Richard Russell On GoldQuestion -- Just for the sake of argument, let's say that 2003 turns out to be a mini-bull market year. If we do go into a mini-bull market, should we play it?Answer -- Personally, I wouldn't. The situation is too "iffy." You'd be putting your hard-earned money into a bear market rally, which is always dangerous.
I'd rather put my money in an area where the primary trend is bullish. Which is where gold and silver come in. I've been advising positions in gold and silver for the past few years. I continue to advise positions in the precious metals.
Buy the coins, buy the gold stocks, buy the gold funds, but if you haven't already done so, it's not to late to take a position in precious metals. I think it's going to be a long and ultimately speculative bull market in the precious metals.
Gold has recently emerged from a 20-year bear market. After 20 year of going sideways to down, gold is despised, ignored, mocked -- and thoroughly sold-out. The majority of analysts and certainly the public don't understand gold. They've been brain-washed by central bankers who would rather produce and control their own fiat paper money. The central bankers produce paper currency, and they tell us "this is money." And for many decades a brain-washed public has accepted paper as money. But for how much longer?
Hey, I can take a piece of purple cardboard and tell you that "this is money." And if all the central bankers in the world agree with me, and the government tells us that purple cardboard is "legal tender" for all debts, then damn it, purple cardboard will be treated as money.
Until one day people start asking why gold is rising -- and why in hell purple cardboard is sinking against other nations' paper money -- then the trouble begins.
So say hello to today's fiat currency -- some people are beginning, just beginning, to ask why this junk paper should be called money.
Thought -- you can still trade your junk paper in for real money -- gold. And you can still swap your junk legal tender for stock in companies that produce real intrinsic money. They're called gold mines. Sounds like an interesting swap, don't you think? Junk paper for real intrinsic money that doesn't become worthless over time.
But why is this the time to make the swap? It's time because the word is out -- the Fed is manufacturing far too much junk paper. People are beginning to ask questions. And if people continue to ask questions, eventually the truth will out. And the truth will spoil the whole rotten central banks' scam.
The truth is that the dollar is not real money. You don't believe it? Then here's the test -- give me the definition of a dollar. The reason you can't is that there is no definition of a dollar. The dollar can only be described in terms of its relationship to other fiat money.
Oh yes, there used to be a definition of a dollar. A dollar used to be defined in terms of a specific quantity of silver or gold. But today, poor bastards that we are, we've got all our assets denominated in paper for which there is no definition.
The awful truth -- the Federal Reserve is pulling off the biggest scam in United States history.
Gold -- I want to say a bit more about gold. I've beseeched my subscribers to take a position in gold and gold shares. Repeat -- take a position in gold, and if you haven't done so, take a position NOW.
I'm very much afraid that the US is going into a state of deflation. The bonds are telling me that... The economic statistics are telling me that... My "insides" are telling me that...
The US has accumulated too much debt. The US has accumulated more debt than it can handle. The situation looks increasingly as though the debt mountain is about to fall over. If it does, we will have deflation.
If we are going into deflation, then investors are going to turn to items and assets that will stand up and remain solvent under severe deflationary conditions -- under bankruptcy condition.
There's a "safety pyramid." At the base of the pyramid is gold. Gold is pure intrinsic money, gold is nobody's debt as is the junk we call "dollars" that are churned out by the Federal Reserve.
Therefore, knowledgeable investors who want to protect themselves against deflation will "go for the gold." Gold under deflationary conditions represents ultimate safety. This is the basic reason for the move that we're seeing now as the price of gold rises higher and higher.
I heard some fool on CNBC today denigrating gold. He said that gold only goes up in the face of some news emergency such as an attack on Iraq. Pure bull shit.
Gold is rising because it senses deflation and a debt collapse. Gold is going up because big money - sophisticated money - smart money - is moving to protect itself against a potential deflationary collapse.
Note -- Subscriber are writing telling me that some analysts are saying that gold is topping out and that gold is "blowing off" and that gold will shortly cave in.
They may be right, anything can happen to anything in any market.
But the Russell view is different -- the Russell view is that gold is in a major bull market. Furthermore, gold is in the early or accumulation phase of this bull market. Further still, since this is a bull market in gold, I believe gold will go vastly higher.
Remember, I go by price action, and I don't give one damn in hell what any other analysts say. I go by what the markets tells me, and what my brain (what little brain I have left) tells me -- and they tell me that gold is in a bull market and that it is heading higher.
Incidentally, the Commercials (gold banks, hedged mines) currently have a huge short position in gold of 143,000 contracts. And they keep adding to their short position. Ordinarily, the Commercials will prevail. But this time the Commercial shorts are aligned against the primary trend of gold. The Commercials are being squeezed. They need a big break in gold to make money or even to get out of their positions. And so far, they are not getting that big break. How much longer will the Commercials continue to build up their short positions? I don't know. But once a position is taken, it has no further ability to weaken the market. Only additional new short positions can weaken the market, since new shorts represent further supply.
Richard Russell
Editor-in-chief - DOW THEORY LETTERS
www.dowtheoryletters.comJanuary 10, 2003
The inimitable and venerable Mr. Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.
