Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
Bullish Silver Stealth Buying - 24th Oct 14
Blood in the Streets to Create the Gold Stocks Investor Opportunity of the Decade - 24th Oct 14
Swiss ‘Yes’ and ‘No’ Gold Initiative Campaigns Compete at Launches in Bern - 24th Oct 14
War And The Law Of Unintended Consequences - 24th Oct 14
Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - 24th Oct 14
Saudi Move to Cut Oil Prices Is Now Russia's Biggest Economic Threat - 24th Oct 14
US Stock Market Top Is Now In Sight - 24th Oct 14
New Profit Points in the Shifting Balance of Power, Welcome to Saudi America - 24th Oct 14
QE Failure & Folly Of Paper Mache, Treasury Bond Integrated Lifeline Patches - 24th Oct 14
U.S. Economy Faltering Momentum, Debt and Asset Bubbles - 23rd Oct 14
Annuities - Afraid Your Money Will Vanish before You Do? - 23rd Oct 14
What Debt Deleveraging? - 23rd Oct 14
How to Profit from Massive Spin-Offs with Just One Play - 23rd Oct 14
Evaluating Ebola as a Biological Weapon - 23rd Oct 14
Euro, USD, Gold and Stocks According to Chartology - 23rd Oct 14
Why You Should Always Be Invested in the Stock Market (Even Now) - 23rd Oct 14
Five U.S. Housing Market Warning Signs Point to Real Estate Market Downturn - 23rd Oct 14
The Better Short: Gold or Silver? - 23rd Oct 14
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

When This Indicator Says to ‘Buy Gold,’ It’s Never Wrong

Commodities / Gold and Silver 2010 Jul 20, 2010 - 05:27 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticlePeter Krauth writes: When I recently predicted that the long-term trends were in place to send gold to $5,000 an ounce, I was stunned by all the attention that my forecast received.

Granted, a move of that magnitude represents a dizzying long-term profit opportunity. But that's just it - it's a long-term profit opportunity.


I've uncovered some profit plays that offer equally hefty gains - but in the short term.

One in particular stands out - a profit opportunity that relates to a signal that I refer to as the "Gold Spike Indicator," or GSI. Because of the nature of the indicator itself, this profit opportunity is available only four times a year.

And the next "window" of opportunity is just weeks away.

Near-Term Profits Hidden Within Long-Term Gains
Gold has posted some solid gains over the past decade, zooming from about $250 an ounce in June of 2000 to an all-time record of $1,260 an ounce earlier this summer, before trading down to the current level of about $1,160. That zooming long-term surge in the yellow metal has some pundits shouting "bubble."

My advice: Don't listen.

In fact, I've got two good reasons investors should ignore these doomsayers.

First of all, from a long-term standpoint, one of the first signs of a bubble is a parabolic rise in price - a short-term spike that's clearly visible on a long-term chart. The more-recent bubbles are fairly easy to spot: Just think about the Nasdaq Composite Index in 1999-2000 and U.S. housing prices from 1997 to 2003.

The accompanying chart of gold prices over the past decade illustrates this very well: One look underscores that there's been no such short-term price spike.

But the second reason is even more dramatic: The near-term profit story may be even more dramatic than the long-term opportunity - thanks, believe it or not, to the global financial crisis.

As an aftermath of that worldwide financial mess - currently manifesting itself as an inflation-fueling debt overhang - several of the leading investment banks reconstituted themselves as "bank holding companies."

This is where the near-term profit story for gold gets quite interesting.

The "Gold Spike Indicator"

You see, while firms such as Morgan Stanley (NYSE: MS) and Goldman Sachs Group Inc. (NYSE: GS) may now be officially characterized as bank holding companies, they can't ignore their investment-banking DNA. And that means that Goldman and Morgan remain major traders of - and holders of - such commodities as oil... and gold.

As bank holding companies, Goldman Sachs, Morgan Stanley and other firms in similar circumstances are required by law to make quarterly disclosures on their holdings - including commodities. And my research shows that there's a certain "window" during this disclosure period during which some of those commodities can make some pretty hefty price moves.

Gold is one of the commodities that's worth watching.

In each of the last six quarters, in fact, this indicator has signaled - to the day - the optimal time to buy gold.

How do I use that information? There's an old investing adage that says: "The best place to look for gold is in a gold mine."

While some traders use futures or options to play the commodity markets, I prefer to keep my strategies simple: I like to go directly to the source - I believe the shares of the companies that get the gold out of the ground offer the biggest payoffs at the lowest levels of risk.

If you really think about it, this strategy makes the most sense: Investors stand to maximize their profits when they buy into a well-run company that controls sizeable amounts of a rare mineral that happens to be one of the world's most-sought-after natural resources.

That means it's time to buy gold-mining stocks. But only certain ones.

Right now, for instance, I'm looking at a junior-metals player with a resource estimate in the millions of ounces. At current prices, its gold holdings are worth roughly $2.5 billion. If gold were to hit $1,425 an ounce next year, as Goldman Sachs predicts, these holdings would be worth more than $3 billion.

And I've publicly predicted that gold could hit $1,500 an ounce by late this year or early next year.

What makes this company especially intriguing is the fact that there are two neat wildcards at play here.

First, the company's resource estimate may be low. There's a lot of interest in its latest drilling results. A "new" estimate could be announced at any time.

Second, there's a relationship between the indicator and the company's stock price. The last time the GSI was available - remember, it's only available four times a year - this stock zoomed 21% in just a few days.

Vigilance Pays

In that afore-mentioned Money Morning report back in January, I said that I expected gold to eventually reach the $5,000 level. My "gold superspike" prediction got quite a bit of attention. So let me say this: I haven't changed my mind - I've grown even more confident in my forecast. It will take some time for this price point to be achieved, but the long-term catalysts I outlined remain in place

If there's a takeway message here, it's this: When it comes to gold, by all means invest for the long-term.

But don't ignore the short term.

The huge level of debt the United States has taken on as a result of this financial crisis is a long-term positive for gold. All that debt is highly inflationary.

And I continue to believe that gold prices could reach $1,500 by the end of the year. On a straight gold play alone, that would make for a tidy 29% gain from recent price levels.

My short-term target is actually becoming more realistic by the day, given the growing lack of confidence that exists in the U.S. government's ability to arrest the nation's financial slide.

This particular "wall of worry" will be very good for near-term gold prices.

That's a short-term catalyst that no shrewd investor can afford to ignore.

[Editor's Note: Peter Krauth, a frequent contributor to Money Morning, is the editor of the Global Resource Alert, a private advisory service that focuses on precious metals, energy resources and other natural-resource-related commodities. Krauth spent two decades as a market analyst and portfolio advisor, and has covered all the commodities sectors, including gold, silver, coal, alternative energy and agriculture.

All that research led Krauth to the discovery of the "Gold Spike Indicator," or GSI, which signals the near-term direction of key commodity prices, including gold.

However, because it's tied to quarterly disclosure data, the GSI is available only four times a year, meaning it offers investors only a short time to act. Investors who wish to find out more before this "profit window" closes should click here for more information.]

Source :http://moneymorning.com/2010/07/20/gold-7/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014