Gold Juniors Poised for Historic Bull Run

Posted by Eric Hommelberg

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On October 07 The Gold Report conducted an interview with me just after gold broke out to new news above $1030. During that interview I made the case for $1300 gold by spring next year and advocated to be invested in high quality juniors which are poised for a multi year bull run that could even surprise the staunchest junior investors. This piece is an update on that interview and shines a light on how to approach investing in junior gold mining shares.

Gold poised for correction? Not now!

On October 07 with gold prices just above $1030 The Gold Report asked me if I had one more final thought for the reader. I said:

Excerpt TGR Interview October 07, 2009

TGR: Any final thoughts you’d like to give our readers?

EH: Yes, most likely you’ll be hearing bearish gold tunes in coming months from the traditional gold institutions, saying that gold’s rise is not justified by its fundamentals and therefore bound to fall. They did so in 2003, they did so in 2005 and now they are at it again. The traditional gold institutions simply don’t appreciate the fact that gold is money and how it has been manipulated over the years. Traditional gold institutions in 2005, with gold prices at $425, were saying that increased gold production would bring down gold prices; that certainly didn’t boost their credibility. Still many analysts quote these very same institutions today for the very same argument— that increased gold production will bring down gold prices in the years ahead. GATA, on the other hand, said in 2001 that gold was going to $850 and that central bank selling wouldn’t be an issue anymore within seven to ten years from then. We find ourselves right in the middle of that projection and gold is trading well above $850 and central bank sales have dried up completely. You are not going to hear these kind of predictions from the traditional gold institutions. No one has been right on the money more than GATA. It’s therefore no wonder that GATA’s credibility is rising fast. To give you an example here, the Chinese sovereign wealth fund ,which manages over $200 billion, has held already three teleconference calls with GATA—they wanted to know what GATA knows. We all know now that China has been accumulating gold for years; we all know now that China wants a new world reserve currency. This, of course, won’t happen overnight, but it’s quite obvious that the U.S. dollar as a world reserve currency is not going to survive. Gold will continue to rise until something new has been put in place on the monetary front and I think we are years away from that. So what I’d say is. “Stick to it and stay the course. “


Well, we are just one month further now and $50 closer to our $1300 target by spring next year, this despite the many calls for $680 gold that have been aired since then through the traditional bear channels.

Now does it come as a surprise to see gold holding up so well after breaching the $1000 mark and marching into higher grounds?

No, of course not, when The Gold Report asked me about a potential pull back I said:

TGR: Given the recent run-ups, would you expect a pullback before the price rises again?

EH: I don’t expect a sharp pullback; nothing like the correction last year. That’s not going to happen. Since gold breached the $1,000 mark for the first time in March 2008, the $1,000 area had been a resistance area. It took about five attempts to slash the $1,000 mark. A long-time resistance area becomes a support level once that level has been breached to the upside. That’s exactly what happened a few weeks ago, when we saw our first weekly close above the $1,000 mark in history. Furthermore, we had our highest monthly close ever as well and this marks the beginning of a new up leg. The charts leave no doubt; they point to gold prices of $1250+ within the next six months. When you analyze the long-term charts you’ll notice a pattern of long consolidation phases followed by sharp up moves. The consolidation phases last for about 18 months, the sharp up moves last for about six months, whereby gold can appreciate by 50% or more. We saw it in 2005 when gold just finished an 18-month consolidation period and then it shot up within six months from $430 to $730. That move started with a commercial signal failure, today with record high commercial shorts outstanding we could be on the verge of a commercial signal failure again


Here we are, gold shooting up by $40 in the face of all nay sayers just like it did in 2005. The odds of a massive commercial signal failure are increasing by the day. Certainly the Indian bombshell of buying 200 tons of IMF gold wasn’t exactly the kind of news the commercial short traders were waiting for. And yes, the FED not willing to defend the dollar won’t be giving much comfort either, and yes, the fact that more and more investors are demanding the real metal instead of paper gold substitutes like GLD (see also my entire interview with The Gold Report) is making things worse for the commercial short traders. So yes, we are on our way to $1300 gold which is consistent with previous patterns of consolidation phases followed by sharp up moves. The chart below which we’ve send out to our members on Oct 07 visualizes this pattern:



Now fast forward to today with gold clocking $1080. Is it overbought now? Time for a correction? Don’t think so!

….read more HERE to read more including Junior Mining Companies Poised for Historic Bull Run



Eric Hommelberg is the founder and chief editor of Inc, a Caribbean based gold company. Hommelberg served as a writer on gold markets since 2002 with a strong focus on junior mining gold companies. In June 2009 Hommelberg conducted an exclusive deal with Valcambi Suisse and launched the GoldDrivers Bullion Store. The GoldDrivers Bullion Store thereby became the first on-line retail seller that deals with Valcambi Suisse directly. The Bullion Store offers 999.9 Fine Gold Bars from 1 to 100g to investors/collectors world wide