BREAKOUT

We may see gold breakout of the triangle consolidation today. However I don’t think one should expect gold to just “runaway”. It is late enough in the daily cycle that we have a short term correction coming due soon. It’s probably more likely that gold breaks out, then re-tests the breakout level at $1250.
I’ll have more in the weekend report of what I think is unfolding in the precious metals markets.

48 thoughts on “BREAKOUT

  1. Anonymous

    Looks like Precther is going to miss another one LOL

    Gold back to $600.
    98% bullish sentiment.

    What an idiot!

  2. Anonymous

    Thanks for your timely updates Gary. It has kept me from selling most all of my pm positions. However, I was worried about a summer pm correction so sold a small amount just in case and am currently underweight silver (I own AZK, ANV, GOLD, GSS, IAG, NEM and SLW).

    I am tempted to buy more SLW as well as BVN and PAAS (though the gold chart looks a lot better than the silver chart IMO). Anyway, just wondering if you think its too late and better off waiting for a D decline? I hate chasing stuff (have been watching EGO, too, but it’s got away from me). But mainly wondering if you think it’s too late to buy on a pullback (if there is one)from the breakout point?

    Thanks in advance,
    Albert

  3. Gary

    If you believe in the bull then what difference does a few dollars make?

    Is it really that big of a deal if you enter at $1260 or $1250 if gold eventually goes to $5000?

    I’ll invlude my guess as to where I think gold is going for the rest of the summer in tomorrows update.

  4. Alex

    What an Glorious day gold touched 1259,5 so far and I just finished my seemingly endless beeing as student, finaly after 8 years I graduated. If the german team can score at least one goal i would call it a perfect day. So i am heading out to get drunk stoned and laid. I wish everyone the best in trading for today and a great weekend. life is great ๐Ÿ™‚

  5. Anonymous

    Thanks for your comments, Gary, better to keep in mind the big picture.

    Sounds like what Alex has in mind is more fun than watching the ticker on CNBC:-)

    Albert

  6. TommyD

    Alex,
    I just want the ladder, you can keep both former.. Congratulations, now get a job! hehe

    Ok, Gary, this is where I get nervous,, I am in the camp where I am use to taking profits when 10-15% is achieved. Like take some off the table and play with the house money. But, I am down for the year, based on prior mess-ups and before joining the good team SMT. So, I will let it ride and sit on hands and go enjoy the day…

  7. Gary

    Tom,
    My advice is to go find a some beers & a girl like Alex and enjoy life for the next couple of months.
    There are more important things than watching a computer all day.

  8. Anonymous

    DG,

    What’re your thoughts on ole yeller? Why are you so bearish on it?

    Just wonderin’…

  9. Anonymous

    I’m hoping ole Timmy Knight comes out with a 5 star short recommendation on gold, so I’ll know it’s got more upside.

  10. Anonymous

    Man…all I did was drink beer and avoid the computer, and gold is taking off. Glad to see my lazy butt can do so much above what my lazy trader self can do. On board until $5000.

    I heard estimates of a potential Gold $5000, gold $10,000 and even $15,000.

    Gary, maybe in your week-end report you can show signs of what you are looking for when gold hits an absolute top. I understand, “when everybody and his brother gets in”, but there must be more…no?

  11. LowTax

    Nat, regarding your last couple of replies from the previous post: you are right on. The laws and IRS literature on Eagles is pretty much non-existent. And your point about no records being kept for silver eagles is correct and well taken. It DOES seem like eagles rely on the honor system doesn’t it? And it IS odd that there are no reporting requirements for either gold or silver eagles. I’ll have to run this by my tax accountant but it does appear that your view is certainly well grounded in the facts. Thanks.

  12. knifecatcher

    Are there any tax reporting requirements for a gold coin purchase?

    You can purchase any quantity of our gold bullion coin products without any government reporting requirements.

    There is no sales tax charged on gold coin orders shipped outside the state

    Are there any tax reporting requirements for gold coin liquidations?

    Your sale of 25 or more (in a 24 hour period) of the South African Gold Krugerrand, Mexico Gold Onza, or Canadian Gold Maple Leafs coins will require a 1099 submission. All other gold coins transactions are private.

  13. Elaine

    Gary,

    I am new to your blog, and completely new to the possibility of gold investing. I have read that ETFs are not the way to go, how does one actually invest in gold?

    I have enjoyed reading the archives and your commentary.

    Thank you.

  14. Gary

    Elaine,
    There is nothing wrong with any of the ETF’s.

    You can buy either GLD or SLV and expect to track physical very closely. You can buy miners as they should outperform gold as they are leveraged to the price of gold.

    GDX or GDXJ are the ETF’s to consider if you want to go that route.

