Graceland Updates 4am-7am
Row Row Your Gold Boat
Dec 16, 2008
- 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.
- 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.
- While there is no fever
like gold fever, please keep this in mind: A fever is a symptom
- Many gold stocks are sitting
in the "bargain basement". Down 50-90% from the highs
in many cases.
- 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.
- 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.
- 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.
- What I see right now... is
a parade of the price chasing hogs making their way to the gold
- 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.
- 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.
- Many investors would be happy
to bank 150% by the time the whole gold bull market ends.
- 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.
- Like a boat on a river, the
stock price is the boat, the green Bollinger bands are the banks
of the river.
- 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.
- 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.
- 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.
- 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...
- 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.
- 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.
- 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
- 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".
- 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.
- The technical indicators,
particularly the MACD, are suggesting that gold weakness should
- 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.
- 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.
- 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!
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