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Why are precious metals so strong today, and will it continue?

*Dow Theory Letters, Richard Russell, April 17, 2006

“Question — Russell, what are we to make of the surges in the precious metals today? Is this the final blow-off?

Answer — No, it’s not. Sure, we know, the metals are overbought. Every day the market opens with the metals up a bit or even down a bit. The traders and the shorts wait impatiently for weakness. They know the metals are overdue for a correction. After a few hours of waiting without any weakness appearing, the “waiters” can wait no longer. They buy. With no downside relief, the shorts are forced to buy. And the metals close higher. “It’s a blow-off!” is the rumor on Wall Street. “It’s the speculators bulling the price of gold,” the newspapers explain. “It’s a parabolic rise, and the metals will crash any day,” warn the technicians. “The Commercials will kill the metals,” scream the traders.

Says Russell, “It’s a big primary bull market, and no one on this green earth knows when it will correct or where it will stop. Remember, gold has been depressed in a severe bear market for twenty years. During those twenty years the dollar has lost over half its purchasing power. What we see now is gold breaking free.The tightly compressed spring has been released, and gold and silver are simply making up for lost time.

Bull markets tend to end when the crowd takes over and madness reigns. As far as the precious metals are concerned, the only part of the precious metals sector the public owns is the gold in their teeth or the gold in their Rolex watches. As far as a stake in the gold bull market, the public hardly knows that the gold bull market exists.

No, I believe this bull market in precious metals has a long way to go. I believe the purchasing power of the world’s fiat money also has a long way to go — on the downside, towards ultimate worthlessness.”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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