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What about Gold?

Richard Russell snippet
Dow Theory Letters
January 31, 2005

Extracted from the January 29th, 2005 edition of Richard's Remarks

Question -- What about gold in this environment of "gradual inflation?"

Answer -- I never worry about the price of gold. Gold is real money, and it always will be, despite the efforts of the central banks to have you think otherwise. Honestly, I worry about a lot of things, but I don't worry about gold. How about gold stocks? Somewhere ahead gold is going to take off to the upside, and that's where the gold stocks will make up for lost time. Very frankly, I don't think the cycles or Elliott or trendlines are going to tell us when gold is ready to make its move.

My attitude is that gold made its low in 2002 and recently rose to a 16-year high. You decide how much gold you're willing to hold, and then you forget it. Because inflation is wanted and needed in the US, the long-term trend of the dollar is down. The dollar's decline will be erratic, it will probably take place over years, not weeks or months. Gold can be likened to a Picasso painting or an autographed letter from George Washington or a flawless D-color 10-carat diamond. You just hold it. You don't try to get a quote on it every week. You consider it the safest part of your wealth, and that's it. What do you do with your gold? You leave it to your spouse or your kids or your best friend.

Gold is true wealth, discovered by expensive methods, brought out of the ground by sweat and capital. Gold can't be manufactured out of thin air by the Fed, and maybe that's the major difference. Nah, I don't worry about gold, if I have to worry, I worry about my dollar denominated assets. Now there's something that is legitimately worth worrying about.

Remember, when this bear market started I wrote that "In a primary bear market, everyone loses, and the winner is the one who loses the least." I'll stand by that statement, and this bear market has hardly begun.

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