By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report
While we’re convinced gold and gold stocks are destined for much higher levels, buying when prices are low can mean the difference between a double or triple and a ten-bagger… a week in Malibu vs. a week in Milan.
There’s no secret formula to buying low, and we aren’t holding the right hand of Midas, but there are periods when prices tend to be lower than others. And if those tendencies play out, it can give us the opportunity to snag a high-quality asset at a bargain price.
So, how do you get a bargain price? You cheat.
I think the secret to getting a low-cost basis on all your gold and gold stocks is this: only buy on significant price pullbacks.
And this can be done without trading or using technical analysis.
I think there’s a good chance we can cheat this summer. For example, here are the average monthly increases in gold since our bull market began in 2001.

In our current 9-year bull market, June and August have seen the lowest average return for gold, representing one of the best times to buy.

You’ll see that in the bull market of the 1970s, summer was also a good time to buy gold.

What about gold stocks? Since 2001, June and July have been among the weakest months and thus one of the best times to buy.

Obviously, these are price tendencies and not certainties. There were Junes when gold was up, and some Julys when gold stocks were up. Meaning, we’d avoid using these charts for trading purposes or in anticipation of an immediate gain. Instead, use these “trendencies” to look for possible price weakness. And if it arrives, use the opportunity to add to your holdings and position yourself for the next leg up in the bull market.
What are the odds of a correction in gold and gold stocks this summer?
►Since 2001, almost every precious metal stock, in every summer, has moved lower from its May high. This includes gold and silver. There’s no guarantee this won’t be the summer of galloping unicorn herds, but the record is hard to argue with.
Here are the buy zones I identified for gold and silver, based on a tally of how far they’ve corrected from their May high to their summer low, in each year of the current bull market.

You’ll see that the average price of all pullbacks in gold, from the May highs to the summer lows, is 8.9%, and would take the price to $1,126.98. That’s not to say this price will be hit, but it tips you off that a fall to that level would not be out of the ordinary – and would also be an invitation to buy. You can also see the smallest summer decline, which we’ve already exceeded. We wouldn’t wait for the largest drop to materialize; there’s a good chance you’d be left empty-handed and chasing the stock higher.

Silver is naturally more volatile, allowing us perhaps a better opportunity to buy low. The average summer decline for silver is 16.6%, which would take the price to $16.39. However, the furthest its fallen so far this summer is $17.36, meaning strictly on a historical price basis, a 10% correction from current levels would be perfectly normal. And again, an invitation to buy.
Whatever price (or prices) you select, I’d only use the charts to add to current positions, not for trading. The currency crisis Casey Research believes is inevitable could strike suddenly again and will eventually hit the U.S. dollar, and the last thing you want is to be left standing on the sidelines if gold and gold stocks surge higher. In our opinion, being completely out of precious metals in the middle of a once-in-a-generation bull market would be a mistake. Instead, keep adding to your savings every month and buy when it feels like you’re cheating.
See you in Milan?

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Want to see the buy zones for all our recommended gold and silver stocks? Our Summer Buying Guide is an invaluable resource for buying low. And check out our just-released July issue, where a respected bullion seller tells you why in the near future you may not be able to buy gold, at ANY price. Try a risk-free subscription for only $39 per year. Details here.

GLD – Gold ETF Price Action

Gold continues to pull back from the June highs. It looks as though it could form an ABC retrace pattern if the July 7th low is broken. If $1085 is broken we should see gold drop to $1065-75 level. On the GLD etf that would be around the $112.50 – $113.50 level. That should shake out the majority of weak positions and start to rally towards the $1250/60 level.

If you would like to receive my trading analysis and trade alerts be sure to checkout my services at: www.TheGoldAndOilGuy.com & www.FuturesTradingSignals.com

Chris Vermeulen

Jeff Clark, Senior Editor, Casey’s Gold & Resource Report

It’s true that GLD’s assets just passed the $50 billion mark, and that it’s the second largest U.S. ETF. Yes, mints had difficulty filling orders when the Greek crisis broke. And yes, the gold price is up nine years in a row.

But those who look at statistics like these are missing the other side of the equation. I think it’s less about how much money is already invested in gold and more about what’s available to invest. After all, one could be impressed that China, for example, invested $14.6 billion in gold over the past few years – until you realize they have $2.45 trillion sitting in reserves.

So, how much is invested in gold, and how much is available?

According to hedge fund Paulson & Co, if you added up all the money invested in gold ETFs, it would total $78.3 billion (at $1,200 gold). The amount of money currently sitting in U.S. money market funds, on the other hand, comes to $2.849 trillion.

