Gold Versus Paper

Turning paper into Gold

December 28, 2011INTERIM UPDATELet me cut to the chase and give the executive summary in two words: we’re there. It isnow time to get bullish again on the PM sector. Others are afraid; we want to be greedyhere. I believe there is a 75% chance this is “THE” bottom in the PM sector, but even if itis only “a” bottom, it should make a very profitable trade.The only way I can reconcile my general bearish outlook for global equities with my bullish outlook on the PM sector is to look at the late 2000-2002 period and the 1973-1974 period. During these periods, Gold and Gold stocks rose while the general marketswent down.It is true that when markets decline precipitously, Gold stocks decline with them.However, if we get a steady and/or choppy decline in global markets (due to endlessinterventions and money printing), then Gold stocks can rise while markets are flat todeclining.I think there is a very good chance that the bottom will be in tomorrow at some pointduring the day. Notice in the bullish percent chart on the GDX (i.e. the $BPGDM) wherewe are relative to the fall of 2008 bottom (4 year busy daily chart plotting the $BPGDMas a black linear plot and the GDX as a green area plot behind it thru today’s close):

Also, I have been waiting for the weekly slow stochastic on the GDX ETF to get to theusual level that has marked previous bottoms. We’re now there (weekly 12 year log scalechart of the GDX thru today’s close):