Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
How the US Dollar Penalizes Emerging Asia - 24th Sep18
Stock Market Macro/Macro View: Waves and Cycles Part II - 24th Sep18
DJIA Makes New High  - 24th Sep18
Gold Price Trend Forecast 2018 - 24th Sep18
The Stock Market Has Been Exceptionally Strong this September. What’s Next for Q4 2018 - 24th Sep18
Gold / US Dollar Inverse Trend Relationship Video - 23rd Sep 18
US and Global Stocks, Commodities, Precious Metals and the ‘Anti-USD’ Trade - 23rd Sep 18
Gerald Celente Warns Fed May Bring Down the Economy, Crash Markets - 23rd Sep 18
Top 3 Side Jobs for Day Traders - 23rd Sep 18
Gold Exodus to Reverse - 22nd Sep 18
Bitcoin Trader SCAM WARNING - Peter Jones, Dragons Den Fake Facebook Ads - 22nd Sep 18
China Is Building the World’s Largest Innovation Economy - 21st Sep 18
How Can New Companies Succeed in the Overcrowded Online Gambling Market? - 21st Sep 18
Golden Sunsets in the Land of U.S. Dollar Hegemony - 20th Sep 18
5 Things to Keep in Mind When Buying a Luxury Car in Dubai - 20th Sep 18
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB
Silver's Relationship with Gold Reaching Historical Extremes - 16th Sep 18
Emerging Markets to Follow and Those to Avoid - 16th Sep 18
Investing - Look at the Facts to Find the Truth - 16th Sep 18
Gold Stocks Forced Capitulation - 15th Sep 18
Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - 15th Sep 18
Trading The Global Future - Bad Consequences - 15th Sep 18
Central Banks Have Gone Rogue, Putting Us All at Risk - 15th Sep 18

Market Oracle FREE Newsletter

Trading Any Market

Gold in a Beautiful Long-term Secular Bull Market

Commodities / Gold & Silver 2009 Sep 20, 2009 - 07:07 PM GMT

By: Adam_Brochert

Commodities

Best Financial Markets Analysis ArticleThe short and intermediate-term future for Gold and any investment for that matter are tricky to navigate. I have guessed right and wrong many times on shorter-term moves. It seems that the best most investors can hope to do is identify the long-term secular bull market (i.e. the major bull market of the current 10-20 year period) that is in progress, buy into it, and hold on.


Since it is easier, safer and more comfortable for most investors to go long rather than go short (due to risk management issues, availability of different types of trading in retirement accounts, margin, etc.), most would like to invest in a bull market rather than a bear market. To each his own, and I like a little of both, but the majority of people with money to invest are looking for a buy and hold bull market.

I can tell those investors that, without a doubt, that bull market is no longer in general stocks. Period. Buy and hold for stocks and corporate bonds (individual specific stocks or bonds aside) is dead for the next decade. I can also tell those investors to avoid real estate (same caveat related to unique individual opportunities). Commodities are more of a question mark as the inflation-deflation debate rages on and are certainly not a slam dunk in a weak global economic environment.

Government bonds are very high risk at the local / state level and are again a little more uncertain at the federal level. This is related to currency risk (again, the inflation-deflation debate) and the paltry yields paid to take on this risk. The likelihood of significant appreciation is also very close to zero, as yields will not go below zero percent for any length of time.

Which leaves us with Gold. Yes, that shiny piece of metal that you can't eat, has no growth prospects and that pays no dividend. Yes, the Gold that crazy people seem to like - the ones who are always talking about guns and the end of the world. Yes, the Gold that mainstream financial "advisers" always say is a bad or risky investment. Yes, the Gold that is up 300% for the decade while the S&P 500 is down 20% over the same period. Yes, the Gold that just had it highest weekly closing price in United States history on Friday (in nominal/non-inflation adjusted terms).

Gold is in a beautiful, long-term secular bull market with a technically perfect uptrend that shows no sign of having started the "blow-off" top that ends nearly all major bull markets (think oil last year or the NASDAQ in 2000). Here's a look at a monthly Gold price chart in log scale over the past 10 years:




A bull market chart doesn't get any clearer than this. Yes, you can try to guess when the bull market will end based on fundamental data you see on the news or in cyberspace, but the trend is unmistakably up and very strong. And this trend will continue for a long time after the fundamental reasons for the Gold price to go higher are there (remember dot-com mania in 2000 or how the world was going to run out of oil any second last summer?).

