which stands at $1,678. If gold can close above $1,678 it will have turned clearly bullish and should head for the $1,700’s.
It’s 6:15 a.m. New York time, on Thursday and gold is $1,664. The $1,678.63 50-day moving average is not that far off now. The last time gold was north of the 50-day moving average was in early December. When gold closes above both the 50-day and the 200-day moving averages, the momentum funds and technical funds will start to re-enter the market and gold should move up fast. Gold is already comfortably above the 200-day moving average, which stands at $1,634.30.
When I talk about the “black box” algorithms – the computer programs that buy and sell with no human input, other than their programing, I am usually talking about the moving averages. Why do they work? Because people expect them to work and program their computers to buy and sell around those numbers. It is a self-fulfilling prophecy. What does it have to do with the “real” market, where the buyers and sellers of physical gold do their business? Not much.
Look back to around the 20th of September (on the chart above) and notice the waterfall drop of gold – to BELOW the blue line, the 50-day moving average. All it takes is for JPMorgan or HSBC and friends to dump a large number of contracts and pull their bids and the price plunges, in this case below the all-important 50-day moving average. Then the funds jump in, as their computers issue sell orders, and the fall continues. The same thing happened again in mid-December (the red line, the 200-day moving average) and once again the funds sell, sell, and sell.
Eventually it reaches a point where there is virtually no one left to sell, so the prices start moving up. That occurred around the first of the year. That is the point when the Gold Cartel starts buying again, buying gold contracts on the cheap, for much less than they sold them for last fall. The traders at JPMorgan make a killing and my clients pull their hair out. But this is just a dance, the three-step that takes place over and over again. Two steps forward and one step back, and the band plays on. That is why I urge you, time after time, to think big picture, think long-term and ignore the daily “market noise.” Gold is going UP. The bull market is ALIVE AND WELL. Gold will sell for at least twice or even three times the current price, in the next few years. Why are you bothered by a drop of a few hundred dollars? That is when you buy more, when there is “blood in the streets.”
Speaking of “blood in the streets,” check out Jeff Clark’s article from the January 13th daily on platinum. Now there is a BUY! Check out the following chart, and then be sure and read Jeff’s excellent article. (Recently, I purchased some Canadian Maple Leaf one ounce platinum coins and yesterday I asked Andy to buy me some Australian platypus one ounce platinum coins.) Just a few years ago, when I was a speaker at The Money Show in Orlando, platinum was selling for double the price of gold. Double! Today it can be yours for $130 an ounce LESS than gold.
There is always the “possibility” that our friends in Washington could confiscate our gold. But that is not going to happen to platinum. And if gold were ever to be confiscated, the price of platinum would go out of sight. Every single gold owner should make it a point to hedge that possibility with platinum.
Platinum is hard to source – there are no Platinum Eagles available. Buy it in any form that is available. It makes no difference what the picture is on the face of the coin as long as it is from a major mint. When I placed my order I said get me whatever is available and at the lowest price.