Gold Consolidation or Correction?

1.   “…Some governments will topple….” –Jim Rogers, referring to the effects of coming rising food prices. Jan 14, 2011.

2.   Some penny stock investors have written to me, laughing at my prediction of coming bread lines.  Jim Rogers, the greatest food commodity trader in the history of the world, doesn’t seem to find it very funny.

3.   I was alone in the world, arguing that the main reason Lehman had to be turfed… was because of rising rice prices.  More than 2 billion Asians were on the verge of not just rioting, but engaging in revolution, if prices had continued higher and into a parabolic rise. Turfing Lehman effectively marked to market pricing of minus 90%, not model of par, trillions in OTC Derivatives debt.  That action killed the rate of rise of price of the world’s most important food, rice, against paper money.  As a side effect, it killed the paper money price rate of rise of everything else, too.

4. It killed the rate of rise.  Not the trend.  Rice, not Gold, is the most important chart in the world.

5.   Here’s the Rice Chart. Watch the rice chart like your life depends on it.  Why?  Because it does. You don’t need to trade rice, but you need to watch it regularly.  The “my penny stocks to the moon while a hundred million Asians starve to death ” fantasy went down in minus 90% price quote flames in Round One.

6.   In Round Two, if rice rises to & thru the highs, team starvation will make a real appearance in Asia.

7. In Round Three, Team Rice passes the starvation baton to Team Wheat, and the only question is: Are YOU prepared?

8. Here’s the Wheat Chart. I am locked and loaded in the wheat market.  Measure your wealth in number of bushels, not price per bushel.  Price is the tool to get more bushels.  Price is the wealth building mechanism, not wealth itself.  Do YOU understand? The sideways price action in wheat dwarfs the sideways action in gold, and also has a 2/3 chance of an upside breakout, as gold does.  Or should I say, a 2/3 chance of…. an upside rocket blast.

9. Here’s the NYSE-traded Corn ETF. Note the massive volume I’ve circled as price blasts higher, confirming price.  You want to be a buyer of food on all weakness, and use profits to buy more ounces of gold.  Period.

10.           Here’s the GDX Chart. Look at Friday’s monster red volume bar.  There was panic buying of US dollar currency on Friday, and panic selling of “gold stock currency”.   A massive, and disastrous, hand off of stock just occurred, from the gold community to the banksters.  What a horror.

11.           Here’s what could turn out to be: Chart Of The Year! It’s Gold against gold stocks via the SGOL fund and GDX.  It’s a unique 60 minute chart that runs back 6 months.  You can see the huge outperformance of gold against gold stocks.  I would suggest gold stocks are about to blast off against bullion, first in the very short term, and then in the very long term.  Use this chart to book consistently profit on GDX and plough a portion of those profits into more ounces of gold bullion wealth.

12.           Be a Gold Ruler, not a beat up toilet paper bug, in 2011!

13.           This Dow to Bullion Chart shows the mighty Dow beginning to stir in gold currency.

14.           Now, check out the this one on GDX to Dow. Here’s how I see the situation.  What I see is bullion consolidating against the dollar.  I see gold stocks as a short term buy and long term super-buy against both Gold and Dow, proven if bullion rises towards $1700.  You can’t wait for $1700 to buy gold stocks, or even $1430.  That will be far too late.

15.            GDX looks set to rally against the Dow, which itself looks set to rally against bullion.  GDX may be gearing up for some sort of “supermove” upside.

16.           Did you buy any gold stock on Friday?  Or are you in the financial outhouse along with the rest of team correction, clutching your role of “protective” US Dollar toilet paper?  There is no protection in there.  Come back into the light. The Golden Light.

17.           The OTC derivatives nightmare was the main cause of the crisis, and remains the main driver of the crisis. Still, most want to focus on everything but OTC derivatives, so they feel good all the time.

18.           Marking to model has not solved anything.  It’s simply changed the story from crash to fade away. The fading away refers not to the crisis, but to good timesGood times are gone for decades, not just years, because of OTC derivatives.

19. You need a different emotional mindset to manage the fade away theme.  The crash mindset is a failed mindset, going forwards.  Crash vs Fade is like the street fighter champ who now finds he has cancer. It takes stronger tactics and more patience to battle terminal illness.  The Chinese Water Torture destruction of the financial system requires you to “reach down inside” for a level of patience and intestinal fortitude you didn’t know you had, but do.

20.            The gold bears population, aka “Team Terrified”, has grown like a weed, rabbit or lemming population, over the past two weeks.  Most are claiming they are on “Team Correction”, not Team Terrified, while liquidating madly.  Be careful of demanding that a chart shape be a chart pattern.

21.           What did I say to all of you as gold and gold stock fell hard against the dollar last week, what did I say right into the lows?  Here’s what I said:   “I’m not on team correction.  I’m on team ‘Get Richer’.” How do you get richer?  You get richer by ignoring the paper money valuations except as a tool to get more ounces, because more ounces defines you as richer, and does so because OTC derivatives have made paper money valuation of your gold an inaccurate measurement of your wealth now. Think…Ounces!

22.           I also have been telling you for quite a while that gold has a 2/3 chance of going $100 higher, not lower, out of the current $1315-$1430 box.  Nothing has changed. Gold has a 2/3 chance of being in a consolidation, and the current maniacal obsession with predicting how low gold is going next against paper money sounds to me like the making, and perhaps marking, of a bottom, not a top.

23.           At minimum, it enforces the 2/3 odds of a breakout higher as: realistic.  My message to the Gold top callers is:  You totally failed at $680, $800, $860, $905, $1044, and $1156.  You drove the Gold Community out of their holdings at each of those lows. Maybe you’re much smarter now.  I say: No. I bought each of those lows, almost alone, and beat on my subscribers, and the general gold community, to do the same, just as I’m buying this one.

24.           Because the range is approx. $100 “thick” ($1315-$1430), the move above or below those two boundary points is likely to be at least $100.  By buying into $1315, you have a chance to make $200 should price move $100 higher above $1430, and you minimize the discomfort should price instead move lower. Those waiting for $1430 to be taken out upside or for $1250 on the downside to buy anything, are making major tactical errors.  Uranium, Corn, Wheat, Oil, Dow, and many other anti-dollar items are blasting higher, and a number are hitting new highs.  Use the crazed actions of Team Correction to make yourself….. A lot richer!

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Stewart Thomson

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