"Gold -- I've been thinking more and more about the yellow metal. Price action -- Over the last month gold has had every opportunity to break down below 1500 and undergo a full correction. But it never happened. What the market doesn't do can be as important as what the market does do. Of course, the gold mining stocks underwent a full correction, and many gold "experts" warned that the metal would follow the gold mines down. It never happened, which I took as very bullish for bullion.
In this business, logic and reality usually win out, although sometimes it seems forever before this comes to pass. In the long history of paper fiat money, no fiat currency has ever lasted for long. And this is as it should be. It's illogical, immoral, and against reason that a group of men at a central bank should be able to print or publish wealth at will -- to create wealth out of thin air.
Thus, I am taking it for granted that history will repeat. In due time all of the current fiat money that is being ground out by the various central banks will be footnotes in monetary history. But this won't happen overnight. It may take many months or even years. But while it is happening, intelligent men and women will sense the trend. As the news of the slow death of fiat money becomes accepted, smart investors will be looking for tangible substitutes for the dollars and the euros and the reals that they hold.
Already this is happening; we can see it in the astounding prices certain works of art are selling for. It's happening in many areas. Babe Ruth's 1934 uniform just sold for $400,000. Diamond prices are up 35% over the last few years. Classic cars are being auctioned off in the millions of fiat dollars. In dozens of areas, tangible items are being purchased at outrageous prices. Munch's pastel work, "The Scream," just sold at auction for $110 million dollars, a record.
I believe that gold is far behind the game. Gold has been recognized as a medium of purchasing power for five thousand years. Most of Asia understands gold, but decades of anti-gold propaganda has turned Americans against bullion. Proof -- try to pay for your next restaurant dinner with a one-ounce gold krugerrand.
This is starting to change. For ten years running, the price of gold has pushed higher. Even this remarkable record has not changed US sentiment towards gold.
Gold is in a classic bull market. I think gold is in its second psychological phase.The second is the longest phase of a bull market. It's the phase where the public slowly becomes interested in an item.
I believe that the third sentiment phase for gold lies ahead. In the third phase the public finally turns bullish, then more bullish, and finally all-out insanely bullish.
What will be the signs of the third phase of the gold bull market? First, new inflation adjusted highs in the price of gold (gold above $6,200). Next, gold will be the focus of every conversation; it will become THE talk at parties and wherever people gather together. Next, gold coins and bars will disappear. The coin dealers will be out of gold and will start touting silver and platinum (the prices of which will be rocketing higher). Finally, the naysayers will start warning of a "gold bubble." But their warnings will be early. The price of gold will shoot up to unbelievable prices."
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Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.
Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.
The Letters, published every three weeks, cover the US stock market, foreign markets, bonds, precious metals, commodities, economics --plus Russell's widely-followed comments and observations and stock market philosophy.
In 1989 Russell took over Julian Snyder's well-known advisory service, "International Moneyline", a service which Mr. Synder ran from Switzerland. Then, in 1998 Russell took over the Zweig Forecast from famed market analyst, Martin Zweig. Russell has written articles and been quoted in such publications as Bloomberg magazine, Barron's, Time, Newsweek, Money Magazine, the Wall Street Journal, the New York Times, Reuters, and others. Subscribers to Dow Theory Letters number over 12,000, hailing from all 50 states and dozens of overseas counties.
A native New Yorker (born in 1924) Russell has lived through depressions and booms, through good times and bad, through war and peace. He was educated at Rutgers and received his BA at NYU. Russell flew as a combat bombardier on B-25 Mitchell Bombers with the 12th Air Force during World War II.
One of the favorite features of the Letter is Russell's daily Primary Trend Index (PTI), which is a proprietary index which has been included in the Letters since 1971. The PTI has been an amazingly accurate and useful guide to the trend of the market, and it often actually differs with Russell's opinions. But Russell always defers to his PTI. Says Russell, "The PTI is a lot smarter than I am. It's a great ego-deflator, as far as I'm concerned, and I've learned never to fight it."
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