“PLEASE MOVE INTO GOLD,” urges Richard Russell

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Since its precipitous decline of more than $350 from August to December last year, gold bullion has regained almost $100 of its loss. The yellow metal two days ago managed to climb above its 200-day moving average in what appears to be an upside break from a mini inverse head-and-shoulders pattern.

Source: StockCharts.com

I remain bullish on the fundamental outlook for gold for, among others, the following reasons:

  • Stress in sovereign debt markets.
  • A likely recession in Europe (and commensurate quantitative easing in whatever form).
  • L0w real interest rates.
  • Central bank buying.
  • The least bullish positioning of investors in gold since 2008. (Also see yesterday’s post “Gold bounces off most oversold level since ’08 – buying time?“)

Having said this, I believe gold has more consolidation ahead before resuming its bull market. Pull-backs during this period should be used for adding to positions.

I often get asked what Richard Russell, 87-year old writer of the Dow Theory Letters, nowadays says about the outlook for gold. In short, he sees a world “economic train wreck” ahead, and views gold as the “last man standing”. A few of his comments are below.

“For a decade I have been urging my subscribers to move into gold – either physical bullion or otherwise. Now I am at it again PLEASE MOVE INTO GOLD. Those who think gold has lapsed into a bear market simply do not know what they are talking about. Gold has simply been correcting in an on-going bull market.

“This is a time when almost every central bank in the world is grinding out paper currency, grinding it out by the car-load. This is a time when people are searching for safety. People are frightened and confused. Where is the land of safety?

“There is only one safe asset on the planet: that safe asset is gold. Uninformed people believe gold is just a commodity. Wrong, gold is absolute money. Gold alone is the world’s only completely safe currency. Gold has no counter-party against it, and no central bank has ever found a way to create gold.

“Almost every nation on earth has indulged in the same kind of fiscal madness. To cover the insane spending, nations have had to create an almost endless amount of fiat currency. This avalanche of “money” has steadily reduced the buying power of almost every currency. The result is that it takes increasingly more paper currency to buy one ounce of real money – gold.

“Gold may now be ending its latest correction. If I am correct in this, gold is in a buying zone.”

The long-timer has spoken!

Source: Dow Theory Letters , January 11, 2012.

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20 comments to “PLEASE MOVE INTO GOLD,” urges Richard Russell

  • Why do you feel there is more consolidation ahead, and in what time frame?

    Thanks.

  • @Bud: I say that as a result of the significant overhead resistance. A lot of people piled into gold between the current price and $1,800 (and higher), and I think it could take a while to clear this area. It is difficult to put a time frame to it – not years, but anything from a few weeks to a few months.

  • Cricket

    Which form is easiest and safest to get into? Physical bullion? ETFs? Mining stocks? SPY? Thanks.

  • steve

    I think it’s time for the vertical move. Many people are jumping in and out of stocks and gold. Literally playing with fire. Just as they are with our nation’s future by not supporting Dr. Paul.

    You can lead a horse to water, but a pencil must be lead. :)

  • Bill Goode

    What does Mr. Russel say about silver? Gold pretty much maintains the value of one’s investment over time. If one prices commodities in gold, one will find that the prices have not gone up or down very much. But if you price them in silver, you will find a big change. The industrial demand for silver is rising. The supply is dropping. Miners don’t want to mine silver because the price is so low. But demand from industry & small investors will radically increase that demand. Gold is certainly a very worthwhile investment, but silver is MUCH better.

  • @Bill Goode: Richard hasn’t expressed a view on silver for a while. But he has generally also been positive on silver, but less so than gold as a result of the silver price being affected in a greater way by industrial demand (as opposed to monetary considerations in the case of gold). He thinks the global economy is going for a complete loop and that silver may not have the same appeal as gold under a “train wreck” scenario.

  • @Cricket: I like a combination of physical bullion (coins and bars) and gold mining stocks. Unless you are a short-term trader, I would prefer not to include bullion ETFs. SPY is a totally different issue as it is not a gold-related instrument.

  • An AP news story out yesterday reports that “Barclays Capital has mapped an ‘unhealthy correlation’ between construction of the world’s tallest buildings and impending financial crises over the last 140 years” and then notes a skyscraper building boom underway in both India & China right now.

    Is this a harbinger of coming gloom for Chindia?

    In the west the Great Recession train wreck continues piling up. Perhaps Russell is saying ‘we ain’t seen nothing yet’, but in my opinion the wreck got going nicely in late ’08 and it’s been ongoing ever since. Nothing of note has actually been fixed. The US will have to authorize raising it’s debt ceiling yet again in the space of the next few weeks, and Europe looks to be sinking as inexorably as the Titanic. If “rescuing” Greece is already stretching Europe to it’s limits what happens when Italian, Spain and their various bondholders need rescuing too? Will Bernanke ‘simply’ add trillions of Euros to the Feds veiled balance sheet?

    It’s an all but universal truth that governments will spend ANY amount of money attempting to avoid pain, but it’s all borrowed money.

    Can the gargantuan amount of debt being created ever realistically be repaid with interest, in money of the same value that was borrowed? Not a snow-balls chance in hell, in my opinion. Apparently not in Mr Russel’s opinion either.

    Good productive farmland may ultimately become a better asset to hold, but ‘undebaseable’ is looking better & better by the day.

  • JimT

    Around mid-August the price of gold embarked on a symmetric triangle pattern. As the price moved well beyond the 2/3 distance toward the apex it became clear that this triangle became neutralized, precluding its effectiveness as a predictor. As sometimes happens in these events a larger indicator develops, in this case a declining wedge. This is strongly bullish. Watch the price action as it approaches the top border for a breakout above $1700 or so.

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  • Sal

    Gold …??? Or real estate …???

    Which one will have a better return …???

    What have they done historically…???

    Take care and thank you.

  • Jack

    Barclays Capital? Tall buildings? The original research for this come form the Socionomics Institute… see http://www.socionomics.net

  • Gary

    When Gold comes back and another mad rush to buy ensues the price will go up, but will it go beyond the reach of the avergae person? Will the price be so high that the best alternative be Silver? Just think by the time the mainstream realizes the need (highest % after the fact) the best bargain and rush may be towards Silver as the price will be affordable.

  • [...] “PLEASE MOVE INTO GOLD,” urges Richard Russell [...]

  • Banjerd N.

    Absolutely right. I love gold. The glittering yellow colour is so beautiful.

  • Abob

    What gold bullion would be best for my IRA?

  • @Abob: I am unfortunately not familiar with what you are allowed to include in your IRA, but if possible would suggest a combination of physical gold and gold stocks.

  • DickMBZ

    I have held Gold in various fashions for over 50 years. Recently I discovered an iShares ETF (IAU) that holds actual gold in London and Swiss banks as the real asset of the (IAU) ETF that you buy. Do your own due-diligence (and please tell me if I am wrong)… I’ve been deeply invest in (IAU) for over two years (at small loss now) and plan to stay with it. I did enter too early and I am going to continue to violate the old adage “Cut your losses, but let your profits run”… Dick – Nashville

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