Sword of Damocles Does Not Hang Over the Gold Shares

Hi Eric,

I am curious to find out how you see the HUI playing out from
here in the month of August and early September? Of course it depends on the
price of Gold... Not to mention is sagging Stock Market... But there is a Sword
of Damocles that seems to hang above the poor lonely HUI. The Gold stocks are
still sucking wind over $1200 Gold.

No complaints here.... Just your level headed thoughts.

Selim

Hi Selim,

The Sword of Damocles over gold and the gold stocks has been reinforced by various media outlets since 2000. Yet, despite all the negativity, the gold shares have significantly outperformed all assets during this stretch. Why? Because capital continues to seek safe haven from the more "unofficial" devaluation policies from the official sector.

Martin Armstrong says it best,

NEVER has any government paid its debt. They ALWAYS and without ANY exception default.

By default, Armstrong and the market trends imply devaluation of previously held bonds through inflation. Deflation is only an option if the government intends to repay the debt.

Lots of investors are thinking "the poor HUI (gold stock index). The gold stocks, excluding dividends, have risen more than 300% since 2000, and as have edged slightly above their long-term (30-year) consolidation pattern as of July 2010. A technical breakout will be difficult to refute the longer price and time show strength.

As the calendar turns to August, it is amazing that gold remains in the psychological dog house. Fear, supported by endless spin, allows investors to ignore the incredibly positive seasonal tendencies for gold and the gold shares in August - not to mention fall and early winter. If the first decline after a new purchase is equivalent to a drop down an elevator shaft as often suggested by spin, how many investors will queue to buy?

Risk Free Total Returns* 1926-2010 & 1968-2010:


Source: martinarmstrong.org