Seeking Alpha

Jeff Clark's  Instablog

Jeff Clark
Send Message
Jeff Clark is Editor of BIG GOLD and Explorers’ League at Casey Research (http://www.caseyresearch.com). Having worked on his family’s gold claims in California and Arizona, as well as a mine in a place to remain nameless, these days Jeff Clark focuses on following some of the most successful... More
My company:
Casey Research
  • Time For Goldbugs To Admit Defeat? 0 comments
    Dec 5, 2013 2:13 PM

    After a 12-year run, it looks like gold's wave has truly crested, and many bears are arguing that it's all downhill from here. A quick glance at a long-term gold price chart can certainly seem to confirm this impression.

    (click to enlarge)

    Gold's price has fallen by more than a third since its 2011 high. The downturn exceeds the 2008 waterfall selloff. Many technical analysts are saying that the "damage" on the charts is too great for gold to recover. The rout is so bad, even hardened goldbugs have grown quiet lately.

    Is it time for gold investors to admit defeat?

    Well, if it were true that "damage" on a chart such as we've seen signals the end of a bull market, perhaps it might be. But is it so? Or is this just a correction?

    One of the greatest bull markets in modern times was the Nasdaq in the 1990s. The Nasdaq composite rose a whopping 1,150% over the span of a decade. But did you know it had a major correction in the middle of that run? The same is true of oil's big surge in the mid-2000s. Consider this chart of the big corrections oil and the Nasdaq experienced:

    (click to enlarge)

    After seeing prices crash in both the Nasdaq and oil, most investors assumed those bull markets were over-but they weren't. Here's the subsequent rise in each after prices bottomed:

    (click to enlarge)

    The Nasdaq and oil did recover from their large corrections-despite all the technical "damage" many pointed to as proof that those bull markets were over. Investors who sold their positions during the downdrafts missed out on some fantastic profits.

    Given that all the reasons gold rose from 2001 to 2011 are still in force, I am convinced gold's current correction is the setup for a second big surge-and, ultimately, a true gold mania of historic proportions.

    Just because gold doesn't seem to be reacting to Fed money-printing at the moment doesn't mean it won't. Sooner or later, reality trumps fantasy. Reason says that you can't quintuple your balance sheet in five years and expect no repercussions. The Fed keeps hinting it will taper its money printing, but it still has not. We've had QE1, QE2, Operation Twist, and now QE3… none of them has worked, and the new Fed chair wants to print even more money.

    It's pure fantasy to believe there will be no consequences to these actions-and the reality is that whatever else happens, gold will react positively.

    Should gold investors admit defeat? I say it's reckless central bankers who should declare defeat.

    A gold recovery is inevitable. Prepare accordingly. Try BIG GOLD risk-free for 3 months to access our GLD put strategy, frequent bullion discounts, and the producers that will respond the strongest once the recovery takes hold. 100% satisfaction, or your money back-click here to get started.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: gold
Back To Jeff Clark's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.