Is Gold Over Bought?

Gold has run up very rapidly. It is up 34.50 (+5.15%) over the last 30 days and up 116.80 (+19.88%) over the last year. The 30 Day Gold graph from www.kitco.com clearly shows that the run up in price was significant. Long term, it confirms the bull market in gold. We may be in for another correction, but I believe that it will be short lived and a small blip on the 10 year chart displayed a few posts ago.

The overnight and early morning trading in gold has moved the price down to 705.40, a drop of $6.00. This has caused the mining stocks to back off some, but they are still well above what they were just two weeks ago.

Over the next few days, the market will reveal to us the short term direction. In the meantime, we must focus on and maintain a long term view. After all, we are in for the long haul and plan to sell the mining stocks during the third phase of this bull market. Then, we will have funds to pay off any remaining debt and to purchase assets at bargain prices when the bubble bursts.

The dollar lost more ground against the EURO over night. The EURO sprinted to a new high of $1.3904 and seems to be headed to above $1.45 by year end. Wow, this upstart currency is really kicking its way through a succession of new highs as the dollar loses more purchasing power.

There is more evidence that foreigners are diversifying out of dollars. Very likely some of the dollars have gone into gold, but the banks and large investors are going into other more stable currencies. Remember none are truly stable as they are all unbacked paper and have value only in relation to other currencies.

It is the time of year when the residents of India really get into buying gold. The high price does not seem to deter their buying. This is a yearly event and is just beginning for 2007. That will tend to stabilize the price. Thus, there will be strong buying of gold. The ETF in gold (GLD) has been adding tons of gold to its holding as more investors have climbed aboard.

Crude oil is rushing toward $80/barrel. Rumors of a military strike on Iran abound. Check this

http://www.newsmax.com/insidecover/iran/2007/09/12/32225
.html?s=al&promo_code=39F7-1

I emphasize RUMORS. I pray that it does not happen. But if it does, consider the impact upon the price of crude oil, gold, silver, and other commodities. We might even have to sell some of our holdings into that type of run up. This is not good news, but we must be prepared for what ever happens and take advantage when we can.

In closing, remember the concept of trailing stops. I use them on much of my portfolio and believe they are a great way to lock in profit and prevent substantial loses.

The news of the day may not all be good, but it is out there and I try to present it to you. It is not intended to be a gloom and doom report, but an honest presentation of the days events. I rest securely in the Lord. This is a privilege which His people have. He has said, "Be still and know that I am God." He is the one and only God of all.

Gold has moved back up to 708, down 3.40 for the day.

Best to each, Doug