Gold, Silver and Other PMs: Gold At Key Support; Buy with a stop?

» Kirk - Gold At Key Support; Buy with a stop?

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If we are in for a reversal of trend and inflation returns to a secular uptrend, then Gold will be an important commodity to own. Gold will also be to trade around a core position from the long side as I have done with technology stocks like LRCX for the last 7 years with great success. Many claim the price is manipulated by large holders, usually governments and central banks, who want a stable currency. The argument is they have a need to deceive their public into thinking inflation is not as bad as it really is using phony measures like “rental equivalent housing prices” rather than the actual cost to buy a home. Low inflation means lower cost of living payments to Social Security recipients and lower wage increases to government workers. Eventually, they argue, all of this “monkey business” won’t hold back the flood waters and Gold will explode to the upside to recognize inflation. Of course, the other side can say inflation already shows in higher land prices, especially in good locations, which is far more valuable than gold.

I find it hard to believe any single organization can actually “keep gold down” due to the huge size of the market. I’d like to find out, perhaps with your help:

• what is the total size of the Gold Market?
  
• If you were to put all the Gold in the World (not in the ground) in one place, how much would it weigh and be worth?
  
• What is the “float?” That is how many actual ounces actually trade each year?
  
• What is the total trading volume for gold each year? Is one ounce being sold 100 times?
  

<img width=520 height=468 src=http://stockcharts.com/def/servlet/Sharp...>

This chart actually shows Gold is at a key support level with higher lows on RSI. A buy here with a stop a bit below the Blue Line makes a lot of sense if you wanted to trade gold on the idea it will go higher.

ETF for Gold

<img width=520 height=468 src=http://stockcharts.com/def/servlet/Sharp... >

I think Gold can go up if the World Economy continues to flourish. That mostly means that China and India are successful in growing their middle class while taxing the rich enough to improve the condition of their poor to stave off revolutions.

The World is awash in liquidity due to excessive savings in countries outside the US. China and India and many other places like Gold over their own currencies for obvious reasons plus it is a key part of those cultures for jewelry and gifts. If you have extra cash, why not invest in buying gold for personal use? I don’t do this or recommend my subscribers do it, but I think I can see why others outside the US might.

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As of 11/2/05 the Total Return for "Kirk's Newsletter Portfolio" since 12/31/98 is Up 171% while the NASDAQ is down 4%!!! (my portfolio beta is roughly equal to that of QQQQ.

For 2005, Kirk’s Newsletter is Up 4.2% YTD vs QQQQ down 1.4% YTD vs DJIA down 2.9% YTD vs S&P500 Up 1.5% YTD

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-- posted by Kirk