100 Months So Far

In August 1999, more people were focused on the announcement from the Bank of England that it would be selling one-half of the UK's gold reserve than the opportunity that news presented to buy gold when it was unbelievably cheap. Gold closed that month at $255.80, and it has been rising ever since. Here we are now exactly 100 months later with gold closing November at $782.20, a three-fold increase.

I had hoped that gold would close November above $800. It is another meaningful hurdle for gold to climb. Gold actually closed above $800 on 12 of the 21 trading days in November, but slumped at month-end, which is simply more evidence of my favorite adage - when it comes to markets, anything can happen.

So a monthly close above $800 hasn't happened - yet. It will soon though I expect. The dollar remains near record lows. The US government debt continues to grow. The subprime mess continues to create a huge 'black-hole' on the balance sheet of banks and other financial institutions. As measured by M3, the quantity of dollars is growing by 15% per annum. And perhaps most important of all, inflation is worsening.

Gold's technical position also remains very bullish, as we can see on the following chart.

I last presented the above chart in my alert of June 1st, 2006. It has been my contention that gold will repeat what it twice achieved in the 1970s, as indicated by the three red ovals.

Gold is pulling away from the green uptrend line just like it did twice in the 1970s. So why can't history repeat? Why can't gold continue to move away from the green uptrend line just like it did two times before? I expect that it will, and if history does repeat, the above chart indicates that we can expect gold to move well into 4-digits in the years ahead.

Silver continues to build within the same accumulation pattern we have been watching develop for months.

The overall picture for the precious metals remains bullish. I continue to recommend accumulating the precious metals, exchanging overvalued dollars for undervalued gold and silver month after month after month.

In the 100 months since August 1999, it is interesting to note that gold was higher at month end only 56% of the time. In other words, it rose from the month before 56 times, and declined 44 times, which is somewhat surprising. That's almost the same result from flipping a coin. That result is what makes trading so difficult, which is why I recommend 'accumulating'. It's a much easier strategy than trading.

Gold averaged 4.2% on the up-months and lost -2.6% on the months it declined, which was enough for gold to achieve its 3-fold gain over 100 months.

But regardless whether you are an accumulator, trader or perhaps even both, don't lose sight of the big picture presented in the above charts. This precious metal bull market still has a long way to run.

Published by GoldMoney
Copyright © 2007. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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