Still Waiting After All These Years?

An investor who claims he has listened to my radio show for years expressed his irritation over my constant bullish views on gold. He is understandably unhappy about what he says is a 35% loss with his gold and silver stocks. He is unhappy about what he perceives to be constant market manipulation of the gold price. He wrote, “By any logical measure gold should be turning higher any time now. But I’ve been burned so many times. I simply don’t believe there is any indication that the declines in the price of gold or gold stocks will turn around any time soon.” He concluded that, “It’s not fair, but by age 65, it’s clear that’s the way it is.”

I responded as follows: “Thank you for your thoughts. I don’t blame you for your impatience. I feel the same. Having 90% of my investments in gold bullion and gold shares, I’d like 

to see an upturn sooner rather than later. But this is the only way I know how to respond to you.  Looking at this chart, would you say now is the time to buy stocks and sell gold during this, the second-longest bull market in stocks in history, and with a protracted major correction in gold since 2011? Also, by the tone of your message, I think you provide still another reason not to give up. I know the feeling from experience at the bottom of a market and your statement about hopelessness is an emotion that indicates we are near or very near a bottom. Right now there are very few people who care two hoots about gold. But that will likely change very dramatically when even a small amount of money exits stocks and bonds to enter gold, which indeed provides a safe haven for wealth preservation thanks to its negative correlation with mainstream asset classes. Don’t lose heart, because we are very near to a turn in gold and gold shares. Best regards, Jay Taylor” `

How close might we be to a turn for gold? Michael Oliver’s momentum and structural work (www.OliverMSA.com) that he passed along to his subscribers on July 17 suggests it could start next week with a rise in the price of gold above $1,244. Cash gold closed the week in New York at $1,221.50. That’s not far away at all. And keep in mind that every month during the second half of the year is on average an up month, with September being by far the best month for gold bulls. Added to that, my friend David Jensen reminds me that September is the first month that the yuan-denominated Shanghai petroleum exchange contract matures, which means those who have sold their oil to China and wish to exchange their yuan payments for gold may do so. Keep in mind that the Shanghai gold market is totally a physical market. No paper substitutes for physical gold in that exchange! David has pointed out that the volume of oil traded on the Shanghai petroleum exchange is sufficiently large that a mere 10% of yuan exchanged for gold bullion could trigger much higher prices because real gold, not phony paper gold (as traded on the LBMA), would have to be delivered.