Gold: Best to "go away" . . .

Richard Russell snippet
Dow Theory Letters
Jun 12, 2006

Extracted from the Jun 9, 2006 edition of Richard's Remarks

What about gold? Below we see the weekly chart of GLD, which is simply a proxy for gold. Everything on the weekly chart suggests that gold has further to go on the downside, and I'm referring to RSI and MACD. The histograms have just turned bearish, and as a guess I'd say it going to be a matter of months before gold can establish a real bottom. Of course, a high-level consolidation is always possible, but I wouldn't bet on it.

HUI, the gold average looks toppy, but is still holding above support. The gold shares tend to lead the metal, so we'll see if HUI can hold above support at around 28.50 or whether HUI breaks down and tests its 50-week moving average at 274.

Conclusion -- Best to "go away" and not look at gold for another six months to a year. As far as I can see, the first phase of the gold bull market is over. Accumulation time for the second phase lies ahead. And that's going to take time.

But don't worry about gold. When your great grand-kids' hair is turning grey, gold will still be here, and it will still be wealth. OK, you want something to worry about? Standard&Poor's has just come out saying that unless large nations deal with their pension and aging problems, by 2012 their bonds could be reduced to "junk." What, you mean that unless the US addresses its long-term debt liabilities, US notes and bonds could be reduced to "junk" status? That's what S&P is saying. Aw, I'm not going to worry about that. That's something for my kids or their kids to worry about.

Russell Comment -- You see, that's where gold comes in. Gold is not somebody else's liability. Gold is intrinsic wealth, and it will remain intrinsic wealth unless some scientist learns how to turn lead or zinc or copper into gold. But who would try to turn a base metal into gold? The obvious candidates -- the central banks.

Sundry Russell Notes Snippets -- The Chinese have no tradition of giving rings to brides on weddings or even engagements. That's changing. Now 50% of the weddings in Beijing include a diamond ring for the bride.

There are 300,000 (in American-dollars) millionaires in China. This is building a large luxury business in China. Almost every luxury outfit from Ralph Lauren to Cartier to Tiffany now has a store in Beijing.

The movement of 100 million Chinese from the country to the coasts is the greatest migration of people in human history.

Tens of thousands of kids playing in college sports want to be professional athletes. But only one in 15,000 becomes a pro athlete in one of the major sports.

The world soccer play-offs are on in Germany and three million fans are expected to arrive in Germany. Prostitution is legal in Germany and along with the fans 40,000 prostitutes are expected to arrive in Germany.

Talk about change. The following nations have women at their heads -- either as prime ministers, presidents or chancellors -- Chile, New Zealand, Finland, Mozambique, South Korea, Liberia, Philippines, Ireland, Germany, Jamaica, Latvia, Bangladesh. So don't tell me times aren't changing. You can tell a nation's state of civilization by the way it treats its women.

lots more follows for subscribers...

Jun 9, 2006
Richard Russell
website: Dow Theory Letters
email: Dow Theory Letters
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