Wednesday, January 27, 2010


Most investors have such short little attention spans they never see the forest from the trees. It's exactly this preoccupation with the immediate that prevents the vast majority of people from making any money in the stock market much less get rich.

The simple fact is that the strategies with the largest reward almost always have the largest drawdowns. If you want to make the big money you have to adjust your thinking. I can tell you that you are never going to get rich by day trading the market. You might make a living but you are never going to be the next Warren Buffett, George Soros, or Jim Rogers.

Patience my friends is a priceless commodity in this business. One that is in very short supply in the retail community.

Let's step back, look past the trees at the forrest, and see what's really going on in the precious metals market.

That breakout above the old highs at $850 is a major breakout. One that I doubt will ever get penetrated again during the rest of this bull market.

During the crash last year, in a period when everything was being thrown overboard, the demand for gold was so great that you couldn't buy it...anywhere. There was none to be had. And even though the paper price for gold dropped to $680 the real price, the price you had to pay to order actual gold, that you might take delivery on in 2-3 months if you were lucky, was almost $100 higher.

Now we are hearing calls from every angle about the imminent collapse of gold. But what is the real story? The real story is that despite a powerful rally in the dollar gold hasn't even tested the recent breakout level. It's not even very close to testing that level.

When you stand back and look at the big picture it's easy to see that gold is exhibiting tremendous relative strength. The two strong sisters Palladium and Platinum are showing even more relative strength having already eclipsed their December highs by wide margins.

While I think it's virtually impossible that gold will ever penetrate the $850 level again I also doubt we are going to see sub $1000 gold for the rest of this secular bull.