Interesting viewRegards, DH
Gold's Long Consolidation Ending
By David Vaughn
December 10, 2004
www.goldletterdv.com
And how is gold doing?
Gold is taking a bounce this week, but gold is still robust & doing well. Gold continues to remain solidly & comfortably over 400 an ounce, but still no one cares. Very little enthusiasm period except among maybe one or two persistent gold bugs. Why? Because since this last spring everyone has turned bearish.
The reasoning for this bear call is that most investors believe that gold has peaked & it is only a matter of time before gold begins its loooong slide back down hill. Isn't that what has always happened these past 20 years?
Anyway, where do we believe gold is at now & what do we think is the next move for gold? We said over a year ago that 2004 would be a year of consolidation for gold. Actually, this consolidation period really has applied to the masses as the masses slowly have observed gold's behavior to be more positive than in years past. Still, most folks are not yet convinced that this pattern is for real. Isn't the economy strong & hasn't Greenspan & George Bush promised & assured all of us that the US Government can always continue to successfully manipulate & control favorably our economy?
While the rest of the world witnesses the deterioration of the dollar Americans just rush to their banks & refinance their homes for more cash to pay their bills. I read recently that over 25% of consumer spending these past few years has come from refinancing homes. I suppose this is OK if housing prices keep going up. But what happens if they don't?
So what happens next if this consolidation period is ending?
Look to the next year, 2005, to be a very interesting year. I believe as spring comes closer that everyone's present self assurance & over confidence will be severely challenged. If we continue to see the US dollar deteriorate through spring then other problems associated with a plummeting dollar will begin to crop up & there will begin to arise serious doubts about how strong our economy really is.
Today, as you watch the news you will notice only the foreign news services carrying sufficient coverage on the falling US dollar. The US news sources down play the dollars fall as merely an insignificant event & a mere temporary blimp on the financial horizon.
Don't count on foreigners to feel this way though since they are affected the most from a plummeting dollar as they watch the value of their reserve holdings disappear by billions & billions. I believe I heard that just each one penny reduction in the dollars value represents the loss of billions of dollars in the value of the US notes held by foreign banks. Don't doubt for a moment that other countries are very concerned over the falling US dollar.
So what will gold do in 2005? I believe 550 or 575 may be the next target reached sometime next year. This gold bull market is for real & we are still only in its very early stages.
For those few gold bugs out there it is hard to maintain enthusiasm when everyone else is so bearish. But the present bearishness is actually a very bullish indicator. I suppose if everyone was bullish on gold now then the trend would be "bearish." But a bearish trend is actually "bullish." Right?
It gets confusing, but the important point to get is that the gold price is going to continue climbing over time. The short term cyclical swings up & down are inevitable.
The concept of what factors contribute to a bear market & a bullish market can become contradictory & seem inconsistent. But what all this means for those few who care is that the precious metals equities will only climb that much higher when the rest of the house gets on board.
THE BEST ATTITUDE NOW IS PATIENCE.
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December 10, 2004