Friday, September 30, 2011

Gold is in the process of pulling back substantially from its recent all-time high, but it appears very unlikely that the bull market has ended.  The current decline is thus far the third-largest of the ten-year uptrend, in percentage terms, having narrowly exceeded 20%.  The weekly logarithmic chart makes clear that the upward thrust which began at 1478.30 on July 1, and which preceded the current pullback, was much smaller than the sharp rallies which came before the two larger corrections of 2006 and 2008.  One implication of this fact is that gold has not passed through the kind of blow-off top that is likely to bring the bull market to an end.  Another possible implication is that the downside from here is limited.  The most prominent bearish pattern begins at 1819.40, and the BC retracement is already more than half of the impulse wave, putting the midpoint exactly two dollars above the 1535.00 low, which serves as our "B" point.  As such, we might see a re-test of that low, and we might expect it to survive.  If it doesn't, the "D" target of 1394.80 will come into view.  The eventual low of this pullback will become the "C" point of a large pattern which must be reckoned to begin at 681.00 three years ago.  As things stand, this large but still tentative pattern targets a high at the memorable level of 2777.70.  (Posted by Doug "harry" McLagan)

(Louis Piro is an investor from the old school, a guy who innately understood that there were no shortcuts to building wealth.  His approach may seem almost quaint in an era of instant IPO billionaires, but --  who knows? -- it may yet come back into vogue. Piro was my barber when I lived in Mountain View a decade ago, and his story originally appeared in the Sunday San Francisco Examiner during the dot-com boom of the late 1990s. I republish it here every couple of years because the advice it holds for investors remains timeless. RA] If there is a single word to sum up the success of investor Louis Piro, that word is "dull." Piro has never made a killing on a stock.  He doesn't play hunches and he runs from hot tips.  He says he passed up Pfizer not long ago because its shares were too pricey even before impotent men started flocking to their Viagra pill for a cure. Nor will Piro sell anything from his portfolio.  He just keeps buying -- and then only with money he knows he won't need any time soon.  He adds stock whenever the price drops substantially. Piro shuns companies that sell products or services he can't understand, and he has never even owned a share of a Silicon Valley upstart. His favorite word -- "dividend" -- could be the mantra of a successful hypnotist.  Zzzzzzzz.  Finally there is this pearl, the cliché that underlies nearly every investment decision that Louis Piro has made in the last 45 years:  "Buy shares in companies that will grow with America." ‘Build a Little Nest Egg’ That Piro, 63, could have amassed considerable riches by following such homely rules is probably not unusual.  What is striking, however, is the remarkable degree of his