Aren't you stinkin' tired of it yet? I sure am...
I'm
tired of hearing "Inflation is coming!" and "Gold is going to soar!" over the last 18 months... only to see nothing happen.The inflation argument makes some sense... In the second half of 2008, the bond market essentially froze – so the government started on a binge of "printing" money to help unstick it. As the economy sank, the money-printing continued.
That much new money should have caused the price of gold to soar. But something wasn't quite right...
Gold didn't soar. And it still hasn't. Back in March 2008, when the storied Wall Street firm Bear Stearns went belly up, Gold poked its head above $1,000 per ounce for two days... Then strangely, that was it for gold.
No matter how bad the credit crisis got... no matter how much closer the world got to the Next Great Depression... gold still didn't soar. Gold didn't do anything really, except go to sleep.
For almost two years now, gold has been hovering between about $800 and $1,000 per ounce. It's been a year and a half since gold last closed over $1,000. Quietly, I've been getting worried...
If the Credit Crisis couldn't push gold over $1,000... and if the prospect of the Next Great Depression couldn't push it over $1,000... then what would happen when the economy started to return to "normal"? Would gold crash? It sure could.
And now it seems that "normal" is returning...
In the last few months, the world has come back from the abyss. I've repeatedly said the U.S. recession is over. The crazy fears that the world was ending are behind us for now.
But a funny thing has happened... gold is quietly moving up.
Now this is important – incredibly important. You see, this is exactly the way a REAL bull market works...
In a real bull market, the asset (in this case, gold) hits a new high as optimism over that asset peaks (that was back in March 2008). Then the optimism fades... and so does the price of the asset.
Next, the asset just meanders along, letting people give up on it... But it's just plotting its next move higher. It's shaking off all the nonbelievers before it breaks through to a new high.
My friend Jason Goepfert (of www.sentimentrader.com) is the best in the business at analyzing investor sentiment. So I looked at his recent work to find out if gold is at a peak in optimism (which would mean gold should top out soon) or if we still have farther to go.
Jason says his gold sentiment indicators are "not showing any excessive optimism just yet." In short... we still have farther to go.
If gold closes above $1,000 per ounce a few times in the next few sessions, it could finally hold above the $1,000 level.
People simply haven't been buying gold "hand over fist" lately. But if gold closes over $1,000 a few times, they will. Gold will be all over the news, and the average investor (who hasn't bought yet) will finally start to get in. He'll sell his stocks that have soared but have recently run out of gas... and move his money over to gold.
We could be on the brink of a big move in the price of gold... the next leg up in the gold bull market.
In the last 18 months, the way gold was acting, I wasn't so sure if it was coming. But with this week's action, with gold inching up over $995, I believe a new leg higher in the bull market is here.
We'll know if it's for real in the next few days. If it is, make sure you own some.
This article has been republished from Daily Wealth, a contrarian investment analysis site.
1 comment:
I agree that gold may be ready to make another run in its bull market. The govt has thrown so much money at the problem that it has temporarily stabilized the economy. But this brings up a lot of consequences, and the current expansion of the money supply is not sustainable because it will kill the value of the dollar and create a big inflation problem in a few years. That's why I feel gold is one of the best asset classes to invest in currently given its safe haven status and that it is denominated in dollars. I read this article recently on the gold price and where it could be headed
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