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'High Pole' Action

Richard Russell snippet
Dow Theory Letters
posted Dec 3, 2009

December 2, 2009-- By now, I believe most of my subscribers have some sort of a position in gold or gold shares. Below is an up-dated P&F chart of gold. We see that the latest action is a "high pole" rise to the 1190 box. Then a correction down to the 1130 box. The correction halted well above the halfway level of the high pole. Then most recently, we see a rally and a breakout to the 1200 box. This breakout to new highs is very bullish. There is no technical resistance above gold now. My guess is that gold will now work its way up to the 1500 area.

Gold P&F chart

Central Gold Trust is a Canadian outfit that must hold 90% of its assets in gold bullion. The P&F chart is interesting. Yesterday GTU broke out of its left shoulder formation. This could easily take GTU to its former high box at 50. Anything above 50 would be very bullish. For more on GTU, do a web search -- Central Gold Trust.

Central Gold Trust chart

Question -- Russell, would you still buy gold here?

Answer -- The advantage of buying an item that is in a primary bull market is that the bull trend will tend to bail you out of your mistakes and bad timing. For instance, I bought Newmont years ago when it was in its 40s. Mistake, the stock then sank into the low 20s. I believed gold was in a bull market, and I thought the bull market in gold would eventually bail me out. NEM today is selling above 55.

At this time, if you want to buy into the gold universe my choices would be ABX, NEM, GTU, CEF, GLD, SGOL.


Headline in today's Financial Times -- "Dubai Concerns Help Lift Gold to All-Time High"

Russell Comment --The media continues to explain why each move in any item can be connected with a current event. Gold is in a bull market. "News goes with the trend." With the primary trend of gold bullish, most news will simply blend in with the overall bull trend of gold.

In the big, basic picture gold is the safe haven alternative to fiat money. Sophisticated investors are buying gold as an alternative to the "garbage money" being created by central banks' computers. Sophisticated investors are well aware of the history of fiat money, money that is backed by nothing. Ultimately, it is worth nothing, which is why they are swapping their fiat money for real money -- gold.

As the various central banks continue to create additional fiat money, the purchasing power of fiat money will decline. That's the fundamental story behind the bull market in gold. As more and more people see and understand this picture, they'll move to the safe haven of gold.

In China and Asia they've gone through debasements of their currencies before. Thus, they fully understand the importance of gold in safeguarding their wealth and purchasing power. China with its fast-rising wealth will lead the world in accumulating gold.


Richard Russell
website: Dow Theory Letters
email: Dow Theory Letters

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