In other words, all the money invested in gold ETFs represents just 2.7% of what is sitting in cash. Put another way, if just 5% of available money market funds ($142.4 billion) were to move into the gold ETFs, it would almost triple the current value.

But what if it’s 10%? And what if Doug Casey’s call for a modern-day gold rush comes to pass?

Those who claim the gold market is crowded will also point to Paulson’s extraordinary high percentage of funds sitting in yellow metal investments. Yes, he’s got a $3.4 billion stake in GLD – but the critics didn’t look under the hood. Most of those holdings are from the fund’s employees (including John himself), not outside investors. Not exactly an overheated trade.

To some, the amount of money invested in gold may “feel” high, but it’s a relative pittance compared to what’s sitting idly on the sidelines, waiting for a reason to move and a place to go. And when you consider that the vast majority of U.S. citizens don’t own any form of gold, this is a market that is the opposite of crowded. There is a lot of money that could hit our sector.

And it’s not just precious metal funds. I interviewed Andy Schectman of bullion dealer Miles Franklin, and Kevin Brekke, our Switzerland-based editor, told me it was the most informative interview we’ve published this year. Why? Because based on what Andy sees week after week regarding supply, he’s come to the conclusion that we’ll see a serious drought of bullion when the average citizen begins to buy gold. Meaning, if you wait to buy until everyone else does, you may find yourself out of luck. And the data I present this month backs up that claim; in fact, you may be surprised at some of the findings.

If you’re not a subscriber to Casey’s Gold & Resource Report, you may want to pony up the $39 to check out the current issue. Not only does it contain Andy’s insightful – and scary – interview, but I’ve arranged for huge discounts on the premiums of two bullion coins. The amount of money you’ll save from buying one of each coin is more than the cost of a one-year subscription. And you can’t get these prices anywhere else.

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We’re “Calling All Gold Virgins” in the July issue. So if you don’t own any gold, or don’t have enough, well, I’ve made it very easy for you to lose your virginity. Click here to sign up for a risk-free 3-month trial.

By Jordan Roy-Byrne, CMT

Once again we see another bearish piece on Gold in the WSJ. Rather than attack the author personally, we want to illustrate how the article is another example of the lack of any quality gold commentary both in general and in mainstream publications.

First, its important to note why you won’t see much quality gold-related commentary (or any positive commentary) in publications such as the WSJ and the Economist. It’s because these publications can’t make any money (yet) selling gold-related advertisements. If I’m advertising something related to stocks or bonds, I don’t want to see any gold advertisements in that publication nor do I want to see any gold-friendly content. This is similar with the television networks. When CNBC can make lots of money advertising gold, you’ll see them become friendlier to gold. Why does Fox News talk up Gold? It’s because they are selling Gold advertisements.

Secondly, most professionals in today’s world are biased towards stocks because they grew up during a historic bull market. The only people who really saw and experienced the last bull market in gold are 60+ years old now. Go back to the 1970s and most professionals were skeptical of stocks and saw the value of gold. Today’s 40-year old professional, just three years ago had barely seen anything other than low inflation and a stock and bond bull.

This illustrates why it is pointless to compare stocks against gold. Both are different asset classes and there is a time and season for each. To try to say one is better than the other just shows bias. Gold bulls will start their comparison in 1971 while stock bulls will start their comparison in 1980. There is a time and season for everything.

Moreover, it’s important to understand why the stock market rises over time. It is because market indexes have a survivor-ship bias. The Dow of today is not the Dow of 1980 or 1920. It is always changing as stronger companies replace weaker companies. Hence, it is designed to go higher over time.

Now if Altucher wants to make a good argument against gold he should do some more research by attending our upcoming Webinar.

He starts off picking 1980 (as a comparison date), which any stock bull does. That immediately shows bias.

Secondly, he can’t figure out a “use” for gold. This is where stock bulls really fail.

Centuries ago Aristotle said gold and silver were money because they fit the five properties of money. Kings and governments used gold for international transactions. JP Morgan, 100 years ago, said gold was money and nothing else. If Gold has no use or utility, then why do central banks own it? Why does the US own gold and no paper reserves? It is because gold is money and the ultimate backstop to our monetary system. Throughout history no currency other than gold and silver has kept its value. You can’t get a stock bull or gold bear to admit to this, because it defeats their central argument against gold.

Altucher makes more mistakes. He talks about “recent spikes” in Gold due to hedge fund money. Where has this guy been? Gold has been rising for 10 years. It is actually up every year since 2000. Recent spikes aside, seems to me there were some buyers five and ten years ago.

