Tuesday, November 24, 2009

And Now, Back to Our Sponsor

Mr. Goldie. Mr. Gold, sir, can you show us what a short-term correction in the midst of a powerful bull market uptrend looks like?

Oh, that's right, you're doing it right now for all still watching to see:

And please remember the U.S. Dollar is only part of the story. How can I say that? Easy, take a look at this chart of the U.S. Dollar Index ($USD, the black and red candlestick plot) and the price of Gold ($GOLD, the thin black line plot) over the past 2 years:

The vertical lines with black dots on them delineate specific points in time for the US Dollar Index and price of Gold. Here are those data points in table format (rounding used to make a point):

March 2008: US Dollar Index 71, Gold $1000
February 2009: US Dollar Index 87, Gold $1000
September 2009: US Dollar Index 76.5, Gold $1000
November 2009: US Dollar Index 75, Gold $1165

So, in the last 20 months, the US Dollar has rallied roughly 5.5%. So, the Gold price should be lower, right? Well, it's up roughly 16% over that same period of time. All currencies are sinking and the sponsor of this sight, Mr. Gold himself, would like to remind you that he cannot be debased by apparatchiks or czars looking to seize more power (oops, I mean fix what's wrong with our economy by "stimulating it with other people's money"). The Gold bull is healthy and strong. It's way too early for people to be calling bubble on this Gold bull market - way too early. Central bank buying of Gold does not constitute a top in the market or a bubble, rather it is a marker of the pre-mania phase or middle of the secular bull market. India is not and never has been "dumb money" when it comes to buying physical Gold.

Once GDX and GDXJ are trading comfortably in the triple digit range and the Dow to Gold ratio hits 2, then we can talk about a bubble starting to form. Until then, the so called "contrarians" are just missing out on the strongest bull market in the world right now. Want proof? Here's the Gold price in a few different currencies over the past few years (following table stolen from goldprice.org):

Sure looks like it's a little more than U.S. Dollar weakness to me - call me a crazy Gold bug for using actual data and all...


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