GOLD: When Gold corrects, how low should we expect it to go?
Looking back to the beginning of this Bull Market that started in 2001, we find that in the most recent correction, June 10-July 28, Gold dropped 8.2%. In the two previous corrections, Gold fell just over 12%. The question now is, "Are we in a pullback that is only a minor and healthy strengthening event that offers a great buying opportunity, or is it a full-blown correction or is it a worst case scenario, the end of the Bull Market?"
Looking back to the beginning of this Bull Market that started in 2001, we find that in the most recent correction, June 10-July 28, Gold dropped 8.2%. In the two previous corrections, Gold fell just over 12%. The question now is, "Are we in a pullback that is only a minor and healthy strengthening event that offers a great buying opportunity, or is it a full-blown correction or is it a worst case scenario, the end of the Bull Market?"
The fact that Gold's seasonals are strong, consistent and reliable, suggest that we are only in for a mild pullback. There are times during the calendar year, such as we are now in, when demand for Gold ramps up dramatically and that reoccurs every year like clockwork. Since newly-mined Gold can't be suddenly increased to meet these large increases in demand, prices increase and this year should be no exception. The World Gold Council's latest figures show demand is getting stronger despite rising Gold prices. Does Gold not follow the Laws of Supply and Demand? As I have explained numerous times in the past, Gold is considered a "Superior Good" in economic terms, much like a Rolex Watch or a Bugatti Veyron, the higher the prices go the greater the demand: So yes, Gold does follow the Laws of Economics, but it is a special situation. The higher its price goes, the greater will be its ever increasing demand.
More and more people seem to be rediscovering the fact, one that I have been harping on since 2000, that Gold has been used as money for thousands of years. Especially during times where black swans are not singular rare occurrences but are instead appearing on a regular basis, the status of Gold as a safe haven, Store of Value, is once again proving its mettle (pun intended). I personally have been using Gold not only as a hedge, but also as an alternative to money market funds, as well as leveraging it for investment purposes to such an extent that I now have over 60% of my liquid assets in Gold and Silver. No doubt that in the short run there may be better investment vehicles, but I cannot think of one that allows me to sleep as well. Although we have suffered through two severe set backs in 2006 and 2008, Gold has been the top performing asset for the last 10 consecutive years, rewarding those of us who stayed the course. And in my opinion, "You ain't seen nuttin yet"
For those of you who are worried about what happens to Gold during periods of deflation; Gold nearly quintupled during the predominantly disinflationary period from 2000-2010. I can't wait to see what Gold will do during the coming inflationary period of massive printing of money (QE2), and by Europe and beyond. Remember 1971 to 1980 was just a half of a cycle, as the price of Gold was fixed between 1934 and 1971. Cycles usually last 16 18 or 20 years. The lesson that there is a hard and fast connection between government over-issuance of paper money, inflation and the destruction of middle-class savings has been routinely ignored throughout history, always with the same dire consequences: Students of economic history wonder if politicians and Ivory tower Keynesian Economists will ever learn. Are you listening Mr. Bernanke?
If you are confused and worried by the recent movements in Gold and Silver - don't be. The trend and circumstances are firmly in place, and given the fact that governments the world over have been trying to manipulate the price for more than 10 years, definitely proves that they can't, except for very brief periods. I have stated this more than once that as their economies continue to grow and per capita incomes in countries such as China, India and the rest of South east Asia continue to rise, consumers and investors within those countries will increasingly see Gold as a key investment vehicle in conjunction with their cultural connection to Gold carried over thousands of years. Their government's encouragement to buy Gold certainly doesn't hurt.
Additionally, more and more central banks have become net buyers of Gold with Russia, Sri Lanka, Thailand and Philippines among others sharply increasing their holdings, more than offsetting the IMF's continued selling of Gold (they don't have much left) Gold has stood the test of time for more than 5,000 years. The Gold Market is too universal and too big, so much so that every empire throughout history has crumbled before it (every single time they continued to ignored God's Natural Laws of Economics and MONEY).
Looking back to the beginning of this Bull Market that started in 2001, we find that in the most recent correction, June 10-July 28, Gold dropped 8.2%. In the two previous corrections, Gold fell just over 12%. The question now is, "Are we in a pullback that is only a minor and healthy strengthening event that offers a great buying opportunity, or is it a full-blown correction or is it a worst case scenario, the end of the Bull Market?"
The fact that Gold's seasonals are strong, consistent and reliable, suggest that we are only in for a mild pullback. There are times during the calendar year, such as we are now in, when demand for Gold ramps up dramatically and that reoccurs every year like clockwork. Since newly-mined Gold can't be suddenly increased to meet these large increases in demand, prices increase and this year should be no exception. The World Gold Council's latest figures show demand is getting stronger despite rising Gold prices. Does Gold not follow the Laws of Supply and Demand? As I have explained numerous times in the past, Gold is considered a "Superior Good" in economic terms, much like a Rolex Watch or a Bugatti Veyron, the higher the prices go the greater the demand: So yes, Gold does follow the Laws of Economics, but it is a special situation. The higher its price goes, the greater will be its ever increasing demand.
More and more people seem to be rediscovering the fact, one that I have been harping on since 2000, that Gold has been used as money for thousands of years. Especially during times where black swans are not singular rare occurrences but are instead appearing on a regular basis, the status of Gold as a safe haven, Store of Value, is once again proving its mettle (pun intended). I personally have been using Gold not only as a hedge, but also as an alternative to money market funds, as well as leveraging it for investment purposes to such an extent that I now have over 60% of my liquid assets in Gold and Silver. No doubt that in the short run there may be better investment vehicles, but I cannot think of one that allows me to sleep as well. Although we have suffered through two severe set backs in 2006 and 2008, Gold has been the top performing asset for the last 10 consecutive years, rewarding those of us who stayed the course. And in my opinion, "You ain't seen nuttin yet"
For those of you who are worried about what happens to Gold during periods of deflation; Gold nearly quintupled during the predominantly disinflationary period from 2000-2010. I can't wait to see what Gold will do during the coming inflationary period of massive printing of money (QE2), and by Europe and beyond. Remember 1971 to 1980 was just a half of a cycle, as the price of Gold was fixed between 1934 and 1971. Cycles usually last 16 18 or 20 years. The lesson that there is a hard and fast connection between government over-issuance of paper money, inflation and the destruction of middle-class savings has been routinely ignored throughout history, always with the same dire consequences: Students of economic history wonder if politicians and Ivory tower Keynesian Economists will ever learn. Are you listening Mr. Bernanke?
If you are confused and worried by the recent movements in Gold and Silver - don't be. The trend and circumstances are firmly in place, and given the fact that governments the world over have been trying to manipulate the price for more than 10 years, definitely proves that they can't, except for very brief periods. I have stated this more than once that as their economies continue to grow and per capita incomes in countries such as China, India and the rest of South east Asia continue to rise, consumers and investors within those countries will increasingly see Gold as a key investment vehicle in conjunction with their cultural connection to Gold carried over thousands of years. Their government's encouragement to buy Gold certainly doesn't hurt.
Additionally, more and more central banks have become net buyers of Gold with Russia, Sri Lanka, Thailand and Philippines among others sharply increasing their holdings, more than offsetting the IMF's continued selling of Gold (they don't have much left) Gold has stood the test of time for more than 5,000 years. The Gold Market is too universal and too big, so much so that every empire throughout history has crumbled before it (every single time they continued to ignored God's Natural Laws of Economics and MONEY).