Buying Opportunity; Possibly!

At the right see the 1 Year Gold graph from www.kitco.com. It clearly shows that gold has been in a bull market since about October 1 of last year.

Observe their 5 Year Gold below and you will see that gold has been in a bull market well before that. From the graph it appears that the bull market began in August of 2002.

Both of these graphs show that the bull market is firmly intact and that gold will likely go much
higher. Likely, this year!

Since the bull market in gold is holding firmly, it is well to consider buying into the precious metals and mining stocks on every dip in prices.

The dollar is higher this week after the reported increase in consumer confidence. I question the validity of this report in view of the higher prices at the gas pumps and my experience in shopping for groceries and air fares. Another area of higher prices is in medical care and medicines. Even the vitamins and minerals seem to be higher these days. Are consumers really that confident? Perhaps, they are buying now in anticipation of future even higher prices.

There is inflation in the pipe stream. This has been mellowed a bit by the decrease in the price of homes. The inventory of homes for sale is reported at a very high level and prices have experienced the largest decrease in about nine or so years. Also, there is a big increase in foreclosures. Is there more downside pressure in real estate? I suspect there is, because mortgage companies are requiring higher standards for new borrowers and somewhat higher interest rates. Note: the interest rates remain quite low, but the increased requirements block some would be purchasers and those who would like to refinance.

The economy, on the other hand is picking up a bit, but wages are mostly stagnant. We are still fully dependent upon financing of our governmental, business, and personal spending binge. The red ink is flowing in full force. All of this red ink has created great liquidity which must flow somewhere, and currently, the stock market is the recipient of the surge. The general stock market is soaring.

The NASDAQ has yet to confirm the DJI highs, but the liquidity continues to fuel the general market. We must look for stage three for the blow out. This will come when the soaring market is the subject of every conversation and the top news in all media. The same will be true of the precious metals market as the lemmings climb on board just before the crash. Stand ready to sell stocks at that time.

In the meantime, the temporarily strong dollar is providing another opportunity for creating or adding to our precious metals and mining stocks. Stick to the long term trend and hang tough. You might want to use some 10-20% trailing stops on the stocks you purchase. If you are stopped out, look for opportunities to buy back in at lower prices. Do not put stops on all your mining stocks.

Study hard, plan carefully, commit your plans to the Sovereign God of all, and trust in Him to provide the success.

Best to each, Doug