Hi Jay!
First of all, let me clarify: I make use of the technical aspects of the markets very substantially as well. I don't buy and sell simply based on the fundamentals. I believe price actions in the markets are
irrational, I am a believer in George Soros' theory of reflexivity [
1], and they tend to 'propagate' from 1 dominating time frame to another; every successful/consistent trader/investor makes use of some form of a market timing model, such as George Soros makes use of Tom DeMark's services and Warren Buffett times the markets through market sentiment to a certain extent, which is best described in his famous quote [
2]:
"At the start of the party the punch is flowing and everything's going well, but you know at midnight it's all going to turn into pumpkins and mice. People think they'll be able to get out just before midnight, but everyone else thinks that too. What the wise man does at the beginning [of a rising market] the fool does at the end. Once a price history [rising market] develops enough for other people to see it and get envious, greed takes over markets. We simply attempt to be fearful when others are greedy, and greedy when others are fearful."
My view on Gold:
-- Gold is a currency. It has been seen that way for centuries, and will continue to be seen as a storage of purchasing power for the centuries to come.
-- As with all things on earth, Gold has its cycles of up's as well as down's. Gold was in a nearly 20 years of bear market between 1980 and 2001. Within that period of history, investors bought stocks and was shying away from Gold. It was a boom time for "paper assets", because of their higher yieldings.
-- Since 2001 Gold has been gradually moving to the upside. Such a move is signifying the return of "real assets", alongside commodities such as Wheat, Cotton, Sugar, Crude Oil, Natural Gas, etc. Investors are now shying away from "paper assets" and buying into "real assets".
-- The switch between "real" and "paper assets" has repeated several times in human history, each of which tends to enjoy at least 15 years of up's or down's.
-- The appreciation of "real assets" will be inflationary, which is now being felt world wide.
-- Although Gold has been gradually appreciating since 2001, it's inflation adjusted value has only just made a new all-time high. I believe the bull market in Gold is surely not yet over, and will possibly last for years to come.
-- With central banks around the world, particularly the Fed and now the BoE, literally printing gigantic amount of money in order to bail out the banks, which made irresponsible bets on risky and now worthless assets and securities, it makes the case for Gold as a currency even stronger. Our central banks are now cranking up their printing presses at full tilt, you got to be kidding me if you want me to continue holding the paper money they printed!
Personally, I believe Gold is still pretty "cheap".
With best wishes
