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Gold, Silver, Mining Dip: A Bull in Disguise
by Larry Edelson

Dear Adam,

Larry Edelson

Since last week’s plunge, a lot of investors have thrown in the towel on gold, silver and mining shares, yet again.

But that’s actually music to my ears.

Yes, gold did break a support level I previously gave you. But that line in the sand was merely a short-term floor, a break of which, yes, would confirm a move lower, but — and very importantly:

It would not change the long-term picture, which remains exceptionally bullish for gold, silver and mining shares!

Let me explain why, and bear with me for getting a bit technical.

First, the major chart support levels in gold, the ones that really count, are down at the $1,252 and $1,234 levels and at $18.30 for silver. Those levels have not been broken.

Second, my system support levels, not chart-based, lay at $1,234 for gold and $18.18 for silver. Those have not been broken either. In addition, the fact that they are close to the above chart support levels confirms they are very strong support areas.

Third, my sources in Asia tell me that gold demand has dramatically picked up as of late. The chief reasons: Beijing is expected to soon loosen its monetary policies, and the martial law in Thailand is driving many investors there back into gold.

Gold demand in India is picking up.

In addition, gold demand in India is picking up, they say, due to the recent election of pro-business leader Narendra Modi.

My sources also tell me that the governments of Russia and China are about to come into the gold market, in a very big way. That would not be surprising, given both countries’ recent natural gas agreement and closer ties with each other, as part of an anti-Obama stance.

Fourth, trading volume during last week’s decline reached its highest level since last July, a cathartic sign, indicating lots of recent bulls are getting washed out of the market, a sign you want to see at important bottoms.

And fifth, based on all the indicators I study, the recent decline in gold (and silver) may actually be setting up a more bullish scenario than even I had anticipated.

The reasons have to do with how the trading cycles and wave patterns are setting up. A bit too complicated for me to go into detail in this column.

But the bottom line is this: While gold, silver and mining shares may look weak on the surface, I have every reason to believe that this weakness is merely a disguise for the next big move, which will be dramatically higher for both metals …

To at least $1,500 in gold and $23 in silver.

Hard to believe? Sure it is. That’s exactly what the markets want you to believe. That’s how markets work. The majority are always wrong in the markets, that’s the fuel that gives the markets the needed energy to do what they are destined to do — which is to fake you out.

Needless to say, if you get caught up in the fake moves, you will lose, or at best, miss some of the biggest moves that are about to come.

So what to do now? Here’s what I recommend:

A. Don’t let the recent price declines in the precious metals fool you. While gold and silver can and probably will fall a bit further, they are now making a base that will prove to be exceptionally bullish going forward.

B. Build up your cash and start deploying it. If you don’t own any gold or silver bullion, this is a great time to start buying. Use a trusted dealer, or one of my favorites, the Hard Assets Alliance at www.hardassetsalliance.com.

Buy ingots and bars, not bullion coins. Reason: The premiums you pay over spot are less. You get more bullion for your money.

I am not in the camp that believes you should buy bullion coins because they might somehow escape government confiscation in the future.

First, I don’t believe gold will be confiscated.

Second, if I am wrong and Washington does indeed move to confiscate Americans’ gold holdings, they will confiscate it all. So why pay the higher premiums for bullion coins?

If you want to buy a few coins to have on hand or keep in storage, for whatever reason, do so, but put the bulk of your holdings in ingots and bars.

Also, consider investing again in precious metals ETFs, such as SPDR Gold Shares (GLD), Sprott Physical Gold Trust ETV (PHYS) and iShares Silver Trust (SLV).

Best wishes,

Larry


The investment strategy and opinions expressed in this article are those of the author’s and do not necessarily reflect those of any other editor at Weiss Research or the company as a whole.

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