Graceland Updates 4am-7am
Now or Never. Face The
Gold Cliff & Buy
Stewart Thomson
email: s2p3t4@sympatico.ca
Mar 11, 2009
"The bankers know you
inside out. They have been picking your pocket for hundreds of
years."
1. The million dollar question
on everyone's mind in the gold community is: has the correction
to the $900 area in gold run its course? Or at least running
its course. Or is any rally now going to be followed by another
hit? Let's review the basics:
2. This is the weak season
for gold jewellery in India. The Indian currency has surged,
making gold expensive. While it was already surging in US dollars.
The Indians buy weakness in gold. Not super strength.
3. The strong season for gold
jewellery begins around the end of August, as preparations begin
for the wedding season. Gold is the gift given at Indian weddings,
and the season peaks around Christmas.
4. Some analysts argue that
"seasonality in gold is over" for now, because gold
is now trading as a currency much more than as a commodity.
5. Recently there have been
a lot of changes in established rules of thumb that have confused
traders. Examples are: The US dollar has rallied while
gold has rallied. The Canadian dollar and Australian dollar,
commodity currencies, were hammered while gold soared. Oil fell
while gold rose.
6. I've not referring to the
reasons for these changes, I'm focusing on the fact that the
changes are happening faster and faster. The volatility of change
itself is increasing. Many very good analysts are now mentioning
that "today" the US dollar is moving with the gold
price, but "yesterday" it was not.
7. The "rules of thumb"
are seen as working for shorter and shorter time frames. For
amateur investors, who generally need time to get a handle on
the sometimes complicated concepts involved in explaining why
one asset class is or is not linked to another, you barely have
understood one trend, when it is replaced by another.
8. Just as the US dollar is
surely topping, we read that the euro "may begin a huge
correction". It just had one! The article seems to carry
some "weight", which only adds to the confusion.
9. At such times the charts
should be watched carefully. While charts give many many false
signals, you can at least create a picture for yourself of reasonable
clarity.
10. The mind and emotional
state of the investor at any point in time has a tremendous effect
on the decision making process. What I like to do is face the
fears head on, face the nightmare possibilities, and do that
first. That is the risk component of investing, pure and simple.
Then I focus on the reward side. The upside.
11. Let's see if I can read
your mind right now in the gold market, and then I'll take a
look at whether the gold chart is in agreement with the
same fears and greed we all share. Here we go:
12. At $1000, you were probably
pretty sure gold was going to break out higher. Some bought in
the 950-990 area, anticipating a breakout. Because a real breakout,
if it came, could leave you behind. Prediction of 1060 and 1200
were and now were on the table. Merrill Lynch announced "our
wealthy clients are buying gold" as gold soared towards
$1000.
13. Goldman Sachs was specifically
talking $1000 gold call options. And those calls did make a profit
as gold jumped to $1000. But investors didn't buy those options
to make 30%. They bought them to make 500%. If gold went to 1200,
they would have. Maybe more.
14. The April call options
have a time limit. Time is running out. Even if gold rises to
1000 by the expiry, they expire worthless. These options simply
give the holder the right to buy gold at 1000. If gold is at
1000 when they expire, why pay anything to buy gold at the current
market price? And nobody is going to pay any fee to buy
gold at a higher price than the current market price on the day
those options expire.
15. Another item I want you
to get a handle on is what I call the "news managers".
Whether you believe as I do that the financial news is managed
by the bankers or not, there is no question that a lot of good
gold news appears when prices are rising, and bad gold news appears
when prices fall.
16. One news item of great
concern to me is the very recent news release by UBS Bank that
gold could go to $2500. I got some emails from excited investors
on that one. Which immediately makes me think of this possible
scenario, and it's only a possibility: Gold has come down
from $1000 to $900. An approximately 10% correction. If
you bought gold at higher prices, now could be a time to add
to your position in a big way, since gold is going to $2500.
This is the mind of many investors right now.
17. When Merrill announced
with glee that their "wealthy clients are buying gold now!",
they forgot to mention one minor detail: WHO sold these
people the gold they were buying? For every buyer there
is a seller.
18. When the Goldman Sachs
clients bought all the $1000 calls, where did they come from,
out of the sky? No. Goldman was a seller of gold into the
rally to $1000. Bigtime.
