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Gold: Feeling the FeelingsStewart Thomson 2. The answer is no. They are listening to the pawn shop commercials and they will reap what they sowed. If you plant toilet paper seeds, that’s what grows, toilet paper. 3. Goldman believes gold could hit $1300 before year end. Other banks are talking about average prices above the recent $1225 highs by the fourth quarter. The two most important numbers for gold, in my mind, are gold $1400 and gold $700. Are you holding a gold position now that you would sell in a panic if gold sold off to $700? How about if it rose to $1400? Would you buy in a crazed frenzy there, feeling you are being left behind? 4. The “event” that was the low at $1045 was a key “setting” point. A point where fear in the market was large enough to test your ability to hold on into strong weakness and far enough away from $1400, which is arguably the target of the head and shoulders pattern on the weekly gold chart, so that such high prices seemed almost impossible. That $1045 number is almost exactly the midpoint between $700 and $1400. 5. The Euro broke to another new low last night. Most writers don’t like to quote other ones unless they get paid. I’ve tried to people that trying to show people that you or I alone have all the answers is plain silly. I think Howard Katz wrote a fabulous piece on the Euro and buying the Euro into the current weakness against what may be a Soros-organized gang of fundsters who have a “lifetime trade” going that that Euro is going to Par against the dollar, and that is without question the toughest trade an investor in the gold community can make right now, given the non-stop media bombardments that it could be “all over” for the Euro. 6. When I spoke of doubling and tripling my money on Dow stocks I bought into the lows recently, some readers wrote in and said, “I don’t want to hear about the big easy money you make”. First off, when I bought the Dow into 6500, it wasn’t easy. It was brutally hard. I literally felt that the companies I focused on, General Electric and Alcoa, were going off the board. The bank of England stated we were hours away from the total implosion of the world’s financial system. My fears were not imaginary. They were hours away from actually occurring. 7. My current worries that the Euro could go off the board are not imaginary. The hedge fund gang that has a “lifetime trade” going on shorting the Euro is winning right now. When you take the other side of that trade in the face of an organized “Bail Now, Euro To Zero!” media blitz being hammered at you 24-7, that’s the real world. You are the one eating the pain. 8. Howard sees support at 1.32 for the Euro and notes that whatever happens with Greece, bailout or default, in the big picture it’s all gold-positive. I would add that the reality is that if you look at the Euro glass as half full rather than broken into a million pieces, you note that the entire decline from approx. 1.50 to 1.35 is only a 10% fall in price. Many stocks move that much in a day’s trading. Even if the Euro did go to par, that’s a 33% fall. Many juniors move that much in a week. 9. There’s another “half-full Euro glass” consideration: If gold only fell 15% while Barrick ended their buyback of their hedge program, and while the Euro was threatened with “the next Lehman”, (and while Ben Bernanke thanked the US govt for his reappointment by giving them the finger when it comes to any Gman debt relief via money printing, that after handing the banksters 10 trillion dollars with no strings attached) the question becomes, if the Euro does start to recover, can you imagine how powerfully Gold is going to perform? I don’t think many have really thought thru just how much underlying strength exists in the gold market right now. 10. Weakness must be bought. I have no idea if 1.32 is any bottom for the Euro. Many solid technical analysts thought 1.36 would be the bottom. Wrong. I do know that the banksters are on the Euro buy while telling you to sell and short it. I do know that if we go to 1.34 or 1.33 or 1.32 I’m a buyer at all those levels. If you are using leverage or worse, excessive leverage, and trying to pick the bottom, you may find that a 10% correction in price has you burning on fire and/or hitting stoploss exit points. My suggestion for most is to use Euro weakness to buy gold bullion weakness. The Euro is a strong currency. Euro Bottoming? Video Report Yes the Euro is strong, but keep in mind that Gold is stronger, infinitely stronger. 