The Fat Lady Isn't Even In
The Building
Grandich
Letter
Peter Grandich
Tuesday, March 29, 2005
Other than believing a correction was due at certain times, I've
maintained a bullish long-term stance towards gold. The latest
"step back" in what I've constantly described as a
"two steps up, one step back" trading pattern for gold,
has once again brought fear to the hearts of many gold bugs and
brought bearish forecasters to the forefront of their attention.
The very fact that this is the case reassures me that nothing
long-term has changed. It's when these corrections are met with
excitement and contentment (versus concern and uneasiness) that
I will likely have to rethink my position.
There's always a "major
concern" during the step back part and this time is no different.
The latest hiccup is the belief that the terminally ill U.S.
dollar has had a "miracle" healing and has begun a
long rise back to stardom. Now, I can give you a laundry list
of reasons why such a belief is fantasy, not reality, but I will
just rest my case on the words of Lyman Beecher who said, "Never
chase a lie. Let it alone, and it will run itself to death."
The fall of the U.S. dollar
as the world's reserve currency has already begun! The latest
blip up is nothing more than a countertrend rally in a secular
bear market.
Gold $425.50 - A picture
is indeed worth a thousand words
Since turning bullish on gold
in the spring of 2003, I have constantly stated that $500 an
ounce was to me, a question of "when?" not "if?"
Perhaps it's time to show you why I have felt this.
The chart above is the monthly
gold chart going back to 1975. As you can see, the $500 level
has capped all rallies for over 20 years. At the same time, a
rounding (or a W-like) bottom was formed between the years 1997
and 2003. This bottom was built over a multi-year period and
the uptrend line (indicated on the chart as "up") from
the 2001 bottom has never been violated, despite periods of fear
and calls for the end of the gold bull market. These factors
together continue to give me cause to believe that the $500 level
is a reasonable and justifiable target.
Unless we break below the uptrend
line, I see no reason to change my $500 target.
Peter Grandich
Grandich
Publications
P.O. Box 243
Perrineville, NJ 08535
phone: 732-642-3992
email: Peter@Grandich.com
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