Dead Cat Bounce
Nothing disturbs goldbugs more than someone who dares to suggest gold and silver actually can't be expected to go up every single day. After my April 2 piece suggesting a top in gold and silver, I got a whole heap of very nasty emails telling me what a fool I was to suggest gold and silver might go down.
All I can do is call them as I see them. After a rapid climb in any commodity, it's only natural for there to be at least a correction. But goldbugs don't want to hear it and no wonder so many will end up losing their shirts. I could be wrong and it still wouldn't be the end of the world but with gold sites sprouting up like weeds in a wheat field, it's nice to say something other than 'Rah, rah gold." There are dozens of websites offering the cheerleader approach to investing in precious metals and we rather enjoy a reputation for independent thinking at 321gold.
We are in a gold and silver bull market which will last for years. But anyone who either advocates or believes any commodity will go up every single day has lost his marbles. Gold and silver were in a bull market from 1970 until January of 1980, too. But if you look at a chart of gold in 1975 and 1976, you will see that gold fell from about $195 in February of 1975 to just above $100 in the fall of 1976.
It could happen again and a 45% drop in gold would put gold at $239. I don't believe for even a moment it will go to $239 but it did happen in 1975-1976 and while history doesn't necessarily repeat, it does rhyme. I believe a dead cat bounce has started and the next couple of weeks could be nice for gold, silver and the metals shares. But I will stand by my advice of April 2. It's time to be in as much cash as you are comfortable with and high quality metals shares. The correction has paused but it isn't over by a long shot.
The biggest danger, ignored by most gold bugs, is a crash in stocks, bonds and real estate all at the same time. All it would need to ignite is a slight rise in interest rates which we all know is coming. The next few months could be very dangerous to your financial health. I see a strong and unexpected whiff of deflation coming and it's going to catch a lot of people by surprise.
You can throw a cat off a ten
story building and it will do two things. It will land on all
four feet and it will bounce.
April 17, 2004
FYI: I am
off to Chile today (Sat. Apr 17th) for 10 days, so I won't be
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