Gold Climbs The Wall Of Worry

The above chart was sent to me by one of our listeners. Unfortunately he did not know who created it, but it gives a clear illustration of why the bull market in gold will end in a mania. There is a great deal of fear in the gold and silver markets at this point. You can clearly see looking at the chart that we are in phase II and that we are climbing a “Wall of worry.”

Investors are worried that if the stock market is going to fall that gold will head lower as well and sentiment has dropped off accordingly. It may be the case that gold would go down if the stock market heads lower, but the truth is that no one knows how gold is going to react in the short-term. It is being accumulated and has been under accumulation for many years.

The smart money knows this is a cycle where investors move away from traditional paper investments and into gold. As gold corrects lower, there are large amounts of physical buyers that buy the dips and continue to accumulate on weakness. This is one of the primary reasons why gold has remained strong so far this summer.

We are nearing the end of July and I think it will be interesting to see how gold trades in August to close out the summer. If gold remains firm in August that would surprise many professionals. Some have been looking for a correction to the $1,000 area, which on the surface would seem reasonable as gold continues to consolidate between roughly $1,000 and $1,200.

Having said all of that, bull markets in many cases surprise investors and traders alike on the upside. Take a look again at the chart, and note one more time the “Wall of worry.”

Although that chart is comprised of the Nasdaq mania and subsequent collapse, you can see that during phase II there were dips, and sometimes significant market reactions. The important thing to note is that they were always, without exception, buying opportunities to accumulate prior to the mania.

Use weakness in gold as an opportunity to continue dollar cost averaging into the metal at lower prices. Do not use leverage or trade futures or options. Buy physical gold for delivery and be patient, the mania will come.

Eric King
KingWorldNews.com