Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
Blackstone, BlackRock or a Public Bank for California’s Money? - 27th May 18
Stock Market Study: How Long After a 10%+ “Small Correction” to Make New Highs? - 27th May 18
Gold, US Stocks and Bonds - 26th May 18
Climate Change Canaries and Our Changing Climate - 26th May 18
Gold Junior Stocks GDXJ ETF Fundamentals - 26th May 18
What to Expect at a Critical Stock Market Point: End of a Wave 2 Rally - 25th May 18
Merlin Passes Top Tips for Buying and Using Premium vs Standard, Theme Parks UK - 25th May 18
Trump “Victories” on Trade are Anything But - 25th May 18
Crude Oil: It’s Here! - 25th May 18
Stock Market Distribution Pattern Revealed - 25th May 18
Stock Market Topping - Everything Looks Rosy at the End of a Trend! - 25th May 18
Trump Puts North Korea Nuclear WAR Back on Track as Plans for Nobel Peace Prize Evaporate - 25th May 18
Insane EU GDPR SCAM Triggers Mass Email Spam Attacks! - 24th May 18
Stock Market Higher Again, but Still No Breakout - 24th May 18
Study: Slowing Global Economic Growth IS NOT Bearish for U.S. Stocks - 24th May 18
What if This Week’s Rally in Gold is Already Over? - 24th May 18
EUR/USD – Reward for Bears - 24th May 18
5 Terrible Trading Mistakes That Rookie Investors Keep Making - 24th May 18
More Clarity for the Short Term for Bitcoin Price - 22nd May 18
Study: A Rising and Strong U.S. Dollar Isn’t Consistently Bearish for the Stock Market - 22nd May 18
Gold, Silver & US Dollar Updates with Review of Latest COTS - 22nd May 18
Upside DOW Stock Market Breakout May Be Just the Beginning - 22nd May 18
5 Reasons Why Forex Trading Is Becoming Such A Big Deal In SA - 22nd May 18
Fibonacci And Elliot Wave Predict Stock Market Breakout Highs - 21st May 18
Stock Market Ideal Cycle Low Near - 21st May 18
5 Effects Of Currency Fluctuations On The Economy - 21st May 18
Financial Conditions are Still too Easy for the Stocks Bull Market to End - 21st May 18
US Stock Market Elliott Wave Predictions for 2018 and Beyond - 20th May 18
Are You Still Fearful of Cryptos? - 20th May 18
US Stocks - Why I am Short-term Bearish, Medium-term Bullish - 20th May 18
Looking for a Turn in Gold Price - 20th May 18
GDX Gold Mining Stock Fundamentals 2018 - 19th May 18
Semiconductor Stock Market Canaries: Chirp, Warble… Soon a Croak and Silence? - 19th May 18
Three Drivers of Gold Price - 18th May 18
Gold Market in First Tertile of 2018 - 18th May 18

Market Oracle FREE Newsletter

Trading Lessons

Gold - It's Time to Climb the 'Golden Staircase'

Commodities / Gold and Silver 2012 May 02, 2012 - 08:01 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleWilliam Patalon III writes: When U.K. subscriber John M. wrote in this week, he got right to the point.

Asked John: "What's happening to gold prices? Why are they dropping?"


For an answer, I speed-dialed Real Asset Returns Editor Peter Krauth - our resident expert on mining and precious metals.

Peter is based in Canada, which keeps him close to the natural-resource companies that proliferate north of the border. He gave me a detailed and insightful answer to John M.'s question.

And he recommended three ways to profit - including an ETF he says is perfect for first-time gold investors.

To explain what's happened with the "yellow metal" - and to project where gold prices will go next - Peter invented a pricing theory that he christened the "Golden Staircase."

"The bottom line, Bill, is that the price of gold has simply entered a consolidation phase - much like it has done numerous times since it entered this secular bull market back in 2001," he told me.

Gold futures were at $1,662.40 an ounce yesterday - well off the yellow metal's high. Here's why.

"If you think back, when gold hit its all-time high of $1,900 last August, we were in the midst of wild speculation that the U.S. government wouldn't resolve its debt-ceiling crisis," Peter explained. "A deal in Congress was reached in time, but Standard & Poor's went on to downgrade the nation's credit rating for the first time in history. Since then, there's been considerable apathy towards gold by the general investing public, pushing its price down about 13%. What's more, government-calculated inflation looks benign, taking away from gold's luster."

And here's where it gets interesting.

Gold Prices, Inflation and the "Golden Staircase'
You see, as we've detailed to you a number of times, inflation is much, much worse than Washington would have us believe.

The consumer price index (CPI) - the "official" gauge of U.S. inflation, fell to 2.7% in March. But the American Institute for Economic Research (AIER) says everyday prices - the ones that matter most to working Americans - are up a good 8% over the past year.

"Don't be fooled by the "official' numbers," Peter said. "What this means is that the "real' rate of interest (the interest rate you can earn on the safest investment minus inflation) is down around negative 3%. That scenario has typically kept gold in a bull market. That's why I still expect that we'll see $2,000 gold by late this year or early 2013."

To forecast the timing of that rebound, Peter invoked his "Golden Staircase" theory.

"Since the beginning of gold's secular bull, the "Golden Staircase' has demonstrated that it typically takes 12 to 18 months for gold to establish a new price high once it retreats from a strong run-up. Eight months have already passed since gold reached $1,900. The "Golden Staircase' theory tells us that it will take between four and 10 months to see new highs."

Here are three ways to position your portfolio to profit from this rebound:

•If you're a newcomer to the gold market - or you are somewhat risk-averse - Peter suggests the physically backed Sprott Physical Gold Trust ETV (NYSE: PHYS).
•If you're game for somewhat more leverage, Peter likes Newmont Mining Corp. (NYSE: NEM). It's currently yielding 3%, is stable and well-diversified, and its dividend is linked to the price of gold, Peter said.
•If maximum profits are your goal, Peter's favorite play - and his personal pick for the Private Briefing report "The Five Stocks You

Have to Own in 2012" - is Sandstorm Gold Ltd. (TSXV: SSL). This streaming-gold company is the riskiest of the three. But it's up 39% since Peter recommended it, and forecasts call for years of rapid growth.
So, yes, gold prices are down lately. But don't expect the downturn to last.

[Editor's Note: Since its launch, Private Briefing has delivered as many as 45 winners. Two dozen of them have been double- or triple-digit gainers--all in just eight months.

With his 24/7 access to stock market gurus like Martin Hutchinson, Keith Fitz-Gerald, Shah Gilani and Dr. Kent Moors, Bill is able to provide Private Briefing subscribers with an inside look at some of their key recommendations.

To learn more about Private Briefing, click here.]

Source :http://moneymorning.com/2012/05/02/gold-prices-how-to-climb-the-golden-staircase/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 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