As the year draws to a close, it’s easy to say
that it’s been a difficult one. That’s mainly because of the high
volatility in the markets, in reaction to the daily ups and downs on the
The overall global environment remains complicated,
and it’s still having a strong effect on all of the markets (see Chart
Currently, the Fed and other big central banks have
come to the world’s rescue, at least for the time being. They’re
basically bailing out Europe but there will be a price to pay.
All of this drama and volatility have both raised
many questions. And following are some of the most frequently asked
questions we’ve recently received…
Q. If gold is a “safe haven,” why
does it go up and down so often with the stock market?
A. Great question and that has been the case
lately. This happens at times but over the long haul, gold is the ultimate
safe haven and it will go its own way, based on the underlying fundamentals.
Over the past decade, for example, gold has risen 645% while the Dow
Industrials has only gained 13%. We believe this will continue based on the
vulnerable global debt situation, the weak currency markets and many other
factors we’ve often discussed. In fact, gold has maintained its safe
haven status for thousands of years and there is not another investment,
including any currency, that can make that claim.
Q. When you say, use weakness to accumulate gold,
does that also apply to silver?
Q.Is it prudent to invest in the ETFs for gold
and silver (GLD and SLV), considering they may not have the necessary amount
of metals to cover the shares issued?
A. Yes, this is a risk. Many say there’s
proof the metals are there, others are doubtful. The same is true of the gold
held by the U.S... These days there’s reason to question just about
everything. That’s why we always say, owning
physical gold and silver is your best and safest bet. Also, keep it close to
you rather than having a third party hold it for you. While the ETFs provide
an easy way to buy and profit from the rises in gold and silver, think of
them as an index, like the Dow Industrials, rather than as a way to buy gold
Q. Is gold manipulated?
A. Probably yes, at times. But since the major
trend is always more powerful, manipulation effects will be temporary.
Q. How can I learn more about technical
A. Two great books are How Charts Can Help You
in the Stock Market by William Jiler and Technical
Analysis of Stock Trends by Robert Edwards and John Magee. They were
published years ago but they’re the best for those who want to learn
the basics of technical analysis.
The metals and their shares also fell sharply last
week as gold dropped below its September low.
This means a steeper D decline in gold is
underway. That is, the decline since September is becoming a full on D
decline, which is a first in three years. Chart 2 shows gold now
approaching its key 65-week moving average. Gold could still decline
further, to possibly test this major trend, and if it does this would be
normal for a D decline move. If gold tests its 65-week moving average near
$1525, it would be a 20% decline.
We know this decline is unnerving but keep focused
on the big picture and hold your open positions. Gold is oversold and
this is still the time to be buying and accumulating during weakness.
Mary Anne and