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

Good Morning! The Lord has given us another beautiful day in central Texas. He has blessed us with a good supply of rain this year, as well.

However, you are not here for a weather report. Above, you will see the Kitco.com 5-Year graph of gold. Obviously gold remains in a bull market which began at least as far back as 2002 when the price was around $300 per ounce. As this is written, the price is $657.20 which is down some $15 or so from recent higher prices. Just another small correction on the way to much higher prices in the future.

Markets generally go through three phases of bull markets. The first is a time of accumulation when the "smart" dollars accumulate the asset slowly over time. As the price moves up others slowly join the parade and begin to buy. This is phase two which can last a considerable period of time. What one must seek is phase three when the price accelerates exponentially and very rapidly as all jump on the band wagon. This is yet to be seen.

Phase three comes as the asset gets first or near first place in all business news reports and most newsletters tout the asset. The hype accelerates and becomes the top news story everywhere. Then all those who missed the earlier phases of lower prices attempts to jump on board driving the price to extremes.

It is almost impossible to predict when phase three begins. It is almost impossible to determine when it will end. However, phase three will come and will end in a rout as everyone wants off. Then the price plunges!

Gold and to a great extent silver is real money and has been recognized as such for centuries. The prices of these precious metals today will be seen in the future as bargains. Our paper currencies have no solid backing and are produced at the whims of governments and central banks. They will not be accepted forever by the peoples of the world. Each has a value in relation to other currencies. Not one of them has real value other than the coercive power of government to force its use a legal tender and the acquiescence of people to use it.

Gold and Silver will retain value while the paper currencies continually lose purchasing power over time. Therefore, it is well to have or accumulate the precious metals and to retain them for a lasting store of value.

For trading, I generally use the mining stocks. Producing mines are valued based upon the reserve of precious and base metals which each controls and the cost of production compared with the price of the metal. Speculative companies are those with the potential of discovering metals in controlled property or the prospects of beginning production. As the price of metals increases, there is always more exploration and greater effort toward production.

As with all investment decisions, timing is very important. Almost never will one buy at the absolute low or sell at the absolute high of an investment. However, one should strive to climb on board at bargain prices and unload at higher prices, hopefully, near the high. This is the way I use the mining stocks. However, I never sell all of my holdings. In the past, I have sold out and watched the price move upward beyond what I was willing to re-buy. Thus, I have been "locked out."

I do use trailing stop sell orders which allow the price to increase without selling, but will executed when the price drops more drastically. This protects some of the profit or prevents great losses. This is often used on a portion of my portfolio.

This is written today, to encourage you to consider holding precious metals for the long run and to consider mining stocks or mutual funds of mining stocks as an investment to retain the purchasing power of your investments.


Looking at the upward movement of the general markets, particularly the DJ stocks. The series of higher highs is significant. There is a bull market in these and the utilities, but not some of the other markets (NASDAQ,etc.). The higher movement cannot be ignored. The stocks seem to be over priced, but still they move upward. The Dow Jones stocks continue to ignore all of the bad news of the dollar and the debt. Of course, all of the liquidity produced by the debt over the past few years must go some where. Currently, it seems to be headed into the stocks which are perceived at great investments.

Hopefully, this will help you understand what I do on investments and give you some ideas for your own portfolio. Invest only in that with which you feel comfortable. It is very unhealthy to worry over your investments or any thing else. Effect what you can and leave the rest to the Lord and His wisdom. Worry gains you nothing, but more worry.

Best to each, Doug