Trading above $1000 an ounce, how high will gold go from here...?
MONEY THAT HAS been sat on the sidelines is driving the market, says TraderTracks editor Roger Wiegand in this exclusive interview with The Gold Report.
Devoted intensive research time to the precious metals, currency, energy and financial markets for more than 17 years, "TraderRog" is a regular essay contributor to popular websites addressing the commodities markets, and he is frequently interviewed on radio in the United States and Canada.
Roger Wiegand now see the makings of some "pretty exciting" action in precious metals, forecasting that the Gold Price could go beyond $2,960 with the next big drop in the stock market...
The Gold Report: Roger, when we last spoke, at the end of August, you expected the stock market to have a pretty good fall after Labor Day. So, the market didn't collapse. What's your view on why it keeps appreciating?
Roger Wiegand: Well, part of it has to do with manipulation and part of it has to do with an awful lot of money that has been on the sidelines. A couple of months ago I heard there was around $8.5 trillion in cash that was not invested. I couldn't believe it. A lot of the money is starting to come back because investors are persuaded things are going to really pick up.
Typically, what happens in the cycles is November 1st is the time to buy, after the September-October event sell-off is over. And, if you buy on November 1st forward, you usually do pretty well. This year it was delayed a little bit, and some of those charts look a little bit sloppy and choppy, and that's what got everybody confused, including me. As of November 24, 2009, the news is reporting smaller investors are running to the bear funds for security. If the correction is now imminent, it is off-cycle and late by at least three to four weeks.
TGR: Are you saying that you're expecting the markets to go up now that it's late November?
Roger Wiegand: We could go either way. I really believe that. We've got some interesting charts. There's the S&P chart, which has a double top on it right now, indicative of a selling point, obviously. I don't think there's going to be that much of a selling event. I think it's going to stay propped-up. Last week we saw a gravitational pull from the smaller cap stocks into the larger ones. Usually, when they go into the S&P 100 and they get out of the trading 500, it's because they're looking for security and safety, and they're looking to buy those consumer cyclical stocks, like household goods and toothpaste. There's a heavy load in that regard right now in the market, but I think they're going to get out – the people in the funds are going to get their bonuses, and they're going to get out of town with some pretty big money. But I don't think there's going to be very much selling right now. I really don't. The selling is coming but it is delayed until the funds exit and close the books for bonuses at year end next week.
A big part of this has to do with inflation, too. I know a lot of people say, "Well, there's no inflation now; it's all deflation." We disagree; we say that the inflation is now 7% and rising more quickly.
Unemployment is a lot higher than people are discussing, and others are saying, "Well, this is a jobless recovery." Well, it may be a jobless situation, but it's certainly no recovery. What's happened here is a lot of corporations have laid-off so many people and run down their inventory so much that their overhead was cut back tremendously and they're showing profits, at least where we are right now. And those profits are going to be a one-off deal, I think. They're going to last for maybe a few months but come spring again, we're back to the same old problems. We're overloaded on debt. The bond market in Japan is looking absolutely horrifying right now; it's really scary. The government is selling bonds to pay pensioners and I don't think they've ever been in that position before. The amount of paper that is out there in Japan relative to GDP and the currency is way beyond where it is in the US. And I thought ours was bad!
So, in all likelihood, something is going to snap here pretty soon; it's got to. But it's confusing a lot of people because several good reports continue to be reported.
TGR: If you go back a year ago, everyone was looking at the balance sheets of the gold juniors, looking for those who weren't overloaded with debt who could survive the downturn in the capital markets. And so we've had a shake-out, and we're back to having free markets determine and who's going to make it...
Roger Wiegand: Absolutely. I think your example with the Gold Mining juniors is perfect. A lot of the ones who shouldn't have been in the business anyway are shaken out and gone because they didn't have capital; they didn't have the proper reserves; they didn't have any good partnerships. A lot of those projected mines were located in spots where they shouldn't have been politically. So, what have we got now? I don't know how many there were – I heard numbers like there were 5,000 of them (I don't think there were that many), and I hear now that there's something like 1,500. I have watched the charts and trading activity of these juniors that we like and those we dislike. We've thrown out the dislikes.
