Gold: You Can't Sell High If You Didn't Buy Low

We along with several other analysts have been looking for an upside breakout in gold. On October 6^th we got that breakout with gold exploding to over $1040 an oz into new high territory.

I ask the question, jokingly, What Will You Do When Gold Hits $1200 an Oz, because we know that many investors are not even in the game as yet.

As many readers and investors are still saying, ‘I’ll just watch for now’, well, we have to laugh. Many (hopefully not you) will be watching as the price of gold, silver, the majors, the juniors and even the dogs and cats catch on fire. We know how this story ends, don’t we? As soon as the average investor loads up his portfolio at outrageously high prices that is when we will be approaching a top.

If we make $1200 or beyond on this move up it will no doubt be an opportune time to take some gains off of the table for those of us already invested (at much lower levels).

Our view is that this rally is not going to be a straight run up to the top (it never is) and we will have to make many decisions along the way. But always remember, you can’t sell high, if you didn’t buy low.

The low prices for gold and the juniors are now behind so investors must make some good decisions from here on out instead of just throwing darts at the board. It’s not too late; you just have to be smarter and more careful as prices continue to rise.

The good news is that we see higher prices for gold, the juniors, even the dogs and cats in the coming 18 months or so. Lots of time for you to get involved and ride this wave.

Disclosures: None

Comments

[sdavid0419:]

I couldn't agree with you more. From my previous comments you know I am very PRO GOLD. One thing I learned about the nature of gold is that it does not go straight up and it does correct down rather quickly when it does correct. (as an aside I might add that I believe the manipulators are responsible for the rapid downs) I found this trait to an advantage to take profits and reposition at an even lower rate. I know I run the risk of being caught in the switches should a full stampede ahead occur as what happened yesterday. Fortunately I wasn't this time. It is my belief that gold is trying to anticipate and track expected inflation. Did the 20.4% aug wholesale price increase indicate the inflation was upon us? It is still too early to tell. How rapid will this inflation be and how high will it go only time will tell. If gold gets too far out in front or if Benanke finally raises interest rates the gold march could be halted. I say keep buying gold on the dips and don't be afraid to take some profits if it seems to get over bought for the current time frame.

Oct 07 07:41 AM

[Mad Hedge F...:]

nst Of course you knew it was going to happen like this. After churning around just below the old high, and sucking in as many profit takers and short sellers as possible, gold blasted through to a new high for the year of $1,038. Never mind that the triggering event is complete balderdash, a story in Britain’s Independent newspaper asserting that the Middle East is holding secret global talks to price crude in the yellow metal or other currencies (click here ). It didn’t hurt that Australia cut its interest rates by 0.25%, the first G-20 country to do so. There probably isn’t enough gold in the world to finance more than a few weeks of global oil production. Total gold holdings would only fill two Olympic sized swimming pools. But never let the truth get in the way of a good trade. The confirming moves couldn’t be more ubiquitous, with the Canadian, New Zealand, and Australian dollars all up big, commodities strong, and silver also going ballistic. Regular readers will all recognize these as old friends of mine, core longs that I have been strongly recommending since the beginning of the year. I have been trying to get investors into gold since it was at $800. If you aren’t in gold by now, I can only tear my own clothes and flagellate myself for my abject failure to convince you of gold’s merits. US government debt is exploding, and with foreigners holding a large part of our paper, the only way to get out of this mess is to devalue the dollar. It’s like Obama invited China’s president Hu Jintao to dinner at an expensive Upper East Side restaurant, fakes a sudden case of food poisoning, leaving him with a big fat bill. Next stop $1,200, then $1,500, then the old inflation adjusted high of $2,400. If you want me to help you get set up to trade futures in any of this stuff, please email me at madhedgefundtrader@yah... If you want to know where to buy physical gold and silver in size, or coins with the tightest spreads over spot, check with the experts at www.millenniummetals.net by clicking here.

Oct 07 08:11 AM

[tunaman4u2:]

"we know that many investors are not even in the game as yet"

What planet on you on? 97% dollar bears... Cash for gold commercials on every TV break... now putting cash for gold stores in malls... a .25 Aussie cut leads to panic gold buying...

If by many you mean not 100% of people are 100% in gold you are right but its a very crowded trade and trying to state that isn't the case is misleading.

Oct 07 10:11 AM

[The Recusant:]

Mad Hedge F.. and tunaman4u2 -- You really meant a .25% Aussie increase, right?

Oct 07 10:24 AM

[optionsgirl:]

There are lots of ways to play the inevitable "correction" to come, without actually getting out of your long positions. Look to hedge with dzz, sell out of the money calls on various miners now, while the stocks are going higher, etc.
Thanks for writing this article. Time for me to go sell out of the money calls...

