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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (25485)	11/14/2006 10:52:33 PM
From: RealMuLan	Respond to of 78410

GOLD: PUTTING IT INTO PERSPECTIVE by George Kleinman Editor, Commodities Trends November 13, 2006 financialsense.com Goldman Sachs tells us commodity funds have $100 billion to invest in the commodity markets during 2007. China has $1 trillion in cash reserves (mostly in US dollars) and has expressed an interest in diversifying its investment mix in 2007. Is it possible a portion of this cash hoard will end up in gold? That’s a reasonable assumption. I’d like for you to change your perspective today. Think longer term (not easy in the thick of the day-to-day investment battle) and consider looking at the future by benefiting from past markets. I’ll discuss the future shortly, but first I want to transport you back to the 1979-80 accelerated gold trend, the daddy of all gold bull moves. While 1979-80 was the most-exciting part of this move, the bottom actually was actually formed much earlier, during the summer of 1976. Gold was trading for about $100 an ounce in August 1976. In January 1980, it peaked at $875--an 875 percent run in three and a half years, approximately 250 percent annually. And this is a raw number; if you were trading gold futures on 5 percent margin, the profit potential was outrageous. But the ride was neither easy nor expected. When gold was “cheap,” nobody I know predicted a move of this magnitude ($300 was considered “quite high” when gold traded at $250). And at the $875 peak, predictions of $1,000, $2,000 and even $5,000 gold ran rampant. As it turned out, the January 1980 high remains the all-time high price, with or without 25 years of inflation. Let’s assume you were riding the gold bull in 1979 and were astute enough to buy gold at $220 early in the year--at the time a record high. The move was fairly orderly until the spike to a new high of $441 in early October. Take a look at the following chart. ... The market peaked in May then embarked on a vicious 23 percent correction from the top. It appears to have formed a major top, and I know of nobody who calmly rode out this correction. But what if this is similar to the 1979-80 move? Is it possible this vicious correction will seem tame in the future? The weekly chart appears to have formed a similar flag formation during the past four months--one that resulted in a breakout to the upside during the past few weeks. In 1979-80, the gold price doubled from $220 to $440 during the first major leg and then doubled again from $440 to $875 after the flag formation was completed. We already know the market doubled from about $365 to $728 in this go-round. Let’s move from the present to the future. The future is of course unknown. But interpolating from the past, another double would put gold at $1,450.