The Long-term Picture
The two lengthy consolidation periods within this solid long-term up-trend shown in the chart below reveal in fact striking similarities. One similarity e.g. is the surge of the Index my more than 100% before the inevitable movement of consolidation began.
If the past is admitted as a guide to the future, we can deduce how far the market may rise during the up-swing which is currently under way.
Investors who have been waiting for more than a year to see their purchase prices again, have a tendency to get out once they can get out even and often miss for this reason the ensuing chance to make a substantial profit.
Therefore, we should keep our fears in check and ask ourselves without emotions where the market may lead us. In our opinion, it is of course only possible to indicate a range within which this movement could end, and we would place our Index target between 350 points as a minimum and 430 points as a maximum before a further consolidation phase starts.
The Medium-term Picture
In our article dated May 30, 2005 (see: http://www.gold-eagle.com/editorials_05/zihlmann060605.html), we urged you to go long but we hardly found anybody who would heed our advice.
At present however, 40% above the low of last May, investors start to worry that they may be missing out on the next big move. The fact is that we have approached a strong resistance level which needs to be superseded as many may be tempted to take profit, if they can, or at least to get out even.
There may also be some big players who may attempt to push the gold price down. If they fail however, they could well be forced to cover their short positions which could then propel the gold price to substantially higher levels.
The Short-term Picture
This short-term up-trend which started in mid-May of this year suggests that we may have a bit of consolidation before the trend will be resumed.
It may however prove to be expensive to wait for a short-term correction as, first, we are in a secular bull-market and, second, we are just coming out of a lengthy consolidation which is drawing to its end.
"In the 1970s, the most admired technical analyst was Joe Granville. In fact, for a brief period of time Granville's buy and sell signals would move the US stock market - at least temporary. Granville's demise as a market guru then followed. In 1982, he failed to realize that a secular bull market in bonds and stocks had begun and remained bearish.
There are many ways to participate in this unfolding next leg up in the secular bull-market of precious metals and the corresponding shares. One way of course is to simply buy the industry's leader, Newmont Mining, shown in the chart above. Medium sized companies and juniors however offer a lot more leverage to the gold price but are also riskier.
Another way of participation is through an investment fund that primarily invests in mid-sized and junior companies like THE TIMELESS PRECIOUS METAL FUND (www.timeless-gold.com).
We also offer Portfolio Management services for clients who prefer to have their individually managed precious metals portfolios (www.pzim.com).
The following recommendations were valid at the time of writing, viz. at
and may no longer be pertinent when you read them.
Peter Zihlmann
www.pzim.com
www.timeless-gold.com
investment@pzim.com
forex@pzim.com
September 20, 2005
Disclosure: The author has not been paid to write this article, nor has he received any other inducement to do so. The author is a shareholder in the company and will benefit from any increase in the company's share price. Disclaimer: The author's objective in writing this article is to invoke an interest on the part of potential investors in this stock to the point where they are encouraged to conduct their own further diligent research. Neither the information, nor the opinions expressed should be construed as a solicitation to buy or sell this stock. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions in the stock.