    And then there is always the physical route for those who have trouble holding on to positions during drawdowns.

  15. Anonymous

    Gary said…

    Tom,
    My advice is to go find a some beers & a girl like Alex and enjoy life

    Wait, Alex is a girl? Somewhere in the world a girl named Alex is getting stone drunk and attempting to get laid!

  16. SonofGary

    Hey Gary,

    Thanks for your Fine Work, it is much appreciated. Interesting how the haters have been sparse lately.

    One question. Isn’t it possible that we can classify the recent market action since November-June as a consolidation given the rising dollar, instead of a megaphone pattern?

    Of course, now that the dollar seems to have topped, a fire will be lit under the stock market and especially the PMs.

    Thoughts?

    Take Care

  17. Gary

    The megaphone is just a guess. I really don’t have strong fellings one way or the other if it will play out.

    I am confident this is just a bear marekt rally just like the 02-17 bull was so I have no desire to waste my time trying to make money trading the stock market.

    Gold is clearly still in a secular bull. That gives me a big safty net that the stock market doesn’t. So I’m going to continue to concentrate on that one sector and I’ll continue to urge subscribers to do the same.

  18. Natanarchist

    @lowtax/anyone else. re; eagle coins and taxes.

    here is the best info I found. This is from reading the 1985 legislation and the original house bill introduced by Ron Paul in 1982. There was much debate amongst the committee with respect to eagle coins and taxes. The net of it all is this: Capital gains tax’s are due on the sale of eagle coins. However as per the legislation, there is no reporting on the buying and selling of Eagle coins, it is a completely private transaction. So in effect it is the honor system. Kind of like if I did work at your house and you paid me $1000.00 to do the work. One is supposed to declare this as income, but if you don’t report the payment to me, the IRS has no way of knowing unless I tell them. Now bars, wafers, Maple Leafs and Krugs were specifically mentioned in the legislation as NOT being a legal tender in the US and are reportable using a 1099B tax form. Another coin which at the moment is also not reportable is Austrian Philharmonics. They didn’t exist when the original legislation was passed, therefore dealers will not report the buying and selling of said coins, so again it is the honor system. They are nice looking coins too. I believe they are now the biggest selling coins in the world.

    My opinion is the government through the federal reserve has debased the Currency so much that it is in effect a “tax” or the destruction of individuals wealth. Therefore, since our government has shown no honor, I will return the favor on the sale of my eagles by not honoring their requirement to pay capital gains.

    **I suspect reason Eagles are not reportable is because Eagles are Legal Tender and Government issued Money. The Gov’t doesn’t want its people to know this, that we actually have two systems of Money and money substitutes. They prefer we all use the private FIAT Federal Reserve currency. The implications of understanding Gov’t money vs private currency, such as Fed reserve notes, while both are legal tender, would lead to a complete repudiation by the public of said Fed notes and an immediate end to income tax if everyone was paid with Government Money and not Fed notes. Income tax is constitutional only because we use a private fiat Currency and not Gov’t Money.**

    By the way, eagles,maple leafs, krugs and bars are allowed to be held in an IRA. The disadvantage is of course someone else is actually holding the gold and I would guess there are storage costs and the Gov’t knows exactly how much Gold one has and where it is held.

  19. Gary

    DG,
    If you have been trading as long as you say then you should know by now that diversification is a myth. If you want to diversify save yourself all the trading costs and just buy the S&P.

    At most if you are a real lucky stock picker you may outperform the S&P by a little bit.

    The only way to really outperform is to find and ride a secular bull market.

    That’s what most of us here are doing. The majority understand that we aren’t going to be able to diversify and escape the governments insidous inflation tax. If you want to keep your wealth, or better still profit, you have to massively outperform.

    That is only going to happen by investing in the gold bull.

  20. Anonymous

    The first $1000 rise ($250 to $1250) of this bull took about a decade. Let’s see what the second $1000 rise take.

  21. Anonymous

    Gary – Question for you.
    I see that many miners were up on heavy volume. NXG, GSS up 2x3x and others. Would this volume be attributed at all to options expiriation?
    Thanks

  22. Frank

    Options are not relevant for NXG. There are 696 in the money call June contracts at 2.50. And a whopping total of 17 put contracts in the money. Forget about options w r t juniors.

    I checked max pain on SLW and it was down around 16.

    The reality is that SLW was outperforming recently while NXG was lagging and today was an adjustment toward the mean.

    The strength in the gold miners made option pain irrelevant this month. A lot of GDX call option contracts ($50 million worth) in the money. There is no way that GDX is going to be pulled back to 48-49 (max pain) with gold making new highs.

