When's the Next Streak? by James Turk

Gold closed this past Friday $1.50 lower than the week before, ending gold's streak. What streak was that?

Beginning on August 28th, gold rose six weeks in a row. Gold scored an average weekly gain of 2.1% per week during this streak. So it is remarkable that gold closed this past week only $1.50 lower. I view it to be a sign of underlying strength.

Rising six weeks in a row is a remarkable and rare achievement. There have been only seventeen previous instances when gold rose six or more weeks in a row since trading began on the Comex 32 years ago. Thus, winning streaks like the one just racked up by gold happen on average about once every two years, but interestingly, this latest streak is the third one this year. The two previous streaks were seven weeks each, and ended on February 23rd and April 20th.

Three streaks in the same year? It is in my view another way of saying that gold's bull market is alive and well. The following chart is saying the same thing.

Gold is trading as if there is a lot of money waiting on the sidelines to buy the dips. We saw evidence of that this week. Every time gold was beaten down into the $720s, it quickly bounced back.

If these buyers on the sidelines become impatient, they may cause gold to begin another multi-week advance. Thus, another streak beginning soon is entirely possible.

My $800 target for this year seems well within reach. But regardless whether $800 is hit this year or next, all the evidence suggests that $800 will indeed be reached.

Gold is still undervalued, and the demand for physical gold is increasing as monetary problems continue to worsen. The dollar and other national currencies are suffering the fate of all fiat currency backed by nothing but government promises - inflation.

Silver has risen five of the last seven weeks. So it too is doing well, but the gold/silver ratio has not changed much since August. It took 56.5 grams of silver to buy one gram of gold on August 28th, and it now takes 55.4 grams to do the same. This ratio will continue to fall as the precious metals move higher, meaning that silver will outperform gold.

James Turk

Goldmoney.com

Published by GoldMoney
Copyright © 2008. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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