Gold Bull Market – Stage 2

by Addison Wiggin – The Daily Reckoning

Click on the image below to read commentary

Gold – the Ultimate Bubble?

What George Soros said, and what the press said he said…

“GEORGE SOROS warns gold is now the ‘ultimate bubble’,” ran the Daily Telegraph headline.

But what Soros actually said was:

“When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold.”

I don’t know what was in the great man’s head when he said this, writes Paul Tustain, founder & CEO of BullionVault. But it’s just possible he was making rather more accurate use of the English language than The Daily Telegraph – who inserted the ‘now’ themselves.

“Ultimate” means final. It does not mean “mother-of-all” except near the Thames Estuary, an area made popular with journalists by its proximity to their factories, but not the sort of place an Hungarian hedge fund manager would hang out.

Mr Soros of course would be correct in saying that the final asset bubble in a string of asset bubbles tends to be gold. But since an estuarine interpretation inverts the guru’s advice, you will need to decide for yourself which he meant. So here’s some data:

• At the culmination of the string of asset bubbles which popped in 1929, physical gold multiplied its investment purchasing power by 17 times in the subsequent five years.
• In the 1970s – after gold’s use as a brake on currency production was abandoned – its investment purchasing power multiplied 15 times in nine years.
• From its ‘ultimate’ low in 2000 gold is up about four times – unremarkable next to the recent performance of other asset classes.

If gold is in a bubble, it’s not going to make much of a pop.

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Richard Russell – “Gold — I believe that gold is building a bullish structure above its downside support of 1,000. As I write April (the active month) gold is selling at 1094, only 6 points from the 1100 level. Gold topped on December 3, 2009 at 1218.30. Obviously, that is the upside target. If gold rises above 1218 it will have “gotten rid” of a lot of amateur traders and gold-haters. It will also be squeezing a large short position. I consider the current slow, measured upward action of gold to be positive and characteristic of bull market action.”

“Even the stupid, gold-hating central banks are buying gold. And what are they buying it with. The lousy fiat currency that they themselves are manufacturing. And how long will it be before those with gold won’t swap their gold for fiat paper? That’s the time when gold will go parabolic in the coming third phase.”

Richard Russell has made his subscribers fortunes. One of the best values anywhere in the financial world at only a $300 subscription to get his DAILY report for a year. HERE to subscribe. Amongst his achievements Richard was in cash before the 2008/2009 Crash and he has been Bullish Gold since below $300

Ed Note: Richard Russell is bullish Silver and holds one of the largest single positions he has held since the 1950’s in the precious metals.