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Russell: “The Aden sisters (they flew up from Costa Rica to attend my 90th birthday party), have studied gold for decades -- they are indeed gold experts. In their recent report, the Adens note that gold runs in cycles. Gold tends to form key bottoms every 7-8 years, and it forms key tops every 11 years. The Adens believe that gold is now in the process of forming an important bottom, prior to the beginning of a new bull market to start next year.

The chart below shows gold riding up a large channel, but in 2011 gold broke below its lower channel line and lapsed into a correction or bear market.

Interestingly, gold has now formed a series of ascending lows as it continues its bottoming process. In bottoming, each low is above the preceding low. These ascending lows are usually a sign of accumulation.

The P&F chart below shows that a huge bottom is in formation. We recently had a sell signal when gold filled the 1280 box. But one advantage in holding gold for the long term is that unlike a common stock, gold cannot go bankrupt or down to a price of zero. Gold represents pure wealth and once a price is established, any amount of gold can be sold or purchased. In other words, regardless of its price, gold represents a certain amount of wealth. Gold is at the bottom of the wealth pyramid. All prices are figured off the standard, which is gold. Sell everything else if you have to, but do not trade or sell your gold. If or when everything else is crashing, gold will be the last man standing.

The P&F chart indicates that gold could fall to 1230 while the bottoming process proceeds. A clean bullish breakout would occur if gold fills the 1330 box, but I don' think this is in the cards at this time. I believe gold will continue building its massive base between now and the end of the year. My thinking is the next year we will see the start of a new and giant bull market in gold and silver.

In the meantime, the key is patience and more patience as we wait for the monster base in gold to run to completion.

Caveat -- Of course, if a war starts, everything changes. The most expensive thing a nation can do is fight a war, which is why gold rockets higher in the event of war. Actually, the fact that gold is still trading near the bottom of its trading range is a "good sign." It's a sign that the market, in its incredible wisdom, sees no indication of a war in coming months.

Gold is usually quoted in US dollars. A rising dollar means that it requires fewer dollars to buy an ounce of gold. The dollar's opposite twin is the euro. With much of Europe in a deflationary recession (some call it a depression), the euro has been sagging, and its opposite, the US dollar, has been surging. Of course many investors have turned to the dollar as a safe haven, and the rising dollar is putting pressure on the dollar price of gold.

The chart of the US dollar is below. The dollar has clearly turned bullish, sending the dollar price of gold lower.

Back in 1930 an ounce of Gold sold for $20.22. Consider that you had held an ounce of gold worth $20.22 and $20 in cash. Today that ounce of Gold would be worth $1280. And your $20 would have lost 95% of its purchasing power. People holding Gold for the long-term have tended to retain their purchasing power. The opposite is true of the dollar. Thus I continue to advise retention of silver and gold, both symbols of wealth since biblical times. 

But what of those pros who are in the stock market? They certainly know the risks. So what are they thinking? They can't take a chance of being out of a market rally, and if things don't look right, they'll get out ahead of the next poor slob. But what if everyone wants to hit the exits at the same time? In that case we'll have a crash.

My choice is that I refuse to play musical chairs with the stock market. I believe that somewhere ahead, the current financial system will tear itself apart.

At that time I want to be at the bottom of the pyramid. The bottom is pure, unadulterated wealth. It's called gold. When all is madness, the world will go to the base of the financial pyramid. The base of the pyramid is gold. Gold has represented wealth since Biblical times. Gold opened Alaska and the American West. When all else goes down the drain, the foundation will stand. That foundation is gold. 

Stop the first ten people you see on the street, and ask them how much gold they own. My bet is that not one of these people will say that they own any gold. It's strange that nations have fought over gold. Yet gold is despised and denigrated in America today. My prediction is that you and I will see the day when gold is loved and treasured in the exact opposite way that it is hated today.”

King World News note:  I would encourage everyone around the world to sign up for Russell’s commentary.  Russell witnessed the Great Depression firsthand, he flew B-25 bombing missions in World War II, and he has studied markets for 60 years.  To subscribe to legendary Richard Russell’s Dow Theory Letters CLICK HERE.

© 2014 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

IMPORTANT - KWN has many more interviews being released today.

The audio interviews with Rick Rule, Dr. Philipa Malmgren, Gerald Celente, James Dines, Michael Belkin, Dr. Paul Craig Roberts, Andrew Maguire, Art Cashin, Michael Pento, MEP Nigel Farage, David Stockman, and Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

Eric King

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