Oct 07 10:48 AM

[Trace Mayer:]

Dudley, Even at $1200 the price of gold will be extremely low because of the unwinding of the gold carry trade. Mr. Alan Greenspan testified twice before Congress saying 'Central banks stand ready to lease gold in increasing quantities should the price rise.' Central banks carry gold in the vault and gold out on loan as the same line item; in effect they report cash and accounts receivables as the same thing. As a result, central banks have only 1/2 to 1/3 of the physical gold as reported on their balance sheets. This means they hold not 30,000 tons but more like 8-15,000 tons of physical metal. All of this has been thoroughly documented by publicly available documents. The unwinding of that massive central bank position will be extremely bullish for the monetary metals priced in their fiat coupons.

www.runtogold.com/2005.../

Oct 07 10:54 AM

[anarchist:]

This mentality reminds me of the dot.com bubble when all the tech-bugs were saying stuff like "the price doesn't matter, just get in and ride the gravy train north". This is the same hype that was around when gold was hitting new highs (was it 1979 or 1980?) just before the collapse. There is no profit until you sell so tell me goldbugs, when does one sell the mellow yellow?

Oct 07 11:13 AM

[tunaman4u2:]

They think they are going to sell to you at 2000


On Oct 07 11:13 AM anarchist wrote:

> This mentality reminds me of the dot.com bubble when all the tech-bugs
> were saying stuff like "the price doesn't matter, just get in and
> ride the gravy train north". This is the same hype that was around
> when gold was hitting new highs (was it 1979 or 1980?) just before
> the collapse. There is no profit until you sell so tell me goldbugs,
> when does one sell the mellow yellow?

Oct 07 11:20 AM

[Anicca:]

Like this wasn't as foreseeable as a freight train coming down the tracks. Our national debt has been escalating at incredible levels even before Bush and Obama. I remember looking at it in 1996 when it was around 5T and gasping. Now, we're approaching 12T with foot on the accelerator. It's not so much that gold is going up as the dollar is rightly turning to the paper it's printed on. Not only will gold reach 2000/oz, but bread will likely reach 20/loaf, etc. etc. It's very simple for both large and small investors...would you rather be holding 100K in US$s or 1000 1 oz gold coins. I think at the moment, they feel much more comfortable with gold under the bed than dollars in the bank.

Oct 07 11:37 AM

[Arthur Hau:]

The title is funny!

You don't need to buy it if you are a producer of gold!

For a real commodity like gold, producers will be more than happy to sell high when there are a bunch of stupid I Bankers trying to create positive rumors about the potential of a negative-yield commodity that has NO REAL demand because of its high price!

Oct 07 11:51 AM

[DrZero:]

Thank you Guru Mogambo! Thank you Bill Bonner! Made a very large buy at $411 several years ago based on their writings. While I'm pleased with the new high I'm not quite ready to take profits yet.

Oct 07 11:56 AM

[ETFdesk.com:]

thought this was interesting : WaysToPlay: Jim Rogers wary of buying gold at new high bit.ly/k0Dl GLD IAU PMY DGL DGZ DZZ GLL #Gold #ETF #MKT

Oct 07 12:17 PM

[Shaftsinker:]

I would think the emergence of a big cash for gold industry means the average person isn't into gold whatsoever.

If gold was being bull rushed why would there be a mini-boom in a business based on the average person selling off their gold?

I'm taking the success of these cash4gold places as a sign that we're no where near a craze or mania.

Funny I don't remember commercials and billboards saying "get money selling your tech stocks!". The comparison to the dotcom bubble is asinine.


On Oct 07 10:11 AM tunaman4u2 wrote:

> "we know that many investors are not even in the game as yet"
>
> What planet on you on? 97% dollar bears... Cash for gold commercials
> on every TV break... now putting cash for gold stores in malls...
> a .25 Aussie cut leads to panic gold buying...
>
> If by many you mean not 100% of people are 100% in gold you are right
> but its a very crowded trade and trying to state that isn't the case
> is misleading.

Oct 07 03:22 PM

[Roger Knights:]

"Cash for gold commercials on every TV break... now putting cash for gold stores in malls... a .25 Aussie cut leads to panic gold buying... If by many you mean not 100% of people are 100% in gold you are right but its a very crowded trade"

"This mentality reminds me of the dot.com bubble when all the tech-bugs were saying stuff like "the price doesn't matter, just get in and ride the gravy train north". This is the same hype that was around when gold was hitting new highs (was it 1979 or 1980?) just before the collapse."

We haven't reached the overheated stage because the price of gold miners (using the HUI index as a proxy) is historically not high relative to the price of gold. Peaks in gold prices coincide, roughly, with peaks in the valuation of miners relative to gold. Speculators pile into the miners, and then the junior miners, and then the really junior miners (Gabby Hayes and his burro), as the bubble expands.

Oct 07 04:06 PM

[HA65MPH:]

WHAT EVER ...holding 'real gold and silver....let`s me sleep better, ..SO THERE !!!

Oct 07 05:20 PM

[Gold Bug:]

Gold to Hit $5 000 Per Ounce Peter Schiff on Fox Business News 07 Oct 2009
source :
peterschiffchannel.blo...

Oct 08 01:29 AM