Gold has been rising for a variety of reasons but the main reason is that there is serious question about the creditworthiness of governments. That is the “fear trade” that no one cares to clarify or explain. Unless you think the US, Europe and Japan can grow out of their debt problem, then there is little reason to be bearish on gold. Every major debt crisis, credit contraction and depression has seen a rise in the real price of gold. Gold will continue to outperform until there is a new monetary system or until the world can grow its way out of the debt problem. This isn’t doom and gloom. It is probable based on the facts.

The facts also tell us that stocks are not a good inflation hedge (as Altucher tries to assert). Look at the data. Commodities always outperform in periods of rising inflation. Altucher thinks that the stock market has grown greater than inflation, consistently for 200 years. How is this relevant to our lives? What is relevant is the next five or ten years. Stocks are in a bear market and will continue to suck wind for another five or seven years.

In the meantime, precious metals are the only asset (aside from bonds) in a full-fledged bull market. Bears often say “everyone is bullish on gold” but this is simply not the case. The bears provide zero research to back this claim, because there isn’t any! Barely anyone owns precious metals. Take a look at the charts in my last editorial. Less than 1% of global funds are invested in the precious metals sector. By the way, that figure was 26% in 1981. Given that statistic, it is obvious that too much money is in stocks and bonds and not precious metals. Furthermore, it is obvious that we aren’t even at the outset of a big move into precious metals.

Moreover, as we recently showed our subscribers in a premium research report, bull markets typically accelerate in the ninth or tenth year and then begin a final acceleration three to four years later. It is not difficult to see why we are on the cusp of acceleration in the precious metals. European banks still need to rollover $1.65 Trillion in debt by the end of 2011. Our big states are likely to need bailouts by the end of the year. The Fed will begin a new round of quantitative easing in a desperate attempt to help the banks recover so they can lend again.

Furthermore, it is just a fact that the US, UK, Europe and Japan can’t grow their way out of the debt mess. A new currency regime is coming. It is only a question of when. It could be five years or ten years if we are lucky.

Precious metals will continue to crush stocks for another five to seven years. However, a portfolio of quality emerging gold and silver stocks will outperform gold. Eventually silver will outperform gold. While we are bullish on the metals, we do agree with Altucher that silver is preferred and stocks are the way to go- as long as they are gold and silver stocks.

By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report One of the big hints that gold stocks will be ready for take-off is when they stop following the broader markets and strictly track gold, particularly if the market falls and gold stocks don’t. We now have data showing this has just occurred. From April 2009 to April 2010, gold stocks mirrored the S&P. The two markets held hands as often as high school sweethearts; there was very little separation between them. While it wasn’t always a daily connection, any weekly and especially monthly chart showed them moving in tandem. Until now. For the quarterly period of April through June, gold stocks advanced 11%, tracking gold’s gain of 10.7%. The S&P, however, lost 14.1%. We haven’t seen this level of separation between gold stocks and the general stock market since the first quarter of 2009. This demonstrates obvious strength in our sector, and is precisely the kind of action that can signal we’re getting closer to our precious metals investments starting a major leg up. In the big picture, this data should be considered a short-term indicator. However, it’s a refreshing reminder that at some point, it won’t matter what the broader markets are doing. In the precious metals bull market of the 1970s, the Barron’s Gold Mining Index soared 652%, while the S&P gained only 22% for the entire decade. This means that if you’re bearish on the economy, you don’t have to be bearish on gold stocks. Whether this is the beginning of permanent separation or not, the following chart tells us the stock market, in relation to gold, is going one direction. At gold’s bottom in April 2001, the Dow/Gold ratio (DJIA divided by gold price) was 41.2. It now stands at 7.9 (as of July 2). When gold peaked in January 1980, the Dow/Gold ratio reached “one,” meaning they were both selling for about the same price. To hit that same ratio today, gold will have to go higher and the Dow simultaneously lower. The fundamental reasons gold will rise are far from over, and a second leg down in the broader markets seems almost locked in at this point. In this context, Doug Casey’s call for a $5,000 gold price doesn’t seem so farfetched. It also coincides with his call for a Greater Depression, an environment not exactly suited for higher stock prices. $5,000 gold = 5,000 Dow. Where do you think they’ll meet – three? Eight? This has obvious implications for your investments. If you’re investing for the big picture, you first want to think twice about any conventional stock investment. You might even consider a short position on one of the indices, something without a time limit, such as an inverse ETF. Second, you should plan on higher gold prices. While pullbacks are inevitable, it does mean that even if you don’t own gold yet, it’s not too late. In fact, any excuse you have now for not buying gold will seem shallow and meaningless when the dollar begins cratering and so does your standard of living. Third, don’t shy away from gold stocks. Yes, they’re still stocks and thus vulnerable, and we’re not sure the separation is here to stay, but selling your core holdings would be, in my opinion, a mistake. One of these days gold stocks won’t wait around for you to jump back in. And you could find yourself chasing them, a tactical error for the investor looking to maximize profit from what we believe will be a once-in-a-generation bull market. In fact, if you had followed only this strategy since the precious metals bull market began in April 2001, you’d be up 375% in your gold holdings and up 707% in your gold stocks. An investment in the S&P, meanwhile, would’ve returned you exactly zero. It’s our opinion this trend will continue. Gold stocks could very well get cheaper in the short term, handing us an excellent buying opportunity. But in the big picture, they’re destined for much higher levels. My advice is to make sure you’re on the right side of this trend. —- What’s a good price on gold, silver, and precious metals stocks? We’ve charted every summer pullback in prices since the bull market began in 2001, giving us target zones for every asset in our portfolio. Our Summer Buying Guide is an invaluable resource for identifying a good bargain in our industry. And you can access it right now, for $39 per year, with a risk-free 3-month trial. Click here for more.

