1.. I look out my gold window and I see various pundits calling for higher and lower gold. Most are looking higher now, being transformed into buyers and believers as gold has soared $100 from $905. At 905 I stood pretty much alone in the pain zone, screaming: Buy. Feel free to go back and look thru the major gold sites and you'll see me, alone amongst a sea of "it's going to 880" and "if 880 fails we're going to 850 or even 800!" calls. The theme was: "I'm long term bullish, but right now I'm on the sidelines."
2. My theme at 905 was: Get out of my way, I'm on the buy.
3. What do I see now? First, let's focus on my actions. Here's a letter from one of my subs yesterday, which sums up the action I'm taking in the gold market:
4. "S Kaching T, I am with you today (booking $$$$$$$$) this is the first moment I had to read your letter, been profit taking all morning - man this is the greatest. NEVER have I taken soooo many profits or had this much fun since subscribing in JAN.We win when the price goesup and win when we go down, the pyramid ROCKS" -GU sub letter Sep 8, 2009.
5. If you want to make money in the market, you need to focus on both the past and the present. Look at past market bottoms. Were you a buyer into those bottoms? Yes or No? Look at the gold head and shoulders consolidation. Focus on the lows in that pattern. Not the red neckline. Not the price targets. Focus on the lows.
6. The lows in the pattern, going backwards, are approx: $905 in July 2009. $860 in April 2009. $800 in January 2009. $740 in Dec 2008. And $680 in Oct 2008. Here's a look at those lows:
7. My question to you is: Were you a buyer of those lows?
8. There have been dozens of lows, arguably hundreds of them, so far in this gold bull market. Gold will make many more intermediate lows before this bull market grinds to an end.
9. The time has come to focus on being a buyer of the next low, and a profit booker into the current highs.
10. There is a big difference between being a profit-booker into highs and a seller of gold because it is overbought technically. The difference is subtle, but not small. It is huge, in terms of the effect that understanding can have on your acnt.
11. If you don't have profits, don't sell. It's that simple. As gold rocket-blasts to $1200, you are a profit-booker. Not a top caller.
12. There is a 99.99% chance that gold lows will be made on the gold superhighway to gold 1200. Where will they be? Answer: Where my largest buy points come into that weakness, as it occurs.
13. Don't predict price. You've failed to predict the lows, any of them. Obviously that strategy as a means of making money in the gold market is a failure. So dump it.
14. When gold goes into the tank, and it will, then start buying.
15. For now, keep booking profit like a machine all the way to gold 1200. Maybe we get there, maybe we tank to gold 700 tomorrow morning. Who knows, who cares.
16. Predict your bank account, not the gold price. If you respond to price, you'll have a reasonable means of managing your bank account, and the amount of ounces of gold you own, both in an upwards direction.
17. Sound good? It is. I have a firestorm of testimonial letters like the one I posted above, investors who came into this with no hope, no real plan, and 30 years of consistent failure. They are now booking consistent profits and most importantly, gaining a major sense of control in the market.
18. What might be causing gold to blast to $1200? We're told it is "inflation expectations". Maybe so. The bond market has been selling off. My own view is the bond market is selling off as much on fears of a US dollar collapse, as on inflation expectations. I said months ago that the two most likely events triggering gold to $1200 would be a new escalation on the terrorism front and/or a US dollar crisis.
19. The US dollar has failed to rally from its oversold condition on the weekly charts. The analysts who thought this September would be a twin to last year's gold stock meltdown and USD rocketblast, are now in shock, stuck holding USD and no gold stock, while gold soars. Here's a look at the USdollar as it breaks down "impossibly."
20. The bottom line is this: Rumours continue over serious threats to Germany in terms of a terror attack, and Israel's inner cabinet is conducting intense discussion over Iran's nuclear situation.
21. While I am a profit-booker to gold $1200, and a modest buyer of USD into this sickening weakness, you'll need to cut my head off to get my gold inner core positions. Those who continue to use gold only as an online trading vehicle may soon learn a life lesson equivalent to being hit by a bus.
22. Should a move of substantial money occur from the USdollar and bond market into the gold market, this could set off a period of astronomical volatility in the gold market. Thousands of technical traders could be destroyed, as price careens thru chart points and stop losses, like a freight train thru melted butter.
23. The key point is that global governments (the Gman) will have a harder time calming down fund managers and institutional players in such a situation, than he has up to this point. Up to gold $1000, it has been the retail player and the hedge fund that has acted rashly as gold has moved around. If major institutional money moves into gold, governments will seek to get them out of it. They will succeed at points. As large money tries to move in and out of gold, huge price swings will occur. I firmly believe the next phase of the gold market will feature the complete destruction of thousands of technical traders. This is why I've detailed the key strategy of buying into weakness and selling into strength, rather that using technical indicators to pick bottoms and tops.
24. As gold skyrockets, governments will be forced to print more money to buy their own bonds to halt rates from skyrocketing. If the bond market collapses, a real estate holocaust will take place. Yet, ironically, the collapsing US dollar itself could cause banks to hike mortgage rates, regardless of the Fed's T-bond buy programs. My sense is the whole situation is on the verge of blowing out of control. Even the perception that this could possibly occur could cause a massive institutional buying panic of gold. Most investors have forgotten about oil. Given the absolutely hair-trigger situation in Iran, with Pakistan also pushing the limits of stability, the energy markets could be next to see a powderkeg price explosion upside!
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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am. The newsletter is attractively priced and the format is a unique numbered point form; giving clarity to each point and saving valuable reading time.
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