Jay Taylor's Gold Review
Jay Taylor
Richard Russell Accurately Gold Scene
"I don't see any direction ahead except inflation -- meaning the production
of more and more liquidity and credits. The amount of newly created "money"
needed to fund the costs and the liabilities that the US has taken on will be unbelievable. As the world fully comprehends the situation the US is in, I think it will be reflected in a rising price for real money in terms of dollars. In case you've forgotten, the only real money is GOLD.
The world is starting to take note of the debasement of the dollar and other currencies, which is why gold and other commodities continue to rise in value and now at an apparently accelerating pace. Frankly, the prospect of a Bernanke Fed is downright frightening, because the man's policies will destroy our currency and ultimately the free market capitalism this country
has stood for. What can we do? In addition to trusting in God (which our
politicians say they do but don't), we can trade increasingly worthless paper money for real asset money, chief among which is gold and secondly silver. We also need to stay out of debt, because when this debt inflation collapses, we will all too suddenly be faced with debt deflation.
Gold-Is the Next Stop $650?
"Perhaps There Will Be No Serious Correction This Time" -Roger Wiegand.
My friend Roger Wiegand has been calling for a significant pullback in gold
bullion, based on his technical analysis. Chuck Cohen, another good friend of mine who also is a technical analyst, though he uses different technical tools, told me immediately when he read Roger's pullback warning that "This time Roger may not be right, because the technical tools he was looking at (more from sentiment readings, etc.) show some very major shifts in the global markets, and the psychology of those markets may in fact be taking place. Chuck reasoned that based on the still heavy anti-gold psychology combined with horrible geopolitical events taking place, not to mention the horrendous financial imbalances abounding, that gold might just keep right on moving.
On Friday when I spoke to Trader Roger, he acknowledged in effect that Chuck may indeed be right, admitting candidly that, now that we are over
$550, a $5 pullback in gold may be about all we get. This underscores one
of the reasons Richard Russell advises against trading in a bull market.
Frequently, when you get out, there are no easy entry points. To be fair to
Roger, as a conservative trader he had retained a heavy long position in
gold and gold options, and they continue to do very well. But this little
example is one more reason why I personally prefer staying long in markets
that are in long-term secular bull markets and staying short in markets
that are in secular bear markets. Most people don't do well in timing the
markets, and even a trader as good as Roger, who focuses every day, hour
after hour on technical analysis, simply gets it wrong. And if you want to note a splendid technical analyst who has gotten it wrong, wrong, wrong, look at Bob Prechter, who has steadfastly called for $105 gold even though gold has now broken through downtrend lines not only in the dollar but in virtually all currencies.
Richard Russell's Remarks above provide the logical reasons for gold's
explosive price rise. And quite frankly, this is happening even as the vast
majority of Wall Street cheerleaders continue to tout stocks. When the
entire system breaks down, I am nearly certain we will see gold being
quoted in four digits rather than three. The only question in my mind is
what the first digit of the four-digit number will be.
In any event, here is what Trader Roger Wiegand is saying about gold and gold share markets this week:
"Gold: Closed at 556.50 and about one dollar higher on the February futures. Bullion sales in foreign nations (over the last month?) was reported as now over $20 billion. Metals stocks did not move much. However, today (1/13/06), the stocks came alive with early cash gold sales reports. Japan's largest gold seller reports faster sales, and China announced they will increase their central bank supply. Global gold production is down and sales are up, further tightening the supply. The daily gold chart has much increased pattern momentum and the wave legs are stretching out longer and faster. Should we see three solid closes over $550, there will be no mild
correction as we had forecast. Once gold prices are firmly established over
$550-$500 the heavy resistance is removed and price will easily rise to
$650. After the $650 price, there is little to stop gold until the next
major resistance price point of $850, an old chart high from 25 years ago.
Expect more price range days of $8-$15 per day."
Richard Russell talked this past week about the 50% rule as it applies to
gold. In fact $550 gold is the halfway point between gold's all-time high
and its low that occurred since its all-time high of $850. Richard compares
this to a teeter-totter in that, once you get beyond that halfway point,
the momentum to the upside gets much easier. Trader Rog alludes to it above as well in noting that the next major stop for gold may be $650. Certainly gold has not gotten away from the manipulators, including the major mining companies, which have played a role in helping the Brits, the U.S., and Western allies trash the gold price during the 1990s in the greatest paper money scam and stock market bubble scam in history. Now the chickens seem to be coming home to roost, only most of the mainstream folks still don't get it. They think unlimited prosperity can be had by printing unlimited amounts of money. They call for lower rates of interest to keep the economy going, which is of course tantamount to calling for the Bernanke printing presses to pump out more fraudulent claims against the wealth that honest, hard-working Americans are producing. So, gold is finally having its run. This was expected all along for readers of this letter. The only unknown
was the timing.
"Gold & Silver Index XAU: Closed at 141.97. Trader Tracks had forecast an
XAU high of 145.00 and we are quickly nearing that number. Without a metals correction it appears this number will fall quickly and the XAU will rise higher and faster. The stocks have turned higher in momentum relative to gold bullion. The momentum position has reached the very overbought price level. Price for the past few days on the XAU showed a definite topping and sideways trading action preliminary to a selling correction. Now that the selling did not occur and price has gone higher, we could be opening a new wave set in rally mode. It is difficult for price to stay overbought for
long but with rally pressure we could only see a very mild to sideways triangle pattern, which is nothing but a pause-not a real correction. If
this is true, the next few weeks will see great volatility, wider trading
ranges, and an even faster rally. Usually however, this ends in some hard
selling to compensate for the extreme rally and overbought conditions."
January 15, 2006
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
www.miningstocks.com
Email this Article to a Friend 
Printer Friendly Version