These days,
nothing surprises me
Richard Russell
snippet
Dow Theory Letters
Jan 30, 2008
Extracted
from the Jan 29, 2008 edition of Richard's Remarks
Who is the world's largest
miner of gold? The answer is enough to make old-timers do a double-take.
The answer is China. Why is China so interested in mining
gold? Why has China encouraged its citizens to buy gold? Why
has China made it increasingly easy for its citizens to buy gold
and gold futures? Why has China hinted that sometime in the future,
China - not London and not the US futures market - could set
the price for gold?
My own thinking runs along
the following lines. As the US dollar slowly loses its treasured
reserve status, the Chinese renminbi becomes stronger. Could
the renminbi, sometime in the future, gain reserve status? Will
the renminbi become a convertible currency? It will, the Chinese
already promise it. Could the renminbi, sometime in the future,
be convertible into gold? Yee gods, if that were to happen, the
renminbi might become the world's strongest and most desired
currency. Incredible thought? Fantasy? Absurd dream? You know
something, it wouldn't surprise me. These days, nothing surprises
me. Here's a thought - would China announce that " the renminbi
is now convertible" just before **next
year's Olympics in China? Don't bet against it. [**Editor's note: Dear
Richard - The Olympics are in China THIS year. It's 2008 now,
and don't forget - you've got a Dow Theory Letters 50th anniversary
this year. 1958-2008]
Meanwhile, as I noted yesterday,
the character of the bull market in gold seems to be changing.
The change is that I don't sense any "give" in the
metal. It's like some strange, invisible power is forcing the
metal higher. Will gold correct? Will gold retest the 900 level?
Can this steady almost eerie rise continue? And how is it that
the public remains singularly disinterested? At what point will
the US public drop their disinterest and "go for the gold"?
Below we see a monthly chart
of the bull market in gold. How could gold, how could any item,
rise from 250 to over 930 without attracting intense interest
from the public? Damned if I know, but I can tell you this -
somewhere ahead, rising gold will attract the interest of the
public. I've never seen a rising market that didn't, at some
point, bring in the public. But the higher gold rises without
public participation, the higher gold will ultimately go.
I guess decades of anti-gold
nonsense and ignorant propaganda has left Americans "brain-washed"
when it comes to real money. It really does seem like the ultimate
irony - Americans have faith in fiat junk paper - but they distrust
real tangible money - gold. Americans will "get it"
somewhere ahead. I'm in no hurry, and you shouldn't be either.
Meanwhile, let gold "creep" higher. I continue to call
it the "great stealth bull market."
Now compare the monthly chart
of gold with the chart of the Dow over the same period. Uh oh,
what's this? The major rising trendline has been violated. That's
not good. The rate-of-increase has been halted and reversed.
Any rally from here will be a rally below the bullish trendline.
If we are to believe the charts, and why shouldn't we, gold is
in a bull market and the Dow is breaking down.
Hey, what about silver? Silver
used to be a monetary metal, in fact, the dollar was originally
defined in terms of a specific weight of silver. In 1980 gold
hit a high of 850 and silver hit a high of 50. Today gold is
at 940 and silver sells for 16.75 an ounce. Silver seems behind
gold and platinum, silver seems cheap.
My suggestion for those who
want to take a position in silver is to buy either SLV (the silver
ETF) or buy CEF (the closed end fund that is made up of roughly
52% gold and 46% silver). I own both, and I added to my holdings
of CEF recently.
A comparable chart of CEF is
included below.
Interestingly, a major article
in today's Wall Street Journal did its part in keeping
the public out of what may be one of the greatest bull markets
in history. The headline, "How to Survive the New Gold
Rush." The subtitle, "Investors Race Into the
Hot Commodity. Even as Advisors Warn That Gains May Have Peaked;
Beware the Tax Hit."
Thanks, Journal, for
the ignorant and prejudiced warning. And next time you put a
reporter on a subject, try and find someone who has some knowledge
of what the hell he or she is writing about!
lots more follows for subscribers...
Jan 29, 2008
Richard Russell
website: Dow
Theory Letters
email: Dow Theory Letters
Russell Archives
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