Bullish gold gets ready for big jump By James
Turk - 2009-11-24 09:25:00
Bull
markets are marked by three distinct stages, and when gold
climbed above $1,000, it only entered its second stage. In
other words, gold has much further to climb in the months
and years ahead.
So don’t be misled by what you may hear or read in the mainstream
media and even much of the alternative media. After all, how
many commentators have correctly identified gold’s bull market,
now a decade old?
As Robert Blumen cogently argues: “Many of the financial
media have a pronounced anti-gold bias. Of the writers and
news anchors now calling gold a bubble, not only did they
fail to identify the stock market bubble in the 90s or the
subsequent housing market boom as a bubble, they actively
promoted the excesses of those unsustainable booms, encouraging
their viewers or readers to participate. For the most part,
these pundits have failed to identify a rising gold price
as an investment trend at any point in the past ten years
(during which gold had a positive return each and every year).”
Robert then goes on to observe the silly incongruity of their
warnings about gold: “Witness the irony of the financial media
transformed from hypesters who never saw a bubble they couldn’t
promote into bubble vigilantes, issuing concerned warnings
to ‘get out [of gold], now, before you get hurt.’”
There are different ways to determine relative value, and
one of these is gauging market sentiment, which is what a
bull market’s three stages communicate. During the first stage
of a bull market, the media and most investors alike focus
on past issues, rather than future potential. Over the past
decade one consequently heard all the reasons not to own the
gold.
An old and trusty adage says that bull markets climb a ‘wall
of worry’. In gold’s first stage, there seemingly was a lot
to worry about. But most of these worries were emotional in
nature and not logical. Few paid attention to relative value,
which is the proper determining factor when making decisions
about your portfolio. Truth be told, I too was worried, but
I didn’t let it keep me from accumulating gold and recommending
to anyone reading my analyses to do the same.
Gold is now in its second stage, and of course, the worries
don’t disappear. They never do because there are always emotional
reactions that at first blush offer seemingly plausible reasons
for not taking the right action. But there is a notable difference
in this stage compared to stage one. Look how many people
are writing and talking about gold. Gold has moved from apathy
and neglect – stage one characteristics – to growing attention.
But importantly, instead of embracing gold and analyzing it
to determine relative value, today’s attention is one of widespread
disbelief and skepticism that gold can climb higher. These
are exactly the responses one should expect to emanate from
stage two.
As gold climbs higher, we will eventually enter stage three.
The timing of its arrival cannot be predicted, but we will
know it has arrived when commentators who have been consistently
wrong about gold will be telling everyone willing to listen
to buy gold. But at some point in stage three when gold no
longer is relatively good value, it is when I will be advising
to reduce your gold holding by spending or investing it. We
are, however, a long way from there, so my advice for now
remains the same as it has been throughout this decade. Continue
to accumulate gold. View it as your savings account. Savings
are always a good thing, particularly when you are saving
sound money.