Friday, December 11, 2009

Gold: The Interim Bottom Is In!

Now, before I go any further, the title of this piece is a joke!  NO ONE can predict whether or when any financial instrument has bottomed or topped.   The status of the entity may appear to be at a certain juncture and the declarer of that status may appear to be correct.  However, Gold could just as easily go down today, making me look like a complete ignoramous!   I've read newsletters declare similar things time after time and embarrass themselves by their obviously poor advice on the very same day the newsletter was published!

In addition, any strong declaration of a bottom in Gold is a disservice to readers.  They may interpret the statement as displaying such a high level of confidence, that readers act on it in an ill-advised way.  Many newsletters use this tactic to bait new clients.

Now, on to the actual topic today:  Gold -  where it currently stands.  As I've stated previously, it is my personal belief that the yellow metal and its cousin, Silver, are in the early stages of a parabolic rise, akin to the internet bubble of the late 90's.

Parabolic rises are characterized by long strings of advancing days, followed by a sudden and very sharp move lower, scaring the wits out of the holders.  Skeptics of the rise then come out, in droves, arguing that these heart-wrenching corrections "prove" their belief that the financial instrument, such as Gold, was INDEED in a bubble and that they were right all along.

I, myself, once ran a hedge fund during the internet bubble and was one of those skeptics.  I did the exact same thing, except I did it privately to my partner and employees.  I was wrong each and every time!  Thank God, I wasn't writing publicly about the topic or I would have looked like a complete jerk!  This goes to show why experience is so vital when advising people and how difficult it is to navigate the markets.  I was once a cocky, young punk, too!  Thank God, AGAIN that they had the "jaws of life" or my foot would have remained permanently implanted in my mouth!

As to my current "Take", I actually DO believe that Gold is in a bottoming process.  Indexes of Gold mining stocks have produced gains for the last two days and Gold stocks have consistently proven to lead Gold itself.  In addition, several technical indicators I review, have reached  levels absolutely consistent with virtually every other prior interim bottom.

Of course, those indicators aren't "inflammable", as Archie Bunker might say, but they ARE highly reliable from a statistical point of view. What they are suggesting right now, is that we are poised for a rally, NOT that a bona-fide bottom has occurred.  The stats haven't been wrong once since November, 2008, when Gold bottomed at BELOW $700 per ounce.

Of course, there are plenty of reasons to further add credibility to my theory that the latest interim bottom is practically in.  But, I've already covered them extensively in previous blogs.

Finally, by "bottom", I'm not precluding the possibility that Gold may meander around a bit as it re-engergizes before ultimately launching higher.  This, too, happened during the dot-com mania, but these periods of vascillation were fairly short.  And, they displayed some rather wild up days followed by a series of down days in addition to a pattern of wild intra-day swings.

So, my real agenda here is two-fold.  One: to warn you of the dangers of reading hyperbolic "experts" possibly trying to bait you to subscribe to their newsletters (Fortunately, this blog is FREE!), and Two: lay out, using my own experience, a very possible scenario of what might transpire in the days and weeks ahead.

I hope you found this article useful and informative. Unlike some of those "experts" I've referred to, I've put my money where my mouth is. But, as to what you do, that's entirely your decision.  If you have any thoughta, pro or con, I'd appreciate reading and responding to them in the comments section below.

Marko's Take


  1. I maintain you know of what you speak. I love the running conservation of what's happening in the gold/silver market and as you said, no one knows what will happen but unlike MANY, at least you're willing to be honest.

  2. You're still a young punk, Marko! JK.
    Thanks for your honest perspective. Interesting.

  3. Holly and Jenny:

    Thanks for the kudo's! Holly: I'm actually and old fart, but thanks for compliment anyway!

    Jenny: Who said anything about being honest? I have agenda's too, ya know!



Take me on!