After a strong burst last week, Gold has done what would be expected: pull back before launching with a vengeance. The charts look great! As far as the metal itself goes, it is merely pausing and gathering strength after a huge break-out last week.
Gold and Silver mining stocks still appear sluggish. However, a look at their charts indicates a VERY bullish pattern known as a "declining pennant". Such a pattern is formed when an index, in this case the HUI or "Gold Bugs" index, makes a series of lower highs and lower lows forming a channel with a negative slope. Once the HUI breaks above the upper channel, we will be off and running! The upper bounds of the channel were tested last week and it is typical to bounce back a bit before bursting through. That's where we are today.
Once this channel is broken, which I expect in no more than 3 days, GOLD WILL NEVER LOOK BACK!
If, for some reason, you've STILL not gotten in, this may be your last ideal entry point. Once the market goes parabolic, it will be impossible to find a good spot to get in without being whipsawed. I know, since I witnessed the internet bubble in 1998-2000 as a hedge fund manager. I saw how it wreaked havoc with me and others trying to ride the bronco bull.
I will re-iterate a few things about investing in Gold.
1. Avoid the Exchange Traded Fund (ETF) with the symbol GLD. If you want a bona-fide metals backed fund, try CEF, which is roughly comprised of 55% Gold and 45% Silver.
2. If you have to buy ONE stock, make it GDXJ, another ETF, which is a basket of 40 individual Gold and Silver mining companies and will get you instant diversification. I've mentioned ECU Mining in a prior essay, and if you're looking for a real potential home run, check it out (http://markostake.blogspot.com/2010/02/ecu-silver-mining-as-good-as-it-gets_7745.html).
3. Expect increasing volatility on the way up. As the public enters, the day-to-day swings will turn your stomach.
4. Employ the trading strategy I recommended in an earlier blog to preserve your profits and reduce your stress (http://markostake.blogspot.com/2009/12/safe-way-to-trade-tricky-gold-market.html).
5. Be aware that the upcoming mania will last AT LEAST a year and possibly as long as 5 more years. Take profits from time to time as suggested in point 4, but hang on until Gold AT LEAST crosses $2,000. It may even rise to $5,000, which is the ultimate target of "Marko's Take".
6 Employ other inflation-proofing techniques in the context of your lifestyle and other investing(http://markostake.blogspot.com/2009/12/tips-on-grabbing-higher-yields.html).
This may prove to be a life-changing event for anyone poised to take advantage of it. I expect to see a whole new class of millionaires created from the upcoming mania. Let's be smart about it and not suffer the fate of the dotcom millionaires who made and then LOST EVERYTHING!
Good luck! Comments? TAKE ME ON!
Our second segment on YouTube will be posted sometime today, Tuesday, February 23rd, 2009. To access the site click here: http://www.youtube.com/markostaketv