Friday's Gold price intraday drop of over a hundred dollars per ounce seems scary to most. However, In the immortal words of Hyman Roth " its small potatoes". Gold is now trading at a 15% discount to its all time high. Since the bull began in 2001, Gold has not offered many discounts. For those looking at Gold for the first time, 15% off is an excellent entry point. If you want to make money in Bull markets, you buy weakness & sell strength. 15% off is weakness.
Could it get cheaper, absolutely it could. In 10 years, Gold has only offered 3 discounts over 20% (summer 2004, summer 2006, fall 2008). The sharpest discount was 29% off in 2008. If this 15% off sale were to get as bad as 2008, Gold would fall to $1375. While that is possible, its not likely as Gold should find plenty of support at its 200 day moving average (currently just under $1500). Bagholder is of the opinion, the powers that be, can't get it that low as there are simply too many buyers at these levels. Even if they do get the price down there, it won't be for very long.
This can be said with certainty, as ALL the fundamentals for Gold are as Bullish as they have ever been. Consider:
- Real interest rates are Negative, That is a dream scenario for Gold, as it ALWAYS rises in that environment.
- Even better, Benny has been kind enough to pledge keeping those rates negative indefinitely - woohoo - lets party!!
- The worldwide supply of Dollars continues to grow unabated.
- Economically, the future is bleak - as the only things certain are more wars, more taxes, more inflation, more unemployment, and more regulation.
- The days of dollar hegemony are nearing an end (this is what the wars in both Iraq & Libya are all about)
- Bankers are buying at these levels, while the public is selling - That can only mean higher prices ahead.
The MSM, would have us believe Gold was in a bubble & that bubble has now popped. They play this same story over & over again, not because there is a bubble - but rather as a scare tactic. You see, the MSM does the bidding of the people who run this country. Those people are piggish. They want the metals trade for themselves. So, their lap dogs in the media trot out the Gold is a bubble story to scare new money away. Remember, they are trying to get 99% of the masses on the wrong side of the trade. There is a growing number of folks looking at Gold for the first time in their lives. They see 11 straight years of rising prices and think, hey - maybe this is a good investment. Until the MSM trots out the bubble talk, which exists only to assuage the egos & reinforce the incorrect thinking of those who feel they may have missed the move.
Make no mistake, Gold is headed higher - much higher. Of course it could (and probably will) trade lower first. 15% off is a nice size pullback, and like all pullbacks in a bull market - needs to be bought. Looking big picture, the outlook for Gold is as bright today as it has ever been. There is no fundamental reason for Gold to have changed its trend. The trend is up. The pullbacks are sharp - because thats how they come in Bull markets. Long term, gold will continue to power higher until some of the fundamental issues listed above are properly addressed.
We here at Mytwocent$ are grateful for this 15% off sale. We prefer to take the Kevin Bacon approach from Animal house…….THANK YOU SIR!! MAY I HAVE ANOTHER!!
One of your best!
ReplyDelete