I think Adam Hamilton says it best:
321gold.com
" Because gold and gold stocks have run so far so fast in recent months, and gold is far above its new uptrend channel, and gold-stocks are bumping the top resistance line of their own new uptrend channel, I believe it is reasonable to expect a healthy pullback in the coming months. This pullback could conceivably drag us all the way back down to the 200dmas, today around $325 on gold and 125 on the HUI. This will be terrifying for gold and gold-stock investors not expecting it, but for those who are the buying opportunity will be immense at the next interim low.
I suspect the "excuse" for the pullback will be Washington's invasion of Iraq. For some reason many professional futures traders today have not done their homework and believe that the whole gold rally is merely a war-hedge play.
They somehow overlook the fact that the gold bull has been marching relentlessly northward for two years and gold stocks longer than that, well before 9/11 or imperial Washington's crazy crusade to invade practically every sovereign third-world country on Earth it disagrees with, legitimate Constitutional casus belli be damned.
As the immensely wise ancient Chinese military philosopher Sun Tzu wrote millennia ago in his magnificent magnum opus "The Art of War", "All warfare is based on deception."
Because war is based on lies, monopolizing information flow and distributing feel-good propaganda is crucial for any war effort. Since Americans, even patriotic ultra-right-wing conservatives like me, are divided 50/50 on the dubious wisdom of invading another sovereign nation for no good reason, the Bush Administration has an uphill job and will make sure the early war news is good so Washington's rapidly eroding public support in the States doesn't completely vanish.
Since Washington, DC will totally monopolize all information flow in its upcoming Iraq invasion, we are guaranteed that all early war news will be glowingly positive regardless of what is really happening on the front. The large futures traders will take the US government's good-news propaganda at face value as gospel truth and will probably sell gold and oil hard.
They will assume the gold bull is dead because the Iraq war is on, but they will almost certainly be wrong. Primary bull markets in gold this powerful run for many years or even a decade historically, not just a couple. This gold bull has nothing to do with wars and everything to do with fundamental underlying structural economic factors.
Nevertheless, their concerted selling action on the initial good Iraqi war news from Washington, be it truth or propaganda, will probably be the cover under which the overdue and inevitable gold pullback arrives. While it will certainly be frightening and sickening to watch for investors with large capital deployments in gold and gold stocks, have no fear. Even if you are stopped-out you can then patiently watch the gold and HUI 200dmas for ideal buy signals to jump back into the fray near the next interim bottoms.
While the prospect of a gold pullback is no fun for those of us already heavily invested in gold and gold stocks, we can prudently steel ourselves to expect the coming squall and ride it out with minimal discomfort.
Even better, like a stunningly beautiful rainbow after a wicked hailstorm, the tantalizing possibility of a fabulous 200dma gold and gold-stock buy signal being triggered after the pullback is a really exciting prospect that could prove to be immensely profitable."
Adam Hamilton, CPA
Regards,
Bert |
