Gold update

[rickortreat]

It's been a long hard summer for Gold bugs. After ramping up to $730, Gold tumbled to $542.  Note that 542 is a lot higher than when Gold started it's run to $730.  The run started last year at the end of August and ran up until this past May.

Here we are 1 year later and Gold has been consolidating in what we in the trade call a triangle.

I am writing now to give you advance warning.  Although Gold is perking up again it's still a little early.  The price is at the mid-point of the triangle now, and after it hits upward resistance it MAY go back down to retest the bottom.

The real fireworks will begin after gold breaks out of this pattern.  Typically after a big run-up, there will be a consolidation pattern, after which the previous trend will resume.  This process also works in the opposite direction: after a big move down, a stock will consolidate before continuing down.

I expect Gold will start to rise violently once again, starting in a few weeks.  Currently Gold stock are rising along with the price, as if everyone is expecting Gold to break out of the triangle immenently.  It could work out that way, but Bull markets have a way of shaking people of just before the big move up.

A lot depends on the stocks you buy.  Goldcorp, one of my favs, just made a stock swap offer to combine with Glamis.  If there is only one gold stock in your portfolio, this is the one.  It was down a couple of bucks today, but the people who sell on these mergers usually come out loosers unless they buy back quickly.

I was in Wheaton River just before Goldcorp bought them out. After I rec'd my GG shares in trade I had to decide whether to cash out or hold on. GG's story was so good, I stayed in and made another 100%.

Another fav of mine is GSL.TO, a riskier play since they aren't in production and their property is in Columbia.  They keep drilling holes and finding more of the stuff, lots of Silver too.  After waiting patiently, over the last 5 days, it's up over 17%...

Gold is at $625 now, but should be over $800 by the end of the year with the miners going up more on a percentage basis.  Stay away from the hedged big boys like Barrick and Newmont, who need new mines to help cover their forward sales.

If your not a speculator or trader and just want a safe place to park your money, USERX and UNWPX have done very well for me. USERX is up nearly 100% since last year at this time, and so is UNWPX.  Depending on what Gold does these mutual funds could do the same thing again over the next 12 months.

Keep checking back here, as I watch the price to see when it breaks out of the triangle.  

[rickortreat]

As I suspected, they jammed Gold down again, over the past two days, taking it from just under $640 to below $610.

It would be wise to take advantage of the current price weakness to get into some shares here.  I don't mean to imply that the price cannot go lower here, but suggest that it is highly unlikely and moreover, you will eventually be able to sell at a higher price than you buy at now.

Just make sure you buy the right ones, which means staying away from Barrick and Newmont, the two largest miners, who have sold so much forward prodcuction that a price rise in Gold will hurt their bottom line!

These two firms will be trying to buy other miners to add to their reserves and enable them to cover their short positions.  Their share price will be hurt, but those they go after will see thier prices rise and demand a premium in the marketplace.

GG just made an offer to take over Glamis, and their price was hurt in the process.  GG is still a good one, in spite of what others may say.  The merging with Glamis simply increases their reserves, and if gold goes up in the future, no one can really say they overpaid now.

Expect continued weakness until the end of September or thereabouts.  It will take that long for reality to force the market participants to reevaluate their positon.  In truth the dollar is really ugly, but some people are still proping it. They have the control now, but the postition is untenable, since the US dollar is only as good as the tax revenues it can collect, and the debt level is so high that the US cannot pay it off.