19. So my fear is that any
rally in gold will be met with a bigger selloff. Let's face that
fear now: How big a selloff? It's important to separate
the different buyers of gold into groups. And analyze why those
groups buy or sell. It is not the same for all the groups.
20. The gold community, aka
the "gold bugs" think very big. That is you. Most are
looking at gold rising to thousands of dollars an ounce. You
bought because of the following reasons: The end of the American
Empire. The $700 trillion derivatives garbage dump. Coming hyperinflation.
The destruction of the US dollar. There are other reasons, but
they are all mega big picture moves.
21. The bankers are another
group. I believe they hold the largest physical position of gold.
So does Jim Sinclair. No buyer of all the taxpayer gold unloaded
via LBMA by the central banks has ever been revealed. I believe
it was the major bank families. Many claim to have the "inside
track" on what the bankers are doing. I don't know any gold
writers other than Jim Sinclair who ARE part of the families,
so it's highly doubtful that any of these "sources"
are reliable. If accurate, it's probably more by accident than
real information. "Just like in the 1970's, it will be the
banks that make all the money in gold this time." -Jim
Sinclair. World's Largest Gold Trader.
22. So we have the gold community
trying to hold their gold positions, and the much larger bankers
definitely holding their positions. Together forming a sort of
gold core.
23. The risk aversion trade
is another group. This trade arguably fuelled the rise from $680
in October to $1000 recently. As money managers and "wealthy
individuals" began to bail on the stock markets, they moved
to US Treasury Bonds, but as real risks of total system failure
were announced, some money moved into gold as well.
24. Bear with me as I go though
this. I view my role in the gold community, other than "chief
comedian," to be to guide the community as a whole
into acting with a calmness that does not exist now. To build
the new, the old must be broken. If you have felt pain in the
gold markets up to now, that pain WILL increase a hundred fold,
and maybe a thousand fold, as gold moves thousands of dollars
higher. All the way up, the bankers will attempt to play
with your minds, luring you in with managed news. Then scaring
the life out of you, so you bail on terrifying weakness.
25. The higher the price of
gold goes, the higher the gold "cliff" becomes. When
you look down at gold $1800, that's 1800 "feet"
of cliff. The bankers WILL make you FEEL that. My job, I feel,
is to prepare you to handle the endless bankers' schemes
that WILL be used to lure you in and out of gold like a yo yo,
all the way to the end of the gold bull market.
26. One thing I'm going to
tell you is that most of you are likely trading WAY TOO BIG.
Not a little too big. WAY TOO BIG. In too heavy at too few price
points. You don't need to be "all in" to make a pile
of money in gold. Trade smaller and you will make MORE money,
not less. I have worked with a web application guy that I call
superman, who has a serious portfolio himself, to create the
pyramid generator. This systematically generates buy points on
weakness with parameters customizable by you. And sell points
into strength.
27. I used to try to answer
subscriber questions and post them on the site.
28. Now I answer them all directly
by email. Saves a lot of time for me and lets me handle
questions promptly. I work 12-16 hours a day, so I can handle
a lot of volume. At the bottom of this report, you'll see why
I mention this.
29. I'm going to post this
write up on the free reports section of my website, and you can
click on the charts I include here and expand them into a separate
window, even for viewing on a separate monitor if you wish.
30. Now that we've had a "fear
break," let's face it again: If gold breaks $880, it could
fall to $800. The risk aversion trade is a big amount of money.
And most of it came in as gold soared. IF the stock market were
to begin a major rally, and I think it will, both the US dollar
and gold could decline as the risk aversion trade would be unwound.
31. Arguably, that is what
has already happened from $1000 to $900. Because the entire rally
from $680 to $1000 was a risk aversion rally, it is possible
(and yes, now it's time to look over the cliff and feel some
fear, sorry), that gold retraces the entire move back down to
$680.
32. Looking further out, if
gold were to break $680, all out panic selling could occur, particularly
in the ETFs.
33. This would represent a
huge changing of the guard. Putting the bulk of the gold held
by investors now, into the hands of the bankers.
34. For every seller there
is a buyer. The only group capable of absorbing all that gold
is the bankers.
