Fundamentals of gold and gold stocks have never been so bullish....

Fundamentals of gold and gold stocks have never been so bullish. I will refer you to the following article before you decide: http://www.zealllc.com/2008/goldfund2.htm

Yet why charts? Often times prices does not really reflect the fundamentals of stocks or commodities simply because at those times there are too many seller as compared to buyers (for various reasons but due to forced deleveraging in this instance) of particular stocks as in this case over the past few months. Charts can reveal things pertaining to people’s emotions where fundamentals cannot reveal. You can see the charts of gold and hui showing signs of strength compared to any sector. This may be a sign that deleveraging may be over or almost over.

Already there are some gold stocks which have raised well over 100% compare to their bottom over the past few weeks. True most of us will never be able to pick the bottom but all we really need to do is get in early to ride the great bull run to really make serious money.
When something has bottomed usually the fundamentals will again re-establish themselves. When this happens the gains on those undervalue stocks can be enormous.

Take the case of gold according to elliot wave chartist Alf Field we have highly likely ended major wave 2 of 5 majors wave. http://www.gold-eagle.com/editorials_08/field112408.html If that be the case then major wave 3 has highly likely just started. Major wave 3 is the most profitable and longest of the 5 waves according to Elliot wave theory. According to Alf his target is $3500/oz for the price of gold when major wave 3 is finished. Fundamentals support that price as we have witness the most highly inflationary event in history in terms of the increase of money supply over the last few months. And it is highly likely that this is to be continued in the near future in other words central bankers will continue their creation of money over the near term for this crisis is far from over. I would not be surprise that by the time the financial system is stabilised the money supply would have more than double the current money supply and I am only talking about the base money supply which is m1. Remember that it is in the interest of all governments and bankers to stabilise the financial system in other words they do not want the banks to fail hence they will do whatever it take to stabilise the system including a direct devaluation of the dollar against gold. Under this scenario you can say what you like about putting money in the banks but I say it would be much less risky to put my money into tangible assets than in the banks. This wave 3 is also the phase when fund managers and analyst will begin to look into gold. Thus far the people who have invested in gold are mainly the gold bugs and some smart money. Conventional money managers have not really invested into gold yet. It is in this phase (wave 3) that they will begin to look into gold simply because every other asset is losing money or trading in a range especially the finance sector whereby all fund managers have been putting their money. The change will probably take a few years as it is not easy to change a long held idea which is that the finance sector is not the place to be when it has been in a huge bull market for the past 20 to 30 years while commodities has been stuck in the rut for that period of time. But change it will and that is what will drive the price of gold which by the way will drive the price of commodity longer term. The other factor which will greatly drive the price of gold is the fact that in the USA and most other advance countries we are having a negative real yield if you invest in bonds. In other words you are really paying the banks to borrow your money; when bond investors realise that and the fact that this is not going to change in the short and intermediate term they will highly likely shift their money to tangible assets.

The point is if gold were to rise say 5 fold from 700 dollars it is highly likely that gold equities will rise 2 to 3 times that amount given that gold equities are leverage to the price of gold. That’s to say I would not be surprise to see gold equities rise by 4 to 10 times its price from its lows set recently. But this 2 to 3 times leverage are really talking about large producing gold stocks. If you were to look at juniors they are even more leverage than the large gold stocks. It is not uncommon to have juniors rising 4 to 5 times the rise in the majors. In other words when gold goes up 5 times then it is possible for juniors to go up 25 times or more. That is the reason why I am invested in this junior. In other words I am looking at the possibility of returns of multiples of tens.
Don’t believe me? Look back at my earlier postings and see how undervalue KMN is.

The point is we have to look at signs for the rally to begin and it is highly likely that the rally has already started. Gold has already changed trend in its daily chart. It needs to break out of 900 dollars to confirm a change of trend in the weekly chart. Its long term uptrend has never been broken in the monthly chart.
Gold stocks has started to outperform gold which is an indication that investors believe that the gold trend up.
Physical demand of gold has been exceptional.
The trend seemed to have changed too for kmn as well as snn.
Gold has been at backwardation over the last couple of days (a highly significant event!)
The rise of China is positive for gold.
All those newly created money is positive for gold.
There are still lots of stimulus coming which is positive for gold.

Please note that I hold the stock and my analysis can be bias so please do your own research and do yourself a favour convince your self that it is a good stock to own before you get into it.

The truth is sometimes fear causes us to seize up into inaction when we should really act to protect our self. Right now there is great fear as to whether if the equity market is going to go any lower or if stocks are going to tank some more. Yet by being in active we can lose the most over the next couple of years. I have said that I am in agreement with Alf over the increase in the price of gold. In reality if you were to be holding gold you have really not make any gains even though the price of gold has risen 5 fold. Why you may ask? The reason is we are so use to measuring our gains against the dollar but really the gains you made in the dollar has been inflated away. I n other words by the time gold has risen 5 times the same 100 dolllars would buy you 5 times less goods. That is to say if you were to hold onto your dollar there is a likely hood you will lose 5 times the purchasing power in just a few years and maybe more.

Nowadays it is very difficult to separate truth from lies or uninformed truth. There are a few verses in the book of books which sets it apart it says you will know the truth and the truth will set you free. What it takes is the desire to learn the truth and let it set you free. The other which requires truth is “the just shall live by faith”. And lastly “without faith it is impossible to please God”. We need to seek facts and know the truth so that we can really live by faith. This is not just spiritual talk but it applies to your financial health as well. Know the truth and act in faith. You can say I don’t have the time to research but I say you cannot afford not to know the facts in these perilous times.