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Gold & Silver Prices in

Inside The Surprise Zone

IMG Auteur
Published : February 22nd, 2012
1507 words - Reading time : 3 - 6 minutes
( 0 vote, 0/5 ) , 1 commentary
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  1. Most of you believe that a time machine is a theoretical device. You might like to be able to buy gold at $250 an ounce today, but without a time machine your dream cannot come true.

  1. I’ve created a real time machine. It really works, and you can use it to buy gold at $250 an ounce today. To use my time machine, please click here now.

  1. You can’t go back in time and buy gold at its point of maximum price sale, but you can look at other major markets and understand the emotional strength required to buy them during similar price sales.

  1. Oil bottomed at $10, while the major news media told you that the oil supply glut was “here to stay”. Now they are telling you the same thing about natural gas.

  1. When gold bottomed at $250, it didn’t feel like a bottom, to put it mildly. It felt like gold was going straight to $100-$150. Drawing arrows to infinity on the gold price charts after a $200 rally isn’t how you build real wealth. You must buy markets that are dominated by supply gluts, extremely low prices, and investors in capitulation mode.

  1. In the natural gas market, I’d like you to look carefully at the current change in relative strength (RSI), the change in MACD, and most of all, the change in volume.

  1. From current prices near $1740, gold needs to skyrocket to about $3100 to make you an 80% profit. Natural gas needs only to rise to $4.50 to do the same thing.

  1. The last time gold showed any kind of serious price sale was in the $1500-$1600 price zone, and the sad truth is that most investors sold out or became terribly demoralized as those prices happened. Sadly, the great gold sale had almost no buyers amongst gold’s biggest fans.

  1. More gold sales will occur. Have the patience to wait for them, rather than drawing arrows to zero on the Dow chart and arrows to infinity on the gold chart. Those arrows won’t build you any wealth.

  1. You can’t know if $2.45 is the bottom for natural gas. The changes in RSI, MACD, and volume could not have been predicted to occur when they did. Carry some short positions while building a net long position in this mighty asset, so you don’t lose your sanity if a new round of lower prices is yet to come.

  1. Wealth is built by buying assets in what I refer to as the “surprise zone”, or the “discomfort zone”. The surprise zone is the lower price area on the price grid that you “know” your asset can never touch. In contrast, most investors use prediction to buy assets. Use your own failure to predict an asset higher, to buy it lower. My largest buys of a major asset are always triggered inside of my personal surprise zone. I buy my own stupidity. Should you buy yours?

  1. Remember when I came on the gold community scene during the October, 2008 carnage? While most investors were selling out of the stock market and shorting it, I bought Dow stocks into the tick lows, while literally holding my stomach. At the same time, I was maniacally withdrawing money from banks on a weekly basis.

  1. It was clear that either the Dow and gold stocks were at a major bottom, or the markets were going to close down and the financial system would collapse. I had no clue which outcome would prevail. I bet on both outcomes by removing cash from the system, storing gold, and buying the Dow and gold stocks with my pyramid generator.

  1. I was absolutely sure that General Electric was going bankrupt, yet I bought it anyways. The market turned at my point of maximum pain, not my turn call, and the same thing is likely happening now in natural gas. I have no idea whether $2.45 turns out to be the final bottom, but it is certainly a price where risk capital needs to be placed into this superb asset.

  1. Ultimately, I expect natural gas prices to rise to $20 and higher, which is an eight-fold increase from current levels. Gold would have to rise to about $14,000 to produce a similar return. Gold may well achieve that price, but unless it is drastically on sale with investors in capitulation mode, I have no interest in adding to my gold bullion position.

  1. Gamblers can buy gold on $50 price declines, but investors should not touch gold unless it is at least $100 on sale. Look out your gold price window this morning. Is it $100 on sale? Don’t worry, you’ll get a $100 price sale soon enough, and much more. Gold will enter your personal surprise zone, and mine. Will you take action on the buy side when it happens?

  1. Many investors have quietly bought back into the market with some size in the $1680-$1765 area, after selling out into $1525. I call this action price chasing by stealth. Gold appeared to break out to the upside from a falling wedge or drifting rectangle. Maybe that’s what happened, or maybe it’s just a mirage painted on the chart by the banksters.

  1. I sense substantial frustration amongst investors who bought that apparent breakout after selling out into the lows. Instead of blasting higher after the breakout, the gold price looks now more like a chuck wagon that just drove into quicksand. Embittered investors blame supposed “price manipulators” for their current problems, when 100% of the problems stem from failing to buy any gold when it goes on substantial price sale.

  1. Don’t compound one mistake with another one. If gold falls to $1700, or even below that price, remain calm. Hold your ground, regardless of what price you paid for your gold. Never trade gold for dollars at a loss. It’s not a tiddly winks game that you bought. It’s gold.

  1. Gold was “high” at $887 in 1980. Now that price is low. It doesn’t matter if you pay $250 or $250,000 an ounce for gold. What matters is the emotional state of your opponent, and whether you are buying during a real price sale or not.

  1. Click this gold basics chart now. The lines I’ve drawn there are horizontal support and resistance lines (HSR), but just because HSR exists at a certain price doesn’t mean you should be acting in the market at that price, especially in size. Charts indicate potential scenarios for price, but buying a price sale is the only way to build wealth in gold. From where price sits this morning, the price range of $1650-$1665 represents a real price sale for gold, and no buying of size should be done unless price falls to that specific price area.

  1. On the upside, $1800-$1825 represents almost $300 of price appreciation from the lows, and only gold that was bought at $1525 or lower should be sold there. Unless you are a gambler, don’t accept less than a $300 per ounce profit for any gold you purchase at this stage in the crisis. Buy sales that give you a minimum of $100 of price weakness, if you are serious about coming out of the other side of this epic crisis fully intact.

  1. Click here now to view the junior gold stock price action, via GDXJ. Note the highs near $31.68 and $30.65. The $30 price area is significant overhead resistance. We “needed” this pullback to make a serious attempt at breaking through that resistance. The short term Stochastics indicator that I’ve circled in blue suggests that this week should be a good one for gold junior stocks, but it remains to be seen whether the low of $27.16 will hold, or whether this new rally is only a break in the downside action. The GDXJ price could still decline to the supply line of the wedge pattern in the $23-$24 area.

  1. Investors should generally be buying GDXJ on $3-$5 price sales. I buy it every dollar down, increasing the size of my buys all the way to zero. The bottom GDXJ line is that $27 is a good place to accumulate GDXJ, $23 is even better, and $19 is best of all. Since you can’t know where the final low will be, it’s critical to have capital in place to buy GDXJ at prices that are deep inside your personal surprise zone!




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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is attractively priced and the format is a unique numbered point form, giving clarity of each point and saving valuable reading time.
Latest comment posted for this article
Well surprise,surprise. Good analysis on NG. A commodity Ive never traded, still in down mode and a pullback to 2545 will likely see me get long. Cheers to you too.  Read more
S W. - 2/22/2012 at 8:43 AM GMT
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Well surprise,surprise.
Good analysis on NG.
A commodity Ive never traded, still in down mode and a pullback to 2545 will likely see me get long.

Cheers to you too.
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