I have certainly tried and will continue to try to time this bull market when considering buying more physical Gold (I like to buy on weakness rather than strength and view every significant pull-back in the Gold price as a buying opportunity) and when trying to trade Gold miners with my speculative capital. But my core Gold position is not for sale and won't be until I see concrete signs we are near the top of this Gold price bull market. I hear many people think they are seeing these signs (e.g., Gold television commercials), but let me ask you a question: if you were to poll 100 random U.S. investors right now, what percentage of them do you think have a significant portion of their investment portfolio in Gold or Gold miners? Even more importantly, what percentage of them have purchased actual physical Gold? We are not even close to full participation in this bull market and we will be before it's over.

Stepping back from the short and intermediate-term moves in the Gold price, I want to show you in a "big picture" sense where I think we are in this Gold bull market. Below is a chart stolen from Approximity's Gold Charts page (love your site, man, thank you!):


Once we broke above and held the $850/ounce level in Gold we set the stage for MUCH higher prices. There are NO long-term overhead price resistance points that currently exist. The "sky is the limit" in a sense. I believe we are closer to the beginning than the end of the current Gold bull market, at least in price. A 7-fold rise in the Gold price would lift us to $1785/oz., which I think is the absolute minimum long-term secular high in the Gold price. I personally don't think it is reasonable for Gold to top out before we reach the $2000/oz. level. And these are the worst case scenarios for the Gold price!

Depending on what happens to the U.S. currency in the future, prices could certainly go much, much higher. In fact, here's what I see as a move comparable to Gold's break-out above $850 in terms of where we are in this secular Gold bull market (chart stolen from sharelynx - also love your site!):



The Dow Jones went up 10 fold once it was finally able to break above the 1000 level for good. For those who follow oil, it went from a $10 low around the turn of the century to $147 per barrel at its peak last year (a 1370% gain - a similar-sized gain would put the coming peak Gold price at $3500/oz.). These numbers are meant to show what a secular bull market is capable of doing over years. It is Gold's turn to shine and its bull market is not over!

The fundamental underpinnings of this bull market have to do not only with unprecedented money/debt creation (this fiat paper money/debt backed only by hot air/promises rather than real assets), but also with the nature of money and our monetary system itself. The Chinese government is now openly telling its citizens to buy precious metals for investment and making them widely available. Many countries are now starting to clamor for a new global reserve currency to replace the Dollar. Trust in the government and its promises is starting to break down significantly in the United States as more and more people no longer believe our government has their best interests at heart or has the money to pay for all its promises.

A powder keg is also waiting to be ignited in the paper metal ETFs, which cannot possibly have even a fraction of true access to the physical Gold or silver they claim to be in custodial (or sub-custodial) possession. These metal ETFs are diverting investment money away from the actual physical metal and are slowing its bull market progress (this was one of the intentions of these instruments, by the way). Once people realize they cannot trust bankstas at all and need to obtain a little actual physical Gold to be held outside the system, look out!

I am not sure what's going to happen to the Gold price over the next few weeks or even months. I am actually in the deflation camp for now and think the U.S. Dollar will soon have a strong rally. This may or may not affect the Gold price on an intermediate-term basis. Gold is true money and cash is king during deflation, yet the Gold price is denominated in U.S. Dollars. Gold has risen in the past right along side the U.S. Dollar and I believe this can and will happen again.

However, even if Gold is due to take another rest here on a short or intermediate-term basis, I do know that the Dow to Gold ratio will get back to 2 and may even get below one before this secular Gold price bull market is over. And until that time, Gold will vastly outperform stocks, real estate and corporate bonds. Any surprises in a strong bull market are almost always to the upside and Gold will be no exception.

Visit Adam Brochert’s blog: http://goldversuspaper.blogspot.com/

Adam Brochert
abrochert@yahoo.com
http://goldversuspaper.blogspot.com

BIO: Markets and cycles are my new hobby. I've seen the writing on the wall for the U.S. and the global economy and I am seeking financial salvation for myself (and anyone else who cares to listen) while Rome burns around us.

© 2009 Copyright Adam Brochert - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules