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Row Row Your Gold Boat

Stewart Thomson
Dec 16, 2008

  1. The price of Gold has done many things. It has risen from $250 to $1030. It has fallen from $1030 to $680. Gold will do many, many more things in our lifetimes.
  2. Gold has now risen from about $680 to the $840 area. A $160 move to the upside. Many traders are now beginning to buy gold here. Anticipating the next big wave up. The MACD on the weekly charts has given a crossover buy signal, and a number of horizontal technical resistance levels have been crossed on the upside.
  3. While there is no fever like gold fever, please keep this in mind: A fever is a symptom of sickness...
  4. Many gold stocks are sitting in the "bargain basement". Down 50-90% from the highs in many cases.
  5. That is a fact. However it is also a fact that the same gold stocks are up 100% to 200% from the lows at gold $680, in just as many cases.
  6. I have a number of good friends who are now carefully backing up their gold trucks for the next rocket rise in gold. Good friends, yes. And lifetime losers in the market... sadly, yes. Some have lost millions.
  7. Yet after gold rises $160, here they are again! Back at the price chasing trough. Ready for their next feeding. Isn't there some old saying about pigs getting fat, and hogs getting slaughtered? I'm pretty sure there is. And I'm pretty sure there's a reason for that saying.
  8. What I see right now... is a parade of the price chasing hogs making their way to the gold trough.
  9. Here's a chart of Tanzanian Royalty Exploration Corp (TNX-T). Run by Mr. Gold, Jim Sinclair. The KING of the last gold bull market. A man, I will add, who never engages in price chasing. If I remember correctly, Jim told me his biggest position in the last gold bull market was 22,000 gold futures contracts. AND more than 5000 silver contracts. I believe him. Do you know big 22,000 gold futures contracts is? It's almost superhuman. Let me ask you this: If "Big Jim" doesn't chase price... should you? Rumours continue that naked shorting of the stock resulted in the approx. 80% decline in the TNX stock price. That is possible in the case of many gold stocks. Regardless of the reasons for the price decline, the fact is those who bought at much higher prices are suffering badly. However, from the $2 level, TNX has launched an absolute astroblast upside. Gaining approx. 150% in just two months. Those who bought into severe weakness in gold are not suffering. They are partying.
  10. Bottom line: The 80% decline is a fact. The 150% rise is a fact. Two realities. Two truths. Whether a TNX (or any gold stock) shareholder made money or lost money, depends on when and how they bought the stock.

  11. Many investors would be happy to bank 150% by the time the whole gold bull market ends.
  12. Let's get it done. I want you to take a look at the green lines on the TNX chart above. The green lines that surround the price movement are called "Bollinger bands". The upper green line is around the $5 level. The lower green line is around the $2 level. You can see the price of the stock has moved generally between the two lines.
  13. Like a boat on a river, the stock price is the boat, the green Bollinger bands are the banks of the river.
  14. Many beginning investors have tried to use the Bollinger bands. And quickly found themselves frustrated. Like a river can flood its banks, so can the price of your item move beyond the Bollinger bands. Various analysts then try to determine whether that represents a continuation or reversal signal.
  15. Keep it simple. If the price of the item, in this case gold itself, is in a rising mode you want to be focused on selling. Not buying. You are never afraid of being taken "out" of the market, of "missing out on higher prices". Because you hold a core position. Those without a core position in gold bullion, physical gold bullion, are playing with fire. Period.
  16. With India and Pakistan now being put on the geopolitical stove, the unknown status of the $700 trillion derivatives fire, Bernanke's money printing extravaganza, the massive govt debt growth worldwide, these are not times to be without a core position in gold bullion. Physical gold bullion in your safe possession. Gold is the world's lowest risk investment. And has been for 5000 years. When scientists learn to make gold, only then will gold relinquish that role. Gold is an element. Good luck to the alchemists. Meantime, don't trade your physical gold. If things get bad enough, you won't have any stock brokerage account. All that could remain is your physical gold. Take the least amount of risk with your physical gold, not the most.
  17. I want to mention something that the amateur trader should consider very seriously. You have heard me ask you to take delivery of approximately 50% of your gold stock certificates. There are a number of minor and major reasons for doing this. If you take delivery, it makes it impossible for any entity to borrow that stock and short it. Which is to your benefit. You want the price of your gold stocks to go higher. That's why you bought them. To make money. By taking delivery you "starve out" the short sellers. The more people that do it, the better. A more important reason is that if you have safely stored your stock certificate, you won't get demoralized if the price falls. You aren't looking into your computer or staring at your brokerage account statements, staring at red ink. Try taking delivery of a small amount of stock. See if what I am saying is correct. It is. The financial system has blown up. None of us know what horrors are coming. Gold is a thermometer of the health of the financial system. If the price rises vertically, the patient may not recover. Think about that. If gold rises to say, $5000 an ounce, what will your brokerage account look like at that point? Will it even exist? What is the real nature of the accounting inside the brokerages? Nobody really knows. Try this test: Phone just one of the companies that your brokerage statement says you own stock in. Ask them if they have a record of you as a shareholder. I'm afraid many of you are going to hang up the phone with a major frown. Then take delivery of some stock. Call back the same company. I bet they say, "yes sir, we have you here as a registered shareholder holding X amt of shares". Now you hang up the phone with a big smile. Some junior situations could rise tenfold in price. You want to hold some stock for the entire ride. Taking delivery of some stock is a very practical way to ensure your gold rowboat makes it to the ocean...
  18. Below is the gold bullion chart. Imagine you are sculpting a gold statue. The Bollinger bands, and all technical and fundamental analysis, are tools to do that. Look at the green Bollinger lines. Try to look at all price charts "from a distance". Don't look for answers. The chart is a guide, and nothing more. Technicians tend to focus more on their indicators than on price. That is a terrible error. Make your technical tools work for you, make them answer to price. Not the other way round.

  19. When a technical indicator "answers" to price, it means you are using the indicator as a guide to either accelerate or decelerate your buying on weakness. To accelerate or decelerate your selling into strength.
  20. Right now, the price of gold has rallied $160. That's what the price has done. The gold price is banging into the upper green Bollinger band after rallying $160. At the same time, other technical indicators like MACD have crossed into a buy. The black line on the trix indicator has hooked up. Indicating a possible major buy signal is near at hand.
  21. What actions should you be taking now, given all of the above? Gold must be sold into strength. Some money must be taken off the table on a $160 upmove. Regardless of whether this move up is the long awaited "big one".
  22. You must get your original capital out of the market, so you are working with the market's money. After doing that, at least in part, then you can increase your risk, going for bigger reward. Because then you are losing the market's money. Not yours.
  23. The technical indicators, particularly the MACD, are suggesting that gold weakness should be bought.
  24. Professional gold traders only buy weakness. Sell only strength. If you lost large money on the way down from $1030, and you didn't buy at $700, you should definitely not be buying now at 840. The gold price is banging into the upper Bollinger band. You will be totally demoralized if you buy now and gold fails here. The professional buys weakness and sells strength.
  25. The professional does not care if he rebuys gold at a higher price that where he sold. But he must be buying only on price weakness. The bottom line: Professional gold traders, by definition, make money. If you want to make money in gold, you must do the same.
  26. If you have rowed your gold boat $160 an ounce higher, from one Bollinger bank of the gold river to the other, if you have done that - and not booked any profits and taken any risk capital off the table - well, today is the day to do it!


Stewart Thomson
Graceland Updates
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Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:

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