February 02, 2011 – Since December stock market gurus have been trumpeting the demise of gold bullion investments. They confidently pointed to the slump in gold prices as a sure sign of a major market correction that would send gold down to a support level as low as $1000 per ounce. And once again they have egg all over their faces.
Last year was so good for gold bullion that it was natural that big investors retested the market with a significant selloff and that the gold price would consequently drop. If it had fallen below a certain support point then a correction would indeed have occurred as the selloff continued. But by all accounts, the price has bottomed out well above that level and the big boys - such as SPDR, which just added more than three metric tons to its reserves – are coming back. There was no correction because none was necessary.
Wall Street insiders go to such lengths to lure investors back into stocks because they can see the handwriting on the wall. Within the next two years, and possibly as early as Q2 2011, “there is a good chance that we’ll see stocks and bonds in a bear market simultaneously for the first time since the late 1970s,” says Jordan Roy-Byrne in Resource Investor.
Roy-Byrne believes stocks are closely following the template of a secular bear market, which is a prolonged period of large bear markets and much smaller bulls. The significant rally following a mid-point crash in 2008 is a strong indication that stocks will soon enter a cyclical bear market that will last for the next several years.
The gold bullion bears ought to put their own house in order. When stocks join bonds and real estate as undesirable assets, by default gold bullion will become the asset of choice.