The experience we've been through is going to helps us with what's coming next. The thing that's really interesting is that a lot of these stock buyers who focus on the juniors are not really educated in the industry – they don't understand, especially in America; as they do in Canada – how much further we've got to go on this thing. I just wrote in my letter this morning that some of the people that are involved in silver are thinking that because we are up to $22 and fell back to $9 that that's the end of the game. I think if you look at where we are in gold and silver right now we're basically on page two of a ten-page story. I believe that's how much longer we've got to go.
TGR: You've previously mentioned all currencies are devaluing almost simultaneously. Other than currency devaluation, what's driving the price of gold and silver?
Roger Wiegand: Well, a lot of it is fear; gold is now basically considered to be money in many of the foreign countries, partially in the US, more overseas. I think a perfect example is Vietnam. It looked like they were going to have some things that would work out in their economy, and unfortunately for them, a lot of it's coming apart. And they know from experience that if they can get into gold and hang on, they're going to be a lot better off.
And, China is the number-two gold producer now, we've been told. They're not selling any and not only that, they're buying it. Further, they're encouraging gold sales to consumers. And Japan has been doing the same thing. The supply of gold is not going to be able to meet what people are after here, and that's the reason for this breakout we're looking at right now. We felt gold shares would separate from the regular stock market. I saw early glimmers of that this fall, a little bit of that in late summer. And now I am more convinced than ever that with the next big drop in the stock market, the gold and silver shares could really depart from the rest of the mainstream market, especially with the Dollar being so weak.
TGR: You've said that you see a lot of money moving from the smaller cap stocks to the larger cap stocks. Is the smart money moving to the seniors in the Gold Mining equity plays?
Roger Wiegand: Well, two things happen when you get into a market where the gold really starts to take off. Before, the Gold Price was in a long, slow climb from $200 up to $850 – that was one marker. And then we got up to a $1000 and hung around there for quite awhile, and it looked like it was going to sell-off, and did, and then came right back. But we are now in the next price range, which is beyond $1000, and Mark Faber of the Gloom, Boom & Doom Report says if gold will stay above $1000, it's never going under $1000 again. I agree with him; I really don't think it's going to.
Again, getting back to the senior versus junior, keep in mind when these markets get so crazy and convoluted like they are there's so much money looking for a place to go, that when a sector like gold takes off, where does the money go? It's going to go to NYSE gold companies.
TGR: So, as an investor, are you through shifting your funds to the seniors or are you still investing in the juniors?
Roger Wiegand: I don't trade shares personally; I trade the futures because they're faster and that's the business I started in. That's my preference – futures and commodity trading. I can't buy a stock and then go promote it. That's not fair. So, it's easier for me if I don't buy the stocks for me, but there's a lot of people who read our newsletter and that's all they do. They prefer shares, and they've made a lot of money on it.
TGR: Roger, can we wrap up with your thoughts on where you think the price of gold is headed? Or investing in precious metals?
Roger Wiegand: I forecast that gold is going to go beyond $2,960, which is my highest number right now. You're getting to the point in the gold market where some of the really strong, big players – by that, I'm saying commodity funds with hundreds of millions of Dollars – are saying gold is should easily be rising to $2,000.
And as far as investing, I think people are going to have to take more of a trading stance, rather than buy and hold. After what happened at Lehman; and what happened this year with prices mushing around, I suspect people understand they're going to have goals; they're going to have to trade a minimum of two times a year with these shares, and use other available trading vehicles, too. Volatility is increasing and is demanding more trade management than ever before. Opportunities are wider and larger than ever.
TGR: Thanks, Roger. Enlightening as always.
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