35. I mention this "nightmare
scenario" so you are prepared. Don't sell your gold to these
scumbags if the above occurs. If you do, you could be just in
time to watch the emergence of inflation, which would quickly
turn into hyperinflation. Sending gold from $500-$700 to $1200
in a very short period of time. And again enriching the bankers
while investors charge in trying to get on board before missing
out.
36. Let's look at the daily
and weekly gold charts to see if such a scenario is possible.
Don't predict whether it will happen, just be prepared
to buy more gold, or at least hold what you have, if it does
occur.
37. Here's the daily gold chart:
38. I want to draw your attention
to the daily stochastics. Which are in oversold territory. There
is a potential hook up on the shorter term 6,12,9 MACD series.
We have descended towards the demand line of the keltner bands.
These are hints of a coming nice rally. Again, the big question
is whether this is the bottom before we go back over $1000, or
is there more pain to come?
39. To answer that, I draw
your attention to the weekly chart. Always let the weekly chart
"rule" the daily. Unless you are a very short term
trader. Even then, the best trades come when the short term and
long term charts are telling the exact same story. When indicators
and chart patterns are flashing "buy now" on all charts,
you have high odds of buying at a near perfect moment.
40. Here's the weekly chart:
41. I don't like what I'm seeing
on the weekly chart, but keep in mind that I buy weakness. I've
bought gold and gold stock all the way down, and if gold goes
to 800, 700, 600, I'll be a systematic buyer all the way down
there. So should you. Because if you think the gold cliff looks
high now, I URGE you to understand how high that cliff will look
as we move forward to much higher gold prices. The bankers
know you inside out. They have been picking your pocket for hundreds
of years. Your only defence is to be a buyer when they
buy. To prepare for that now. Regardless of how remote the possibility
is. Do NOT repeat May 2006, spring/summer 2008. Those bank games
will look like molehills compared to the mountains of pain they
have planned for you as gold roars higher.
42. The stochastics on the
weekly chart has rolled over, and the shorter time frame MACD
series has crossed into a sell signal. The uptrend line has is
creaking, some would say cracked.
43. Adding it all up, we have
the daily chart saying buy, the UBS bank report saying buy, and
the weekly charts saying, no, not "look out below".
The weekly chart is saying: Begin buying. This is your last chance
to learn to buy weakness in gold. Once gold leaves the $1000
launch pad, a new era of volatility will be ushered in.
44. Jim Sinclair has stated
that gold will become "untradeable" for all but the
top pros and many of them will be destroyed. He believes the
Comex will become a cash market for gold. Those of you
playing leveraged futures trader are making a huge error if you
think you will be holding a big bag of Comex profits at
the end of this bull market. You are more likely to lose your
house as the market gaps through your stops on the day they are
even rumoured to be ending margins. End your use of big margins
now with small profits. Not with bankruptcy or wrist slashing
later.
45. I want to leave you with
this: The gold market is giving you free leverage in gold. That
leverage is called: Hyperinflation. You don't need to borrow
money to leverage gold. Hyperinflation will leverage your gold
for you.
46. As gold does a potential
ten bagger to $10,000 an ounce, the junior gold stocks could
rise a hundred fold. I'm serious. Those who say, "Making
10-fold in physical gold, the world's lowest risk investment,
is not enough for me, I need more with leverage, with borrowed
money," are living a fantasy that will blow up. Those who
are borrowing money to buy junior stocks will see their rates
of interest skyrocket as the bankers tank the stocks in one of
their hits down the road. "A hundred bagger is not enough
for me. I need more!" Does that sound rational?
No.
47. It's time to face the mirror.
Buy this weakness and keep buying if gold falls further. Or never
buy again. Do it in small stages, smaller than you think is rational.
48. For subscribers, I'm now
answering all emails directly and personally rather than trying
to post on the website. If you need help, I'm here.
###
Mar 11, 2009
Stewart Thomson
Graceland Updates
website: www.gracelandupdates.com
email for questions: stewart@gracelandupdates.com
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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
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Stewart
Thomson is no longer an investment advisor. The information provided
by Stewart and Graceland Updates is for general information purposes
only. Before taking any action on any investment, it is imperative
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