Tuesday, February 1, 2011

Richard Russell - Gold is in the Process of Building a Bottom

Richard Russell - Gold is in the Process of Building a Bottom

With gold and silver off of the recent lows and the US Dollar staying below key support at 78.50, the Godfather of newsletter writers Richard Russell asked this important question, “Will the dollar continue its fall, and will the Dollar Index break below its March 2008 record low of 72.165?”

Russell continues:

“A typical know-nothing article appeared in Saturday's Wall Street Journal. The title of the article was: "Is Gold's Golden Era Over?" The article was accompanied by a chart which shows gold matched with the sluggish Consumer Price Index (CPI). The inference is that since the CPI has hardly budged over the years and gold has surged, that gold is in a fairy-land world of its own.

Of course, we know that the CPI is just another phony government index, an index that fails to reflect the true path of price inflation. The WSJ article tells us, "The price of gold largely reflects sentiment rather than fundamental demand, which is one reason why gold kept rising the past ten years. But speculators already have cut their bullish bets on gold to the lowest level since 2009. Heavier selling, in turn, could beget still more selling."

This is the kind of utter nonsense we read in the media, week after week, month after month. Of course, ironically, the media is doing so-called "gold bugs" an enormous favor. The media has kept the US public out of, or afraid of, gold for years, thus holding back what otherwise might have been a panic by Americans to buy gold. In this way, the media has kept gold cheap, cheap enough so that the so-called gold bugs have been able to accumulate the yellow metal at bargain prices over the years.

The media today never asks why no fiat currency has lasted for long. In 1971 Nixon slammed down the gold window because the government feared that it was losing too much gold. Yet articles continue to appear in the US media, all suggesting that gold is a hyped-up relic of the past, and that even if you like gold, it is far too expensive at its current price.

Gold -- I believe that gold is now in the slow and often confusing process of building a bottom. April is now the active month for gold. The low for April gold on the sell-off was 1311.30. That should represent the extreme low for this consolidation. Sit with all your precious metal positions.

Ironically, the media seldom attacks the dollar or fiat currencies. The media never mentions that fact that most fiat currencies have died within 40 years of their original creation.

Yes, it's a strange, strange world we live in. And I expect the year 2011 will be a year when a great many questions will be answered. Stock market, the dollar, gold, interest rates -- we await your verdicts.

In the meantime, I believe the surest bet is as follows -- the US dollar will continue to lose purchasing power. All else will stem from that phenomenon.”

To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.

For all King World News readers and listeners globally, I hope you understand the importance of what Russell is discussing here. Should the US dollar continue its decline and take out the lows, you will see a move into gold and silver and a corresponding price rise that will be absolutely shocking to the investment world.

This would result in a panic into hard assets. So far this bull market has been very orderly, this would be a gold and silver market that would be disorderly to the upside, and one that would utterly destroy the gold and silver bears.

Eric King


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