Worth a Look
Thursday, December 9th, 2004
By Michael Lombardi, MBA for Profit Confidential
In the financial markets, there are really only two ways of looking at events, bullish or bearish.
Case in point: Gold dropped US$15 an ounce yesterday to about US$438 per ounce. Sure, some will see the gold correction yesterday as a signal of the end of the gold bullion rally (bearish). While others will see yesterday’s price drop in gold as a long overdue correction in a bull market that has been going on strong for three years (bullish).
I don’t think many investors, big or small, are paying much attention to gold anyway because it’s still so low priced. But I’d like to declare myself in the second camp… that of gold bullion bulls.
Gold bugs like me were expecting gold to retreat, simply because nothing goes up in a straight line. (Didn’t gold bullion recently hit a new 16-year high?)
In bull markets, corrections are sharp (like yesterday’s pullback in gold prices). In my opinion, I wouldn’t be surprised to see gold lose another $10 to $15 dollars an ounce, to US$425 per ounce, to complete this current price correction. I look at this correction as an opportunity for those investors who believe the long-term trend for the U.S. dollar is down.
Just last month, streetTRACKS (symbol GLD) started trading on the NYSE. Each GLD unit is supposed to equal 1/10th the price of one ounce of gold. It claims to be the first gold exchange-traded fund in the U.S.
Yesterday, GLD closed at $43.80 — bang on the buck in terms of being equal to the value of 1/10th of one ounce of gold. With a healthy 6.1 million shares traded yesterday, aside from being liquid, GLD is becoming very popular. You might want to keep an eye on GLD. If gold does correct another $10 to $15, this pure gold play might prove to be quite the opportunity.
Just keep in mind that if you are not American, an investment in GLD could be risky, as it trades on the NYSE and is thus priced in U.S. dollars. Maybe not a good bet for foreigners, but they have enough good foreign gold stocks to choose from anyway.
Next Post: Falling Dollar to Trigger Biggest Boom in Gold Stocks in 20 YearsPrevious Post: Why U.S. Interest Rates Will Rise Again This Month
Tags: gold, gold bullion, gold stocks, U.S. dollar
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
