Casey’s Gold & Resource Report

$1,200 doesn’t seem so pricey, does it?
I’m not saying there won’t be pullbacks or that you shouldn’t try to buy at lower prices. Just keep a big-picture perspective. Let’s say gold falls to $1,100 and you’re kicking yourself for having bought at $1,200… if gold reaches $6,200 an ounce, the profit difference between buying at $1,200 and buying at $1,100 is only 1.6%. If gold gets whacked to $1,000 (at which point I’ll be buying with both hands) the difference is still only 3.2%.
Heck, even if gold peaks at $2,400, you still get a double from current levels. (But unless government monetary policies immediately reverse course, gold isn’t stopping at $2,400.)
So there’s my answer. Yes, you have to accept my projection of gold’s ultimate price plateau. And you have to sell at some point to realize the profit. But if the final chapter of this bull market looks anything like the chart above, I don’t think you’ll be too upset having bought at $1,200.
Carpe gold.
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In my last article a few weeks ago for Kitco.com, I was concerned that the market could have a hangover after the recent rally.  Apparently, my concern was not un-founded as we dropped from a rising bearish wedge near 1130, to the 1070 Fibonacci pivot earlier this week.  Although my subscribers were prepared for this drop by shorting the SP 500 in advance of that move, we covered our short near 1070 on the SP this week.

Bringing things up to speed, the market rallied up from July 1^st to near 1130, which was a maximum target I mentioned in my last article.  This completed a 3-3-5 elliott wave pattern that I identified, and broke the rising wedge on cue.  At 1130, the SP 500 had re-traced a Fibonacci 61% of the April highs to Jul 1^st lows, and had completed that re-tracement over a Fibonacci 5 week window. At TMTF, we believe that markets move in extremely reliable patterns and are not at all random.  At the 1221 SP 500 top in April, it landed exactly at a 61% Fibonacci upward re-tracement of the 2007 highs and the 2009 lows.  At the 2009 lows, the SP 500 had corrected 61% of the 1974 lows to 2000 highs right on the nose at 666!

What I forecast now is for a re-test of the 1011 area on the SP 500 to be completed likely by the end of August, and potentially a drop to 942 by the end of September and early October.  I realize this is not a popular forecast right now, but at a bare minimum we should expect the market to go back and bounce off the 1011 area where it bottomed on July 1^st.  What would negate this view is if the SP 500 can rally past 1105 this week and hold into next week, then we may expect the bulls to re-take control.  Another interesting point is when the market did in fact bottom at 1011, it was a Fibonacci Intersection.  By that I mean it re-traced 38% of the 2009 lows to 2010 highs, and also was at the exact 38% pivot of the 2007 highs to 2009 lows at the same time. This gives pretty strong support for a 2010 market bottom, with the re-test possible.

I expect Gold to complete it’s “B wave” bounce at 1225-1238 ranges, and pull back to re-test the $1,155 recent low, but possibly stopping around $1177.  That recent pivot low was a 50% Fibonacci re-tracement of the February lows and June highs of this year.  Again, markets actually move in reliable patterns as they are largely controlled by the crowd’s sentimental reactions to news and events, which tend to be the same over time no matter the conditions.  The downside to Gold is that we have had 8 consecutive years of Gold ending the calendar year in positive territory, and somewhere along the line that trend is likely to be interrupted.  The lower level projections I have for gold are a deeper re-tracement to as low as $1,040 by the end of this year, correcting a recent 21 Fibonacci month advance.  The probabilities as outlined on my chart below are for $1,177, a 38% Fibonacci figure.

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Reversing the trend that began in early-July and then accelerated later in the month, the “tonnes in the trust” at the popular SPDR Gold Shares ETF (NYSE:GLD) has been rising in recent weeks, the largest addition in over two months occurring just yesterday.

Some of this new buying could have come from Eton Park Capital Management as they recently disclosed via regulatory filings that their hedge fund holdings of GLD went from zero in the first quarter to nearly $800 million in the second quarter. John Paulson reported that his hedge funds now own 31.5 million shares of GLD,  unchanged from the first quarter, and he remains the ETF’s largest holder at just under $4 billion.

