Jan 25, 2012
The fed announced today that their benchmark rate will stay low until mid 2014, and six officials out of 17 do not see a rate hike until 2015. In other words more ofthe same, this sent both gold and the stock markets on a rampage.
I’m frequently asked how long I think this bull market in gold can continue. The factors that prompted us to start investing ingold 10 years ago are increasingly prominent today; so I don’t think this is anywhere near over. Furthermore, the more that the Fed and the government manage to kick the can down the road, the moreextreme the end game is going to be, or the higher the final gold price before the rally is over.
The fact remains that for the mainstream investor gold, gold shares and junior gold companies are justnot attractive. Despite the fact that both gold and silver beat all major indexes last year while dealing with a very strong dollar, the average investor only seems to recall that gold ended the year25% down from its all time high of almost 2,000. Silver posted slight better return than gold, but ended the year close to whopping 50% below its high. Ironically this volatility is benign whencompared to natural resource shares. I have had investments that crashed over 90% only to sport a spectacular comeback and multiply the initial investment.
We bought some shares of the Central Fund OfCanada (CEF) on the last day of the year with gold trading at around 1,535. I had identified strong support at 1500 on the 27th of September, and on December 29, the gold price rebounded for asecond time of off this support giving us a clear buy signal. As of today this position is up over 10%.
Gold stocks had a poor year in 2011. I correctly identified the exit in December 2010, anda good entry point in September of last year. Today’s price action provides tentative confirmation that an uptrend is in place, but as always it might be a good head fake. Our analysis indicates...