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Gold Price Bull Market a "Once in a Lifetime" Event?

Release Date: 
Friday, December 17, 2010

GOLD PRICE NEWS – The gold price stabilized Friday morning after falling $10.75 yesterday.  The price of gold rallied $1.80 to $1,372 per ounce, which leaves it down roughly 1% on the week.  Shares of gold companies, which have been under pressure due to a weaker gold price, moved slightly higher in pre-market activity.  Silver held near $28.85 per ounce while the more cyclically-sensitive oil price fell to $87.50 per barrel.

Stock prices moved slightly lower after ratings agency Moody’s cut the debt rating on Ireland’s debt five notches.  The severe downgrade, coming on the heels of a massive bailout, came as a surprise to analysts.  Sovereign debt worries may have been temporarily put on the backburner, but the underlying fundamental issues have not been solved.  The resiliency of the gold price is partially due to skepticism that central bankers and politicians will ever have the courage to cleanse the system of the mountain of bad debts that still exist.  Further currency debasement is likely, one of the chief drivers of higher gold prices.

The gold price has fallen $60.5, or 4.2%, from its $1,431 all-time high reached on December 7th.  Furthermore, the spot price of gold is now on pace for its first losing month since July, when it dropped 5.0% to $1,180.98 per ounce.  In concert with the gold price's weakness, sentiment has declined considerably, evidenced by the recent steep drops in the Hulbert Gold Newsletter Sentiment Index and Market Vane's bullish consensus sentiment reading.

Commenting on the recent gold price sell-off, long-time gold bull Richard Russell contended that the weakness is merely a normal correction within the longer-term upward trend in the price of gold.  Russell, the founder of Dow Theory Letters, the world's longest-running daily investment letter, wrote that "this bull market in gold started around 1999 when gold was selling for $259 an ounce.  I did my best at the time to push my subscribers into buying gold stocks (which, at the time, were selling at pitifully low prices) and into buying gold bullion.  At no time since then have I ever suggested that we sell our gold items.  Nor do I suggest that now."

Russell reminded his readers that "Big bull markets are rare, particularly bull markets that span the years or even the decades."   These types of bull markets may only "arrive once or twice in a lifetime.  If you're lucky enough or intuitive enough to spot one, you have the makings of a fortune."

The Dow Theory Letters author went on to say that the price of gold is near the middle stages of its current bull market.  "The last quarter to a third of the story lies ahead," he noted, based in large part on the Federal Reserve's steadfast commitment to try to solve the world's economic problems by printing money.

Russell concluded his latest piece by reiterating his view that "money that made 'legal' by fiat is illogical, it's immoral, it's a fantasy, it's counterfeit, and it's against the great Constitution of the United States."  Accordingly, he urged his readers to continue to accumulate investments tied to the gold price, as the economy has now reached "pay-me-back" time for fiat money.

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This article is independently provided by and does not represent the views or opinions of Goldline International, Inc. Although the information in this article has been obtained from sources believed to be reliable, Goldline does not guar­antee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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