Gold in the Next Stage of a Bull Market
Here's Addison Wiggin, checking in from Baltimore with the one chart every gold investor wants to see his reflection in...
Gold is on track for its best monthly performance in a decade. The money metal reached $1,180 earlier this week, another all-time high. There's buzz that India, which bought 200 metric tons of gold from the International Monetary Fund earlier this month, might well buy the rest of the 203.3 metric tons the IMF has put up for sale.
A gold run-up like this perks up the ears of the mainstream...and that often gets our contrarian impulses tingling. MarketWatch took note this week of the interest in gold among big-name hedge fund managers. Good for them. MarketWatch is only 10 months behind us in noting David Einhorn's interest, and seven months late catching onto John Paulson's stake in South African miners and the gold ETF.
All of this is fueling talk of a "bubble" in gold. To our friend James Turk, this signals that gold has begun only stage two of a three-stage bull market. "Don't be misled by what you may hear or read in the mainstream media, and even much of the alternative media," he writes. "After all, how many commentators have correctly identified gold's bull market, now a decade old?" Or for that matter, how many correctly identified the tech bubble in the '90s or the housing bubble this decade?
"Gold has moved from apathy and neglect - stage-one characteristics - to growing attention. But importantly, instead of embracing gold and analyzing it to determine relative value, today's attention is one of widespread disbelief and skepticism that gold can climb higher. These are exactly the responses one should expect to emanate from stage two."
"As gold climbs higher, we will eventually enter stage three. The timing of its arrival cannot be predicted, but we will know it has arrived when commentators who have been consistently wrong about gold will be telling everyone willing to listen to buy gold."
Addison Wiggin
for The Daily Reckoning Australia
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About the Author
Editorial director of The Daily Reckoning, Addison Wiggin is also the author, with Bill Bonner, of the international bestseller Financial Reckoning Day and a frequent guest on national US radio and television programs. Look for the sequel to Financial Reckoning Day, Empire of Debt (John Wiley & Sons) in October, 2005.
Comment by Greg S. on 3 December 2009:
I agree, gold entered the 2nd. stage of the bull market that began in 2001 in November 2008.
I think you could make the case gold is in the 2nd. stage of the supercycle bull market that began in 1971. We've been in that stage 2 since 2001.
I think you could also make the case that gold is in the 2nd. stage of the shorter term bull market that began in November 2008.
If all this is true, then gold is in the 2nd. stage of a 2nd. stage of a 2nd. stage bull market and the resulting rise in price may be spectacular. Who knows, but it's going to be interesting.