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Minyan Mailbag: The Six Million Dollar Gold Bug

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What if he runs into a $7 or $8 million dollar gold bug? Where will it end?

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Prof. Kevin -

On Tuesday, gold got whacked for $20, which on the face of it, is a lot. However, since gold has been up $83 since Jan. 1, it's not a big deal in the grand scheme of things. Those who follow gold closely knew something like this was out there. That's just the nature of the market. Today, gold is up $12, and you hardly hear one word about it.

There are so few people who truly understand as to why gold is where it's at, and how much higher it will eventually go. On Tuesday, all I read (not just on the Ville) was how the gold run was over, how it never should have been that high in the first place, etc..etc. Even on Tuesday night, Greenspan bashed gold saying the only reason it was higher was because of the tensions in Iran.

In my fifteen years on the Street, I have never felt as right about a trade as I do about gold. I think people will be shocked about how high it will eventually go.

Minyan Oscar "Goldman"

P.S. Steve Austin, gold bug. A gold bug barely alive. Gentlemen, we can rebuild him. We have the technology. We have the capability to build the world's first bionic gold bug. Steve Austin will be that gold bug. Better than he was before. Better, stronger, faster.


Dear Minyan Oscar "Goldman" -

There was a lot of talk about gold stocks on the Ville the other day, and Professor Weldon, a longtime gold bull wrote about the metal itself: "We remain bullish, longer-term [on gold], but are tightening stops dramatically."

As for gold stocks and the XAU, that index has done what we wrote it would do: it met the PnF downside objective of 140, and as Tom Peterson noted, "It would seem a good buying opportunity will come on a test of the 34-day m.a. (which is now at 140 and rising)."

Right now the XAU is testing initial resistance at 145, with greater resistance at 148 (the area of former PnF chart support).

XAU - Chart courtesy Dorsey Wright

But none of this changes the shift to negative context. Not advice, but a move to 139 in the coming days would be a very serious breakdown for this index and change the current move from corrective to something more far-reaching.

P.S. Regarding Steve Austin, it would cost $24,945,762 million to build our $6 million dollar gold bug today. Inflation, you know. Meanwhile, gold at the beginning of 1974 was about $116 an ounce, which in inflation-adjusted terms is the equivalent of $428 an ounce; as it turns out, a rather nice hedge against inflation after all!

No positions in stocks mentioned.

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