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Richard Russell - Expect Mass Entry Into Gold By Retail Public

With gold hitting new all-time highs and silver surging to $43, the Godfather of newsletter writers Richard Russell had this to say in his latest commentary, “Gold -- I've been receiving many calls to the effect, ‘Should I sell my gold now?’ My answer is that I don't have the ultimate answer to that question. My thinking is that gold has been in a decade-long (bull) market. Most extended bull markets end with a third-phase period of torrid speculation and a mass entrance by the retail public. So far, we have seen neither.

My inclination is to ride the gold bull market until it provides a classic ending. That means sitting through many a coming correction and perhaps extended periods where gold does little or nothing. In other words, I may be doing something stupid but I'm sitting.”

Russell continues:

“GOLD -- Lord bless moving averages ‘that work.’ One MA that has worked beautifully for two years is the 150-day MA of gold. Note below that gold has ‘tested’ or touched the 150-day MA of gold on five separate occasions over the last two years, and each time gold has held -- and then rallied to new highs.

Gold's latest run has taken it rather far ABOVE its 150-day MA, and now gold has me a bit nervous. Has gold run up too far? Does gold need a rest? Will gold sit on its butt, until the 150-day MA rises to touch it (nah, that would take too long)? Or is gold rising on a new and steeper angle?”

Regarding stocks Russell had this to say, “So what do I think is happening? I've said this before. The crashing stock market is terrifying US consumers, who immediately cut back on their buying and their orders. As consumers cut back, this impacts on the stock market, and we have a case of two wild hyenas eating each other. It's a case of the stock market "eating" consumers, and consumers frightening the stock market.

Conclusion -- We've seen some extreme downside action. But Jim Stack of InvesTech Research reports that on the August 8th panic the ratio of declining stocks to advancing stocks was 77 to 1, a ratio never seen before in the past 80 years. The closest incidents were the May 1940 ratio when France fell to Germany; that ratio was 60 to 1. The second incident was on Black Monday during October 1987 when the ratio was 49 to 1. In both cases, those hugely high ratios marked a near-bottom, and within one month of those ratios the market was 10% higher.”

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Eric King

KingWorldNews.com

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