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We are
very bullish for the long-term for the resource sector, i.e., gold, silver
and the resource shares. However, we need to live life and the markets in
real time and the question is where are we now and what should investors do,
if anything?
The
big question mark is for the short-term (several weeks) and the immediate
term (1 - 3 months).
One
very simple tool which will frequently keep you on the right side of the
markets is the 50 day moving average.
Gold
and the shares as presented by the HUI (Gold Bugs Index) and the GDX (Gold
Miners Index) broke below the 50 day M.A. early in January.
The
current rally we have been expecting has now brought the prices back up to
the M.A. and the question is: What Now?
With
many of the technical indicators overbought on a short-term basis we think
there is a high probably of gold and the shares resuming their downtrend
soon.
Investors
should consider raising some cash or be mentally prepared for the possibility
of a significant decline in their portfolios.
Cash
will be king in the next few months to take advantage of what we believe
could well be the greatest buying opportunity for the resource shares before
the next major up leg.
A
couple of simple charts on gold and the HUI will allow you to see what we see
and decide for yourself the degree of risk.
 
There
is a strong possibility of gold returning to the $1220 range over the next 3
to 6 months.
Again,
we stress our views that any correction will be within the framework of the
long-term bull market and give investors a great once in a lifetime buying
opportunity.
Patience
and cash are the keys to your future success.
Dudley Baker
PreciousMetalsWarrants
Dudley Baker is
the owner/editor of Precious Metals Warrants, a market data service which
provides you with the details on all mining & energy companies with
warrants trading on the U. S. and Canadian Exchanges.
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