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Posts Tagged ‘bull markets’
Gold Trend for 2009
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People always wonder when any investment goes down if it is smart to buy in at that time. Peoples’ minds run wild with concern when there are corrections in any market they are invested in. What one must follow are the trends. Look at the chart above. This chart says it all. There have been many ups and downs in the gold market this year, some small and some large, however the trend is positive. Gold has been in a long-term positive trend cycle since 1999. Don’t let the normal market action from day to day be of concern. When putting money into anything for the long-term one must only concern themselves with the trend.
What goes up must come down, this is healthy. If the market were only to rise with out building support along the way it will most likely crash hard. It is like building a house without laying a foundation. All markets trade within a trading range, with support on the bottom and resistance on the top. Without getting too technical, the market will try to test support on the bottom, and if it breaks it, the market will then test the next support level. If it breaks resistance on the top it will try to test the next resistance level. Essentially this is a trading range. Look at gold in the chart above. It tested resistance at $1,000 twice this year before it finally broke it. Then it built a foundation above $1,000. It rose rapidly to $1,200 per ounce before correcting; no foundation has been built above $1,100 yet.
If gold rises above $1,100 and stays above it, it will build a foundation and possibly test the $1,225 mark again. The net net is follow the trend and apply funds for the long-term. Allow money to work through the trends. Be in during bull markets and out during bear markets.
Spot Price of Gold is on the Rise
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As you may have noticed the price of gold is on the rise, and has been for the past 9 years. It started at a low of $252 per ounce in 1999 and as of this writing gold has set a new record spot price of $1,149 per ounce. It should be noted that the current record of $1,149/oz when compared to the past record of $850 per ounce set in 1980 is not really a new record. When you adjust the $850 gold price for inflation, in today’s dollars it would be somewhere around $2,300 per ounce. This is one reason why many experts believe that gold is going much higher in the future.
No one will argue that we are in a gold bull market, but when considering investing in anything it is important to understand how bull markets work. Gold is currently in the second phase of a common three phase bull market. The first phase is the accumulation phase. This is where the asset goes up without too much attention being paid by the general public, and very few people are participating. The second phase is the awareness phase. This is where Wall Street starts to pay attention and then participate, and the general public begins to take notice and some people participate, driving prices higher at a little faster pace to its fundamental value. The third and final phase is the panic or speculation phase. This is where everybody is seeing what is happening and are afraid of missing out, and most people are participating, driving prices up far above fundamental values.
The most recent examples of the third phase of a bull market are the dot com boom in 1999-2000 and the housing bubble of 2004-2005. These markets shot up like a rocket and shortly there after corrected themselves.
Gold was in the first phase from roughly 2000-2005; we then entered the second phase which we are still currently experiencing. You can tell we are in the second phase by the action in the market. Many advertisements for gold are popping up. The general public is beginning to talk about it, but only some are actually entering the market. Many experts argue that we will see a blow-off top or third phase in the gold market, and when we do prices will rise very rapidly.
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