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Let the second phase begin

Richard Russell snippet
Dow Theory Letters
November 16, 2004

Extracted from the Nov 15th, 2004 edition of Richard's Remarks

Today it isn't a question of how much paper money there is in the world or how much gold is being mined. The question is how much distrust there is in the dollar and in paper money in general -- the real question is how willing are knowledgeable investors and US creditors to hold dollars? Call it "escape from the dollar," call it "diversification," call it anything you want, but money is starting to flow into gold.

I'm going to revise my thinking on the phase gold is in. I've stated that gold is still in its first psychological phase. I've revised my thinking on that. Often the first and second phase of a bull market is divided by a severe correction. I believe that the July 2004 correction was the correction that ended the first psychological phase of gold, and that we are now in the second psychological phase.

The second phase of a bull market is usually the longest (in duration) phase. It's in the second phase that the public begins to be interested in an item. And it's in the second phase that the funds start to take their initial positions in an item. I believe we're at the start of the second phase in gold. The sharp July correction followed by a second correction in August -- these two corrections, served, I believe, to knock out late-comers and "in-and-out traders" and solidify the technical position in gold. Only the "believers" held on, and in many cases bought more.

All of which takes us to the second psychological phase of gold.

Let the second phase begin.

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Richard Russell
Dow Theory Letters

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