Do You Smell the Gold Bottom?

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...Typically, when such a big drop in commodity prices occurs it is the result of forced selling. Too many people who bought gold on margin at higher prices may have been forced to meet margin calls by liquidating their holdings. (We hope you are not one of them, because we certainly don't recommend trading on margin because of the higher risk.) The result is a sharp plunge that makes no sense fundamentally...

...The naysayers and the self-appointed pundits are saying that the goldbugs have bats in their bellfry and that we have entered a bear market for gold and the other precious metals. How do they know?

Are you ready for their number one answer? They've "read the charts" or "gold has broken down below long-term support" on some other chart. My goodness, are they reading palms and tea leaves too?

I don't smell a bear market, I smell manipulators, paper-traders and self-styled gurus trying to tell you and me that they know as much as a crystall-ball gazer...

Now we don't have to be stargazers, rocket scientists or clairvoyants to clearly see that gold has had a significantcorrection. And the fact of the matter is the world that supported gold at $970 hasn't become a safer, friendlier, less inflationary place where the US dollar remains the bastion of safe paper currencies.

On the contrary, the things that usually make gold a safe haven, money-preserving cache are increasing.

Dr. Stephen Leeb wrote the following to those of us who subscribe to The Complete Investor:

So why is it that the best hedge against inflation and other forms of economic turbulence, gold, took a massive dive? Could it be a bear trap?

Typically, when such a big drop in commodity prices occurs it is the result of forced selling. Too many people who bought gold on margin at higher prices may have been forced to meet margin calls by liquidating their holdings. (We hope you are not one of them, because we certainly don't recommend trading on margin because of the higher risk.) The result is a sharp plunge that makes no sense fundamentally...

Plunges caused by forced liquidation don't usually last long, because the fundamentals simply aren't there to justify prices so low. Usually the smart investors, who have cash on hand, recognize the opportunity and pounce on it. For this reason, we expect a rebound will occur fairly quickly. Gold is a compelling buy under $800, with little downside risk and tremendous upside potential...

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