 Gold is eternal
wealth
Richard Russell
Dow Theory Letters
October 18, 2004
Extracted
from the Oct 15th, 2004 edition of Richard's Remarks
I want to write
something about gold now. Here's the Dollar Index today breaking
to its lowest level since last March. And what does gold do?
Nothing. Why? What's going on?
People aren't
looking at gold correctly. Gold is eternal money. Gold is the
only money not a product of debt. Gold is pure intrinsic wealth.
But when it comes to trading, as long as traders and speculators
can make money buying and selling dollars or euros which pay
interest, why should they speculate in pure direction by buying
or selling gold. The answer is they shouldn't -- and they won't.
Wealthy investors
don't buy gold because they believe gold will move higher. Even
if gold moves higher these people aren't going to sell their
gold. Wealthy people hold their gold until they're near death,
and then they'll pass it on to their kids and their loved ones.
Gold is wealth, paper money is a unit of exchange. Paper money
does not hold its value.
Investors who
have held gold for decades have learned this about gold. Gold
can sit still for months, even years, and then it may make a
huge move in a matter of months. And then it sits for more months
or even years -- before making its next move.
In the 1970s
gold sat on its fanny for years. Then in 1976 gold started up,
and during 1978 and 1979 gold exploded higher. Following the
early-1980 peak of 850, gold went into a bear market that lasted
to July 1999, at which time gold hit a final low of 256. Gold
hit a second bottom in March of 2001 at a price of 257. From
March of 2001 to March of 2004 gold rose from 257 to 436, a rise
of 70%. Which is roughly where we are now.
So if you're
buying gold here for a quick profit, forget it. You're buying
for the wrong reasons. But if you're buying gold as a store of
value, as pure wealth, that makes sense. You may sit with your
gold for six months, a year, five years. Get used to it. At the
end of five years your gold will still be wealth. The stock market
may have collapsed, the dollar may be in smithereens, your house
may have been destroyed by termites, your spouse may have left
you -- but your gold will still be wealth.
Gold stocks
are another story. Gold stocks are stocks. Many are leveraged
vehicles. If the price of gold goes up, the mines' costs will
stay roughly the same, but the profits of the mines will surge.
So when you buy a gold stock, you're buying a different animal.
Gold is eternal wealth. A gold stock is a speculation on that
stock rising exponentially IF gold goes higher.
more follows for subscribers
. . .
Richard Russell
Dow Theory
Letters
© Copyright 2004 Dow Theory Letters, Inc.
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