ANOTHER STEP TOWARD $1,252 GOLD
April 23, 2002
Gold investors seem far happier
these days, and rightly so. The Gold
market recently took another small
step toward my long term target of
US$1,252. Ever since Gold made a
secular low in the Summer of 1999
the prospects for better Gold prices
have slowly been building. Since
July of that year Gold has returned
about 20% while the S&P 500 has
fallen by almost 20% and the poor
NASDAQ Composite Index has
collapsed by 34%.
Another small step was taken at the
end of
2001 when the ratio of Gold to the
S&P 500 crossed up through an
important moving average. The last
time that happened was in the early
in 1970's, and signaled the beginning
of the last bull market in Gold. While
the gurus on CNBC were telling the
world to buy technology stocks, the
MARKETS were saying that end of
the era of financial assets had
occurred. The MARKETS were
telling us that an era of real assets
had arrived and that Gold was in the
early stages of a major bull market
that will carry it to over US$1,250.
Another step is now being taken by Gold toward the new bull market. In the graph above is one of the
most
powerful technical pictures that can be found. In the days when investors did real technical work, they
would pour over chart books hoping to find such a pattern. After the bear trend exhausts itself, price
often
goes into a lateral pattern. During this lateral pattern the weak holders, like the Bank of England, are
eliminated. At the conclusion of the pattern the asset is held by strong hands, and the sellers are
being
exhausted.
What we have been waiting for is the break out of that lateral pattern. That development is in process
and the
implications are extremely bullish. The resolution of this pattern with bullish implications does not
prevent
another test of the lower edge of the lateral pattern but does indicate that the upside is the direction in
which
ultimate resolution will occur. Also, the length of the lateral pattern suggests something about the
upside
target for Gold. Based on the this pattern a move to US$450-500 is definitely in the works.
Also shown in the chart is the trend for fair value of Gold which I calculate as US$498. The discount
from the
fair value is substantial, and is acting like a magnet for the price of Gold. The gradual shift of
psychology from
deeply negative to a more neutral to positive view is important to reaching the potential of this pattern
and fair
value for Gold.
Gold investors should be focusing on the potential, the forest, and quit worrying about daily details,
the trees.
The long-term potential for Gold is in excess of US$1,200. Everywhere one looks the fundamentals
point to
higher prices. Keep your eye on the green, over US$1,200, and stay focused. Remember the wisdom
of the
past, the trend continues till it ends.
Gold investors should remember that current conditions look remarkably like those of the 1970's. The
ratio of
Gold to the S&P 500 has given a signal not seen since the early 1970's. The Chairman of the Federal
Reserve,
the Master of Monetary Instability, is more than willing to provide the fuel for the Gold bull market, as
was the
case then. Gold, then, went on to a major bull move because the Fed provided the monetary fuel.
In the 1970's the Federal Reserve made the mistake of monetizing the war, the budget deficit and the
oil price
surge. Now again we have a Fed Chairman willing to monetize the Pan-Eurasian Islamic War and the
budget
deficit. The Master of Bubble Economics did not learn from the bursting of his Technology Stock
Bubble. At
the present Greenspan is creating a giant Housing/Mortgage Bubble that will too pop. The bursting of
that
bubble, as they always have and will, will also mean the end of the Greenspan Dollar Bubble.
We all know that the current account deficit will be corrected by a devaluation of the U.S. dollar
brought about
by the collapse of the Greenspan bubbles. Stay focused on the long-term potential. Importantly, make
sure
portfolios have exposure to Gold in coin and bullion form. After that, and only after that, move on to
positions
in the Gold stocks. This bull market in Gold is set up to generate another super cycle.
As I said above, my current long-term target for Gold is now above $1,250. A major report, ?$1,245
GOLD,?
takes an investor through the amazing story of the Greenspan Bubbles to the inevitable Super Cycle
for Gold.
Skeptics abound, and wonder how a target such as that is possible. Remember that the NASDAQ
Composite
went from under a 1000 to 5000, or rose more that 5 times the low. Five times the 1999 low of
US$252 is
US$1,260. Achievable? Yes, and largely cause so many remain skeptical and so few own Gold.
Ned W. Schmidt,CFA,CEBS publishes THE VALUE VIEW GOLD REPORT, a monthly review of the
developing
Gold Super Cycle. His major report, ?$1,245 GOLD?, 150+ pages with 70 charts and graphs, is
essential
reading for investors wanting to understand the coming Gold Super Cycle. As a special offer ?$1,245
GOLD?
is available for $10 off the regular price, or $45.
This report can be ordered by contacting Ned at nwschmidt@earthlink.net |