11. My suggestion is that if you are caught between “but what if there’s a test of 1045 Gold?” and “what if it roars to $1300 and I’m left behind?”, rather than buying positions, dumping them for micro profits or bailing on them because you’re sure it’s going to 1045, use the current weakness to add to your physical gold position. Once that’s locked away, you’re not going to worry about price movement. 12. One of the great ironies in the gold community is the pro-China stance. While many cheer on certain actions by the Chinese govt, they are stock market bears. And of course, the Chinese stock market continues to rise while they stand there predicting its demise week after week. 13. Yesterday the FXI-nyse, what I term the “Chinese Dow”, not only rose higher, but gapped higher, blasting out of a head and shoulders bottom formation. Yes, I was a seller of that strength, but the point is that you need to decide if you are a Chinese Gman fan, or a player in the Chinese Industrial Revolution. I couldn’t care less about the current Chinese “boom”. Nor whether it goes “bust”. Any kind of 1929 event in China, and I doubt it will occur, but if it did, any such event is a gift. To you. Don’t make the mistake that the public did in 1929 in America. They were in everything but the Dow, and their holdings never came back. Most were diluted or went right off the board. John “Sir Johnny” Templeton got his start buying NYSE stocks that were down 90% trading at $1 or lower, after the 1929 wipeout. He never looked back. It can be the same for you, for your children, your grandchildren, with China. Since you’re not Sir Johnny, my suggestion is to focus on a Chinese ETF, and the FXI is the cream of the crop of the Chinese market, representing the Xinhua 25, like the DIA-nyse ETF represents the Dow Jones Industrial Average in America. 14. Gold Bullion has been trading in a symmetrical triangle since hitting the 1130 area highs. We broke out, upside, this morning. That’s good news. Good news must be sold, strength must be sold, but relatively and professionally. Small strength equals small selling. Big strength equals bigger selling. 15. While the breakout looks good, and comes within the confines of a larger uptrend channel, I want to remind you that the banksters are chart masters, not the lobotomized idiots that many in the gold community like to imagine they are. When you are a chart master with unlimited money, you can not only read charts, but actually create them. 16. Regardless, the target of the small symmetrical triangle is the $1130 area, which represents a $40 profit on positions put on into weakness into 1090 last week. Some money has to be taken off the gold trading risk table, here and now, if you have not done so already. The fear that you are “missing out” is the clearest sign you can have to book profit. Remember all the concerns at gold 1045? All gone. Book profit on the feeling that you are missing out. Profit on what you bought into the feeling at 1045, the feeling “gold is going down, I’m in trouble”. Here’s a look at the breakout that you should be booking profit into: gold's symmetrical triangle breakout 17. The Australian central banksters decided to raise interest rates, again, now to the 4% marker. The liquidity flows reports show the banksters selling into this strength. I would suggest you do the same. Here’s a look at the currency. I’m long, yes. As I watch the banksters pouring on shorts, am I nervous? Yes. As good as the 4% rates/strong economy in Australia makes things sound, I have to book some profit into this strength alongside the bankster selling. Here’s a look at that strength. Aussie power rise chart Nearly 3 points of price strength from the “hole” at 88, must be sold, not bought. 18. Wheat continues the “’battle for 5.25”. The 5.25 area is the head and shoulders neckline and significant overhead resistance. We had to be sellers into Friday/Sunday nite/Monday AM strength even without knowledge of that key horizontal resistance. Here’s a view of that head and shoulders pattern via my video report. Note why I believe this h&s pattern may not be as strong as it appears: wheat analysis 19. As I get ready to send this off I see gold is already pulling back to the top of the symmetrical triangle pattern, confirming the importance of selling a portion of your positions into this strength. As you wade into the market battlefield this morning, make sure you focus on identifying your “gold feelings” before taking action in the market. Sell your feelings of missing out and buy your feelings of “oh no now it really is going down.” ### Mar 2, 2010
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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am. The newsletter is attractively priced and the format is a unique numbered point form; giving clarity to each point and saving valuable reading time. Risks, Disclaimers,
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