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Trading Lessons

Gold Price Experiencing Extreme Volatility

Commodities / Gold & Silver Nov 20, 2007 - 03:07 PM GMT

By: David_Vaughn

Commodities

Gold is showing extreme volatility now and consolidating after its tremendous gains of the past month.

I have told not to be too bullish and I feel I am about as balanced as I can be. Of course short term I never attempt to speculate. But long term I see a great deal of volatility. And short term I see a great deal of volatility. Already we are observing price movements of 25 dollars and more in a single 24 hour period.


"Present fall in gold prices is temporary and likely to go up owing to geo-political situations especially the nuclear stand-off between United States and Iran which led to price spiral at the international level…” “Market observers said people have started investment in gold as it was considered as a safe capital in times of economic and political crisis.” thepost.com

I would not be surprised to see a bit of consolidation for a while. Even if gold dropped back down to 750 we have still substantially overcome the much irritating 700 ceiling. My observation is two steps forward and one step back.

“The gold price took quite a dive and lost all the ground it had gained after last week's sharp rise. The change in sentiment may mean a slowing of the advance, but the gold price trend still looks to be upwards .” “…but my view is that it will regain some, if not all, of its lost ground and head back up to the $850 mark, but it may take a little time. Has anything fundamental changed?” “…overall the main fundamental driving the gold price upwards - dollar weakness - remains despite the occasional short lived recovery.”

Mineweb.net

In the beginning of the bull market it was predicted that we would eventually see days when gold moved as high as 25 dollars either up or down in a single day. These types of moves are inevitable and a reminder that investing in gold stocks is not for the feint of heart. It takes nerves of steel to watch your investment oscillate wildly and continue to hold on.

“Barrick Says Gold Supply to Fall Faster Than Expected” “Barrick Gold Corp., the world's largest gold producer, said supply will fall faster than expected as it gets harder to extract the precious metal from deeper and older mines.”``Global mine supply is going to fall at a much faster rate than people generally believe,'' Chief Executive Officer Greg Wilkins said today at a conference in London organized by RBC Capital Markets.” Bloomberg

The truth is that the acceptance of gold among the general population is still growing. Sure, there are the die hard gold bugs and professional money managers who understand its value. But mom and pop investors are still undergoing an educational process. Remember, for 25 years the average consumer was “programmed” to think of gold as something archaic and obsolete. This perception is changing of course but it will not be over night.

“RB CC M predicts bullish gold price upswing to last remainder of decade” “The Royal Bank of Canada 's investment banking arm is looking to $900 gold in 1Q 2008 and a continuation of the bullish gold price trend for the remainder of the decade…” Mineweb.net

The important factors to consider are that the fundamentals for gold are very strong and only due to become stronger as we progress into the next decade. The fact that there is a long educational process underway for gold is just representative of one more very sold bullish indicator for gold's longer term bullishness forward.

So, what can we say about gold's volatility? Expect it and don't be shocked by it. Even now gold is scrambling to climb higher to regain some of its earlier outstanding gains. Remember the rule – 2 steps forward and 1 step back. That is not a bad proposition.

“Gold prices may breach the psychological mark of 1,000 usd an ounce by next year, according to Philip Klapwijk, executive chairman, Gold Fields Mineral Services Ltd, a precious metals research consultancy.” "We may get to see levels of 850 usd an ounce by the end of 2007, as oil closes in on the 100 usd per barrel mark," he said” “Gold prices touched 845.58 usd per ounce on Nov 7, fuelled by the falling dollar and the heavy losses in the US equity markets.” “The precious metal fetched its highest ever price of 850 usd per ounce in January 1980.” Interactive Investor

Well, the seasons are quickly changing around us. The fall harvests are now over. Apple picking season has passed. Now we come into the month of November. Thanksgiving today is such a non event as all the older folk, including grandma and grandpa, are long passed away. And as Thanksgiving passes the commercialism of Christmas comes with the message buy, buy, buy. And quickly comes the 21 st of December and we know we are passing the longest and darkest day of the year. Now spring is just around the corner including a new year. And for us older folk we are one year older and hopefully a little wiser.

Gold has its own appropriate seasons for those who observe. But remember it is our concentration on the quality gold stocks where the big money derives. The 80s and 90s are definitely worth studying. In their years the seeds were planted for the economic crises we see now unfolding around us.

Gold stocks continue to be an excellent investment in a rising gold price environment.

“The fact is that Canadian mining stocks are still remarkably cheap.” Financial Post, 11-07

  We are living in the last days of cheap resources and commodities. Recognizing these facts Gold Letter, Inc. reviews undervalued gold, silver, uranium and other resource stocks under valued and poised to rise in this time of increased demand for resources. Gold will only escalate in value. Gold Letter's 10 best performing stocks are up over 1,700% and GL's top 55 performing stocks are up over 300%. Close to 90% of all Gold Letter's recommendations since inception in January, 2003 are up over 150%. GL charts are computer generated and updated every hour while markets are open.

Click here to order Gold Letter

“The Worldwatch Institute, an organization that focuses on environmental, social and economic trends, says the current rate of global demand for resources is unsustainable.”  

Email me if you have the time.

By David Vaughn
Gold Letter, Inc.
David4054@charter.net

© Copyright 2007, Gold Letter Inc.

“The Worldwatch Institute, an organization that focuses on environmental, social and economic trends, says the current rate of global demand for resources is unsustainable.”  

The publisher and its affiliates, officers, directors and owner may actively trade in investments discussed in this newsletter. They may have positions in the securities recommended and may increase or decrease such positions without notice. The publisher is not a registered investment advisor. Subscribers should not view this publication as offering personalized legal, tax, accounting or investment-related advice. The news and editorial viewpoints, and other information on the investments discussed herein are obtained from sources deemed reliable, but their accuracy is not guaranteed. © Copyright 2007, Gold Letter Inc.

David Vaughn Archive

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