November 1, 2004 – Gold closed on Friday at $428.50. It was the highest weekly closing price for gold since $431.70 on December 2, 1988, and the highest monthly closing price since $431.30 in August 1988.
These new 16-year closing highs are very significant. There are many investors who do not follow daily prices. They are long-term oriented and therefore act only on breakouts based on weekly or monthly prices, rather than daily prices which can in the short-term often be buffeted by news events and other fleeting factors that do not have any long-term consequence.
Therefore, these weekly and monthly closing highs in gold constitute an important buy signal. It is ‘the breakout heard around the world’, but notice that I added, “soon to be” in the title above. The reason of course is that so far hardly anyone has heard about this current breakout.
As they say, the market never rings a bell at important breakouts, and this current one is a good example of that adage. Have you read anywhere in the media that gold has broken out to new 16-year highs? Has your broker told you about gold’s stellar performance?
The only place I’ve seen this important news is on Bill Murphy’s website,www.lemetropolecafe.com I spoke to Bill this weekend about the deafening silence accompanying this very important development. He is as bullish about gold as me.
So what happens to gold from here? I explain more fully my thinking on page 3, but my guess is that by the end of this week, gold will be trading in the high $430’s on its way to $500 by the end of the year. I can almost visualize the progression.
When gold climbs over $440, the media will start to pay attention. When gold climbs above $460, investors will start to look at gold more seriously, but the prevailing sentiment will keep them on the sidelines, looking for gold to pull back. But when gold doesn’t pull back and goes instead from strength to strength, Johnny-come-lately investors will eventually pile in en masse above $500 per ounce – better late than never, but it will probably mark a short-term top in gold. By then the breakout above $430 will indeed be heard around the world.