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Tuesday, January 13, 2009
Who's bearish on gold?
He's at it again, this time on gold... with similar reasoning. Yesterday, he pointed out several circumstances that should cause gold to go up... but haven't lately:
Jack says gold investors have gotten the exact circumstances they want for higher gold prices... and yet gold keeps falling. This is not a good sign.
Here's another ominous sign: Gold is breaking down.
You may not put much faith in technical indicators like these. But some actually work...
I ran the numbers today. I use a 45-week moving average as a signal of general uptrends or downtrends (above the moving-average line is a bull market, below is a bear market).
Since late 1970, gold has risen at about 6% a year, compounded. But amazingly, when the price of gold is above its moving average, it compounds at a double-digit annualized rate. And when it is below the moving average, you lose money. That is a huge difference.
We at DailyWealth do believe gold is in a long-run bull market. But the near term could be difficult...
Gold jumped from $35 to $850 from January 1970 to January 1980. That sounds like a rip-roaring bear market. But did you know, from March 1974 to September 1975, the price of gold fell by half? We could see that again. We're already down about 20% from the highs... and nobody is even particularly worried yet.
Look, my friend Jack Crooks is good at what he does. Between Jack and the current downtrend, I wouldn't make big bets buying gold right at this moment.In short... own gold for the long run. But don't take big risks speculating on it in the short run – it could cost you.
P.S. I've known Jack since we worked 15 feet away from each other at a firm specializing in international investing. That was more than a decade ago. I can tell you Jack is a smart, uncompromising currency trader who knows his financial history and knows the markets. You can click here to learn more about his work.
THE "CHEAP OIL TRADE" IS BACK ON...
In The Daily Crux