Russell On Gold, Silver & the Dollar
Gold, unlike silver, has major political considerations. Rising gold implies a preference for real money as against central bank irredeemable paper money. Thus rising gold is a threat to the whole central bank system, and thus gold must always fight the establishment. This presents the question of manipulation and whether the so-called "anti-gold cartel" is "doing something" to frustrate the bull market in gold. In the end, the primary bull trend in gold will fully express itself. The more gold is held back, the greater the rise when the overhead pressure is overcome.
Interestingly, as gold moved exactly to its January and its 15 year high -- selling came into gold today. Coincidence? Perhaps, but it did seem to me that certain interests didn't want to see gold breakout to new 15 year highs. Maybe on another day. Maybe, indeed.
Silver hasn't crept up the way Gold has. Silver has been on a tear. The weekly chart below shows that silver is now overbought, but in a big bull market an item can remain overbought for weeks on end. Which is where we are in silver. There has also been a massive short position in silver, and I doubt whether the shorts are happy about what's happening. Unlike gold, silver is actually "used up" in manufacturing, and the rate of usage now outstrips the amount of silver being mined. So as the Lone Ranger used to shout to his great white steed, "Hi Ho, Silver, away!"
The Big Picture -- It's easy to get lost in the daily and weekly machinations of the market while losing sight of the big picture. For the benefit of new subscribers, I'll repeat my "big picture position" on the market. I believe the stock market is in the process of forming a major top, a top that will put the lid on the counter-primary trend rise from its September 2002 low.
As expected, the Fed continues to fight the bear forces "tooth and nail." Short interest rates are held at 1% and the broad money supply continues to expand. Over the last two weeks $50 billion has been added to M-3, the broad money supply, and tomorrow we'll see what the latest week has brought.
Meanwhile, the debts and deficits build up, and the dollar continues its decline. The various nations of the world are now making plans to diversify, or are actively diversifying, out of dollars. As the stability and even the viability of the dollar becomes increasingly suspect, we can expect the exodus from the dollar to gather momentum. There will also be pressure for something intrinsic behind the favored currencies. In the end, as been the case in all history, gold will win.
Note -- The June Dollar Index broke below its 50-day moving average today.
Richard Russell
Editor-in-chief - DOW THEORY LETTERS
www.dowtheoryletters.com/dtlol.nsf
April 1, 2004
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.
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