  23. Anonymous

    Just checking in after taking another day off, so to speak. Pleasantly surprised yet again!

    The gold goes much higher, especially if it can just take a 2 day break. It’s due for a breather, but I wouldn’t bet any money on it.

    DG must be filing his papers for public assistance by now.. LOL! ๐Ÿ™‚

  24. Anonymous

    Gary said, “Gold had a major breakout today. Technicians are just buying the breakout.”

    I agree with Gary. I was very tempted to sell my the PM shares in my short term trading account today (Friday) before the inevitable 3-5 day pullback but I decided to endure the pain of a potential pullback rather than the pain of missing an unexpected surge higher next week. Although a momentary pullback is to be expected (IMHO) it is by no means guaranteed as we are talking about a major breakout of spot gold and GLD after a nearly perfect cup-with-handle pattern. Everyone with money is going to be talking about gold this weekend. Just my two cents.

  25. Anonymous

    Gary,

    Its Sat so her is a non-market gold related question. If the US truly gets to the point where the dollar finally tanks… hyperinflation or similar. Interest rates soar, as an indirect response to a useless currency. China says finally screw off. The Fed’s only hope is to buy up all the US debt, which in effect is like a default. Or plainly says we default.

    Gold obviously soars…but at that point price is irrelevant. 10 million USD for an ounce or 50k an ounce. But at that point let us say it is time to sell gold, we hit the absolute top.

    We will have tax issues, we will have gov potential confiscations, we will have where do we sell it and in what currency. I don’t think becoming a millionaire due to living in Zimbabwe is a great answer. As a finance guy I don’t know how bad the US will get, but “shit” is a finance term. So how shitty the US will get is debatable, but it will still be shit.

    I think these questions sort of parallel what the blogosphere has been running into. So it is time to sell, what is the exit strategy. I think most of the followers here have developed into the hold….”this is a bull market after all.” Attitude. And are now at the point of trying to figure out how to exit our positions when the time comes…I for one am seeing quite a few bottlenecks. One fellow mentioned American Eagles…I think we need to start thinking exit strategy.

    Just my opinion, but since I don’t trade, I am thinking what the heck do I do with my PMs when it is time to sell.

    Other concerns and thoughts
    If the US needs to start over with a new currency, this will have the effect of revaluing gold in front of our eyes, and will be the equivalent of potentially confiscating it without taking possession.

    If the USD fails, the Comex will implode perhaps, depending on how leveraged the market is. If the future buyers demand physical delivery, and the shorts don’t have it. Unlike the Fed that can just print, no amount of paper money may be sufficient. Default.

    Confiscation of miners via higher taxes.

  26. Gary

    Certainly the government can change the rules. If I had a crystal ball I would know when and how they are going to change them. But since I don’t I just have to play with the hand that’s dealt me.

    Forget about confiscation. It ain’t gonna happen. The currency is no longer linked to gold so the Government has no reason to confiscate gold like it did in the 30’s. If they were going to take gold they would have done it during the last bull market in 1980.

    We are all going to suffer from higher taxes there’s no escaping that, but I doubt Uncle Sam is going to specifically target gold and silver miners. They are never going to make the billions and billions of dollars the oil industry makes. There just isn’t going to ever be a huge piece of pie for the governement to steal in this sector.

    When it comes time to sell it will be easy to do as everyone will be buying. How easy was it to sell a house in 05/06?

  27. Anonymous

    Fair enough….

    But if we were going through a currency crisis, why would you want to sell gold for USD. So where else do you put it?

    My reference of confiscating gold has to do more with an indirect approach to a new currency, not that the Fed will directly attack gold. If USD debt is revalued, then the price of gold will shift towards being revalued in whatever the purchasing power is of that new currency, or the revamped current USD. If we all really believe that the US can’t pay back its debts and needs to monatize its debts, what other action is there except to revamp the dollar or to create a new currency. Unless the demise is slow and there is no parabolic shift downwards in the USD how can we sell gold in order to get something of value back? Unless the USD finally hits a level that is just stupidly low, and the gov gets its act together because it has no choice…now that would be a good point. Sell overvalued gold, for a USD that is way undervalued(not going to virtually zero) and the Fed and US gov start to do the right thing because they have to.

    So the solution is this: sell my gold for a depreciating currency, get taxed like nuts through an artificial gain…and become a millionaire but be about 50% poorer from a purchasing power stand point. I would be better off moving and coming back in a decade or so when things settle.

    The reason we are in this gold bull, is mostly because of the USD and other currencies being printed like nuts. If this gets out of hand, the question becomes what do we do?

  28. Anonymous

    Gary, I think most agree that for a bubble to form in gold, the public needs to get involved

    Empirical evidence shows the public is trading in their gold for cash in record numbers.

    any thoughts?