From 1929 until January 1933, the stock of Homestake Mining, the largest gold producer in the U.S., rose 474%. Dome Mines, the largest Canadian producer, advanced 558%. In spite of the gold price being fixed at the time, gold stocks rose dramatically.
At the same time, the DJIA lost 73% of its value.
And the chart doesn’t show that you could have bought both stocks at half their 1929 price five years earlier, which would have led to gains of around 1,000%. That’s not all: both companies paid healthy and rising dividends as the depression wore on; Homestake’s dividend went from $7 to $15 per share, and Dome’s from $1 to $1.80.
Yes, volatility was high in the gold stocks throughout the depression, with occasional wild price swings. But after the 1929 crash, much of the volatility was to the upside.
The bottom line is that the two largest gold producers – during a time of soup lines and falling standards of living – handed investors five and six times their money in four years.
What about gold itself? On April 5, 1933, President Roosevelt issued an executive order forcing delivery (i.e., confiscation) of gold owned by private citizens to the government in exchange for compensation at the fixed price of $20.67/oz (you can read the original order here). And less than nine months later, he raised the gold price to $35, effectively diluting every dollar 41% overnight and swindling everyone who had turned in his gold.
We don’t know exactly what an untethered gold price would have done during the depression, but given its distinction in history as a store of value, we believe it would retain its purchasing power in a deflationary setting regardless of its nominal price. In other words, while the price of gold might not rise, or could even fall, your best protection is still gold.
But with all this said, the overriding concern isn’t deflation. Yes, economic growth will likely be flat for years, and many Americans will see some hard times ahead. But deflation won’t win; in a fiat money system, any deflation will be met with an inflationary overreaction (as we’ve seen). And the worse the deflation, the more extreme the overreaction will be.
In fact, I think there’s another round of money printing before this year is over. And sooner or later, that extra money is going to dilute every dollar you own, giving us an inflationary hit as bad as the deflationary one we got during the Great Depression.
It’s for this reason that I continue to urge you to own physical gold, in your possession and under your control, given its reliability as a store of value in both inflationary and deflationary environments. If you don’t have a meaningful portion of your investments in physical gold, I think you’re playing with fire. And those who play with fire eventually get burnt.
Want an easy way to start buying physical gold? I arranged for some seriously discounted bullion in the current issue of Casey’s Gold & Resource Report, which you can check out risk-free here…

Just when you thought gold could go through at least one major selloff day without some remarkable fireworks, here comes a perfectly natural $10 selloff in the span of under a minute, because that is precisely how a quantized and “deep” order book looks like. Just how related this is with the reopening of the ECB’s FX swap lines with the US is unclear. We are confident the BIS will be perfectly happy to provide commentary on the issue.

Adrian Douglas, board member of GATA, once again takes a long hard look at the gold market and provides evidence of gold price manipulation. His conclusions:

• the gold price is suppressed through fractional reserve bullion banking
• the gold market is selling on average 45 ounces of gold for every one ounce of real physical gold via “unallocated gold” (fractional reserve bullion banking). In other words the gold market is backed by only 2.3% gold
• The true price of physical gold is currently around $54,000/oz if fractional reserve bullion banking did not exist. In the presence of fractional reserve banking with 2.3% gold backing the market price of “gold” is reduced to $1200/oz
• The US dollar has a purchasing power that is 45 times over valued
• The way to end gold price suppression is for investors to ensure they have allocated physical bullion preferably held outside of the bullion banking system

The solution? Buy physical – “The sick joke of the Gold cartel is that whether you hold dollars or unallocated gold you only have 2.3% of gold backing! However, the trade of the century is to buy actual physical metal with your dollars, or if you have unallocated gold to demand physical delivery. In this way you can trade something with 2.3% gold backing for an investment that is 100% gold.”

Proof Of Gold Price Suppression, Submitted by Adrian Douglas of Market Force Analysis

In our current 9-year bull market, June and August have seen the lowest average return for gold, representing one of the best times to buy.

You’ll see that in the bull market of the 1970s, summer was also a good time to buy gold.

What about gold stocks? Since 2001, June and July have been among the weakest months and thus one of the best times to buy.

Obviously, these are price tendencies and not certainties. There were Junes when gold was up, and some Julys when gold stocks were up. Meaning, we’d avoid using these charts for trading purposes or in anticipation of an immediate gain. Instead, use these “trendencies” to look for possible price weakness. And if it arrives, use the opportunity to add to your holdings and position yourself for the next leg up in the bull market.
What are the odds of a correction in gold and gold stocks this summer?
►Since 2001, almost every precious metal stock, in every summer, has moved lower from its May high. This includes gold and silver. There’s no guarantee this won’t be the summer of galloping unicorn herds, but the record is hard to argue with.
Here are the buy zones I identified for gold and silver, based on a tally of how far they’ve corrected from their May high to their summer low, in each year of the current bull market.

You’ll see that the average price of all pullbacks in gold, from the May highs to the summer lows, is 8.9%, and would take the price to $1,126.98. That’s not to say this price will be hit, but it tips you off that a fall to that level would not be out of the ordinary – and would also be an invitation to buy. You can also see the smallest summer decline, which we’ve already exceeded. We wouldn’t wait for the largest drop to materialize; there’s a good chance you’d be left empty-handed and chasing the stock higher.

Silver is naturally more volatile, allowing us perhaps a better opportunity to buy low. The average summer decline for silver is 16.6%, which would take the price to $16.39. However, the furthest its fallen so far this summer is $17.36, meaning strictly on a historical price basis, a 10% correction from current levels would be perfectly normal. And again, an invitation to buy.
Whatever price (or prices) you select, I’d only use the charts to add to current positions, not for trading. The currency crisis Casey Research believes is inevitable could strike suddenly again and will eventually hit the U.S. dollar, and the last thing you want is to be left standing on the sidelines if gold and gold stocks surge higher. In our opinion, being completely out of precious metals in the middle of a once-in-a-generation bull market would be a mistake. Instead, keep adding to your savings every month and buy when it feels like you’re cheating.
See you in Milan?

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Want to see the buy zones for all our recommended gold and silver stocks? Our Summer Buying Guide is an invaluable resource for buying low. And check out our just-released July issue, where a respected bullion seller tells you why in the near future you may not be able to buy gold, at ANY price. Try a risk-free subscription for only $39 per year. Details here.

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All the best,
Adam Hewison
President of the INO.com
Co-founder of MarketClub