Gold Investing: The Time to Jump Back in Is Very Near
On January 4, 2011, gold bullion fell $44.10 U.S. per ounce. The next
day, January 5, 2011, it fell another $5.10 an ounce. This morning, as I
write this issue of PROFIT CONFIDENTIAL, gold bullion is down
another $9.90 an ounce. In three trading days, we are looking at a
$59.00-an-ounce haircut for gold bullion.
In late 2010, on these pages, I wrote that I would be a buyer of
gold-related investments if gold bullion reached $1,370 U.S. per ounce.
The price of gold bullion reached a record high of $1,421 an ounce on
November 9, 2010, followed by $1,421.60 per ounce on December 31, 2010.
At todays price, I can buy gold investments at $50.00 an ounce off the
record high, which I consider a deal.
So my first step will be to buy more gold investments today if gold
remains under $1,370 an ounce. My next step will be to buy more gold
investments if gold gets down to $1,320 (which is a seven-percent
correction off its high). Hence, Im buying gold investments on dips on
the prices of gold bullion. Unlike many other advisors, I see
corrections in the price of gold as an opportunity to buy, not bail.
This strategy has served me well for almost 10 years now.
My gold bug readers may find the following chart interesting. It is
the close of the price of gold bullion at December 31 each year going
back to 2002 (the year I really turned bullish on gold). I publish this
chart in January of each year for the benefit of my readers.
In this business, they say Dont fight the tape, also known as The
trend is your friend. The above trend has been an investors dream for
almost 10 years running. I intend to continue profiting from the trend
of rising gold prices.
Michaels Personal Notes:
Investors often ask me what news sources I follow each day to keep up
the stock market. Do I watch the business TV stations like CNBC or Bloomberg
or listen to them on the Internet or in the car? The answer is no, I do
not follow the investment news on an hourly or even daily basis.
Why? Because a trend takes time to develop. Sure, I follow the
economic news closely. I read three major business newspaper a day and I
have my favorite Internet sites (like everyone else) to get more
in-depth economic reports. But follow the markets on an hourly or even
daily basis and you are no longer an investor; you are a trader.
The events that led to the real estate crash of 2007 took years to
develop. Similarly, the events that led to the credit crisis of 2008
took three years to develop. The stock market low of March 2009? Well,
that took two years to develop.
Stock market and commodity trends take months and years to develop.
What happens hourly, daily or even weekly does not lead to a sustainable
trend an investor can profit from. Ive always made money looking at
the overall, longer-term trend actions of the economy and how they
relate to the stock market. In other words, I dont sweat the small
hourly, daily or weekly stuff. Neither should my readers.
Where the Market Stands; Where its Headed:
Yesterday, I blew the horn on the market and announced that Im
turning bearish on stocks as we start off 2011. A group of sentiment
indicators we follow are flashing red, as too many investors and
advisors have turned bullish on the stock market. If it were not for the
outright expansive and unheard-of generous monetary and fiscal stimulus
the government has in place, I would be outright bearish.
But the trend is your friend. Since March of 2009, I have been saying
that we are in a bear market rally, and I continue to hold that
opinion. Until we have confirmation by the stock market to the contrary,
and aside from the fact that Im turning short-term bearish on the
stock market, in the immediate term, the bear market rally that started
22 months ago still has life left in it. But investors should tread
carefully.
What He Said:
When property prices start coming down in North America, it wont be
a pretty sight, because consumers are too leveraged. When consumers
have over-borrowed so much that they have no more room in their credit
lines to borrow more, when institutions start to get tight on lending,
demand for housing will decline and so will prices. Its only a matter
of logic, reality and time. Michael Lombardi in PROFIT CONFIDENTIAL,
June 23, 2005. Michael started warning about the crisis coming in the
U.S. real estate market right at the peak of the boom
, now widely
believed to be 2005.