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Gold Action

May 16, 2004

The correction from January was traumatic BUT this is NOT a panic sell area but a HUGE buying opportunity. In the case of the JSE Gold index it marks the final stage of the massive sideways base from April last year. This base is a double bottom and implies an extremely powerful forward movement. As always when these sudden collapses hit the gold market there is panic and the market sold off to stupidly oversold levels.

Frankly it does not matter which stocks you consider for your portfolios, they are all into serious buying areas. The bottom line is that if you have never invested in gold or silver stocks before NOW is the time to do so. In six months time you will look back at the current prices and regret not buying.

I must reiterate that this was certainly a nasty sell off, but NOT the start of a new bear market. It is an intermediate correction, albeit vicious, in an ongoing long term bull trend. DO NOT be tempted to sell out at current prices. Use this sell off as a heaven sent buying opportunity to pick up cheap stock.

The Dow is looking more vulnerable by the day I am expecting a serious bear phase to commence. Forget about elections there are greater global forces at work. I have discussed the oil price on several occasions and indicated a $45 per barrel target. This has virtually been achieved. The price is nominally overbought and a minor period of consolidation is likely before a resumption of the main bull trend to the $52 target. Inflation is going to be rampant.

What I find of interest is the currency scenario. The dollar looks to have run through its period of strength and is ready to turn back into weakness. Of particular interest is the Yen. The bounce back to Y114 has mapped out a text book pullback to a neckline. This is a signal for the Yen to return to strength and hit my long stated target of Y95. I am looking for a resumption of a seriously weak dollar.

South Africa has been awarded the 2010 soccer world cup. This has sent the populace into paroxysms of joy in the belief that jobs for all will be created. Oh Dear! Only a rise in the gold price will affect an economic recovery in this country substantive enough to really create jobs. A once off month long event in six years time will hardly be the panacea for economic lethargy.

Gird your loins and pluck up courage. The precious metal stocks have been sold off to levels of stupidity and are into major buying regions. It does not matter if we miss the bottom by a couple of weeks. In six months time you will be wondering what all the May panic was about.

ANALYSIS - Let's get rid of the emotion and keep a serious perspective on the gold price. First the uptrend is still intact. Second the reaction back from the $430 level was a short term repulsion from a large resistance level. A break above $430 will be very bullish. Finally pattern is a flat top broadening formation for the past 15 years. This is extremely bullish for the long term and indicates an upside potential well in excess of $600. The recent sell off was traumatic but it is merely a correction in an ongoing bull market NOT the start of a serious bear trend.

ACTION - If you have never bought gold and silver shares now is the time to do so.

ANALYSIS - It is essential to maintain perspective when all the comments are so bearish. Once again I detail the relative performance of the gold price against the Dow. There is no doubt that bullion has outperformed the Dow for the past three years and with the current triangular pattern looks set to remain the top dog.

ACTION - Gold will continue to outperform US equities.

If you have never bought a gold share now is the time to do so. If you are holding gold stocks sell your equity holdings and take further positions.

ANALYSIS - Silver has fallen back to the major support level. This is once again a major buying area. I expect a serious bounce back from the current levels. It may be some time before the previous high is again reached but there is a decent buying opportunity at the moment.

ACTION - BUY Silver for a serious bounce.

ANALYSIS - The Silver vs Dow chart has formed a right shoulder after the recent set back. This is very bullish situation and indicates that the silver price will continue to outperform the Dow for quite some time.

ACTION - I rate silver as a serious buy.

ANALYSIS - I have several times detailed the upside potential for the oil price. It has broken above the major $34 resistance and the upside count is to $52 per barrel. In the short term the price is overbought and should take a breather but long term indicates serious inflation.


The recent correction was traumatic, BUT is still just a correction in an ongoing bull market.

It does not matter which stocks you pick, all the gold and silver stocks are into superb buying levels.

Corrections of this nature afford the investor the opportunity to pick up cheap stock.

The relative strengths of gold and silver vs the Dow have only just started their long term out performance.

There is still a HUGE upside still to come in these precious metal and their stocks.

As I have said several times ….. go on holiday for three years and forget about the gold and silver markets!!

Oil combined with the rising interest rates is likely to cause a serious bout of inflationary indigestion world wide.

Rising oil prices could well put a dampener on global growth. So I am taking all the expectations of continued expansionary growth with a very large pinch of salt.

Rising inflation plus rising oil prices indicates major equity bear markets plus booming gold prices.

If you have never invested in gold or silver before now is the time to pick up value and serious upside potential.

India is perennially the world’s largest gold consumer.
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