  29. Anonymous

    Anon,

    The public needs to BUY gold in record numbers. Right now the public is SELLING gold. It’s amazing the number of people who don’t understand the difference between buying and selling.

    At some point there will be a massive bubble in gold, and that will be marked by the public BUYING gold. We are not there yet.

  30. Anonymous

    Anon 9:11,

    If you’re asking about exit strategy, history shows that when a gold bull market ends, a bull market in stocks is just beginning. This was the case in 1980, 1942… At that point stocks will be selling for p/e’s of 5 or 6.

    Of course, when that day comes, the last thing you will want to do is buy stocks. It will feel like the world is ending. That was the case in 1980 and definitely in 1942. It will feel as stupid to buy stocks then as it felt to buy gold in March 2000. And I was buying gold then, BTW. The world’s most prominent mining analyst had a price target of $50 an ounce. You will one day hear analysts calling for Dow 50.

    Regardless of the currency situation, and at some point the
    world’s currencies will be “reset”, shares in good companies will always have real value. That day will be the day when real fortunes are made.

  31. Gary

    I saw an interview with Jim Rogers a few weeks ago where he was speaking to a large audience of professional money managers. Less than 20% of these people had ever bought gold.

    If professionals that are savvy in the finanacial industry haven’t bought gold I think it’s safe to day the public isn’t even close yet.

  32. Anonymous

    Anon 9:45

    Yes, nicely said…I am so anti-stock market as a whole at this point that I neglected to take that into consideration. Of course there will be real massive undervalue stocks in the market if we ever ran into a currency crash. The entire point of dow/gold 1:1 is the transition between gold back into stocks. I look forward to the day I will be able to get a dividend again…Not to mention there would most likely be a strong negative emotion attached to stocks at that point, and probably favourable tax treatments for investment etc.

    Thanks for exposing my biased thinking.

  33. Anonymous

    Anon 10:13

    The really good thing about it is that for all the apocalyptic stuff headed our way in the next few years, better days lie beyond that. Thing are going to look pretty bleak soon, but the best of times is still to come, for America and the world.

    Best,

    Goldbugvariations

  34. Anonymous

    Listen to this, yesterday I went to the gold coin shop to buy some more gold coins, because I read that physical gold is being sucked up as fast as it hits the market.

    You would think with gold at an all time high ($1,260) everyone would be in there selling their coins back for more than they paid.

    I was shocked the guy only had two Krugerands in the whole store. Now Krugerands are the most common gold coin in existence, they have been minted for 30 years, yet he only has two coins that he can sell me.

    There is something going on and it ain’t no bubble.

    Bruce

  35. Anonymous

    Just because a coin store has only two coins doesn’t mean that much. A lot of these dealers wait until a mark comes in to offload coins the before the dealer shells out any of his own money he will call around to other marks and see if they are interested in buying. Once he secures a buyer he will agree to purchase the coins. That way the dealer has zero risk. Gold is going higher it is almost certain… but be careful falling in love with any investment. You can probably buy 100K in Gold Maples right now from Blanchard. They will arrive in the mail within weeks.

  36. Anonymous

    regarding the public interest in gold.

    what I meant is the public IS SELLING gold

    with it being so late in the bull, you would think if this indeed should turn into a bubble, the public would of slowly started to “catch on” by now

    but its just the opposite, they have no interest at all

  37. Anonymous

    The public never gets involved until the very end.

    From this we can infer that it’s not late in the bull market at all. We are probably 3 years from the top.

    It also needs to be remembered that people are liqudating because they are in debt, losing their jobs, etc. The crisis of 2008 was a liquidation event, and that is ongoing.

  38. Anonymous

    It also needs to be remembered that people are liqudating because they are in debt, losing their jobs, etc. The crisis of 2008 was a liquidation event, and that is ongoing.

    Yes…..time will only tell. But life, I think,will react quicker at this point. Get ready, but be patient. 2012, 2013, 2014….all relative to the word soon.

  39. Anonymous

    The reason Betty Jane is turning in her grandmother’s gold necklace is because Betty is being assaulted day and night by ‘Sell Us Your Gold’ ads on television. Theses ads have been running non-stop all day long in my area for about 3 years now. For every ‘buy our gold’ ad there seem to be ten ‘sell us your gold’ ads. This is much different than 3 or 4 years ago when it seemed that all the gold ads on TV were trying to sell us gold. They still exist, but most of the ads now scream for people to turn in their gold.

  40. Anonymous

    Atilla comes up with the same nonsense all over again. If history follows, the bears will get killed once again. I think this guy have multiple ids talking to himself. Geez!

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