Gold a Little More Perspective Please

Dudley Baker sees the same future we do.  Emphasis is ours.

With the big $27 an ounce sell off in gold on Wednesday [and taking out support at $1100 on Thursday]  many are ready to throw in the towel, again.

Every time we have a significant sell off, on any given day, everyone gets panicky. We have seen this numerous times in the past and we will continue to see days of panic in this long term bull market.

If you are a trader, and most of us are not, you are already out. If you are a long term investor with positions in mining shares, take a deep breath, relax and keep your eyes open.

Those of us with a long term perspective realize there will always be days like this and we need to use this time to add to current positions in the junior mining sector which is our favorite choice for making substantial gains within the next 24 months.

Remember it was only last November that gold hit a record high of $1218 and with Wednesday’s close of $1111 that gives us a retracement of less than 9%.  Big deal!

We do acknowledge that this consolidation may take a few months to play out and we could reasonably expect a further decline.

But, let’s step back and examine what the charts are saying for gold using a daily, weekly and a monthly basis.

Daily Chart for Last 12 Months:

Weekly Chart for Last 5 Years

Monthly Chart for Last 9 Years (Beginning of This Bull Market)

Personally, we follow numerous analysts and sometimes it is difficult to wade through all the noise. Our assessment is that a substantial amount of the decline is behind us but we are mentally prepared for a further decline around the $1075 level. We don’t want to see this but it could happen and it that level does not hold, we could possibly see a test of the 65 Week Moving Average around $995 as identified on the last chart above. We see this $1,000 level be our worst case scenario.

Whether we hold at $1075 or drop to the $1000 level, it will then be the last great buying opportunity before gold makes a monster run and takes the entire mining sector up with it.

We would encourage investors to continue searching for great buying opportunities in the junior mining sector. Search for those companies with great management, great properties and be alert for those companies which have long term warrants available and trading.

Tagged as: gold, inflation, investment, preserve wealth