Tim Iacono

It’s still just a tiny trickle, but, for the third straight day, a little gold bullion exited the trust at the SPDR Gold Shares ETF (NYSE:GLD), a total of 4 tonnes in all as shown below.

Of course, the trust added a total of 190 tonnes in April, May, and June, so, this is not yet cause for alarm for those long the yellow metal. Summer has always been a good time to buy gold, not sell it, though that probably doesn’t factor into the decision making process if you’re some hedge fund that needs to raise cash.

The gold market has had a lot of publicity and been under intense scrutiny lately as investors, both conservative (Glenn Beck) and liberal (George Soros), are weighing in and recommending a position in gold. Click The Chart to view the video

By David Galland, Managing Director, Casey Research
For some years now, Doug Casey has gone on record with his view that we’ll know the gold bull market is really picking up steam when central banks stop selling their reserves of gold and begin buying the stuff.
The following excerpt from a Wall Street Journal article titled “As Gold Hits Record, Central Banks in Focus” indicates that this is now happening…

The metal has surged over worries about Europe’s debt woes and the slumping value of the euro. Investors in metals and currency markets have been on alert for any sign that the world’s central banks, and China in particular, are shifting reserves out of the euro and into gold.
Though central banks typically are coy about investment decisions, there have been signs lately that they might be shifting out of euros and into gold.

A key point in this discussion has to do with the Central Bank Gold Agreement under which signatories were allowed to sell 400 tons of gold – 14.11 million ounces – annually.
According to the World Gold Council, in 2007 the central banks took advantage of the CBGA to sell on the order of 484 tons of gold. In 2008 the number began dropping – to 232 tons, followed by a miserly 41 tons in 2009, just 1.44 million ounces, or 10% of the amount sold two years before.
And at the same time the banks stopped selling, they began buying… a net 200 tons last year and almost certainly more than that in 2010. Thus, we have a swing in demand of some 600 tons, or 21 million ounces annually… an amount equal to about 30% of new mine supply.
This, of course, is a two-edged sword, because, in sum, the central banks, IMF, and the Bank for International Settlements hold some 29,000 tons of gold. If push came to shove and the central banks were forced to defend their currencies by selling off their gold reserves, it could have a serious detrimental effect on the gold price.
Using the struggling eurozone as an example, if you added together the official gold reserves of the European Central Bank, Germany, Italy, and France, you’d arrive at a total of 8,791 tons of gold available to be delivered to the market. Converted into a more commonly used and understood unit of measure, 8,791 tons equals 310 million ounces.
Now that seems like a lot of gold, and no question it is. Keeping things simple, at $1,000 per ounce, the European central banks are sitting on gold reserves worth $310 billion.
One might be tempted to think that the European central banks could begin to view this very tangible asset as an important part of the solution to the sovereign debt crisis now bedeviling them.
However, when you consider that Italian government debt alone comes to $1.91 trillion and is closing in on $8 trillion for all the eurozone, it becomes clear that selling their gold would have little real effect. And, of course, selling off their gold reserves would announce for all to see that the sovereigns were nothing more than hollowed-out shells, their currencies dried husks ready to be blown away by the next puff of wind.
Staying on topic, with 8,133 tons of gold in its reserves, the United States rates as the world’s largest sovereign holder. In fact, as of March 2010, gold made up 70% of official U.S. reserves. Pretty good, eh? Now, let’s break it down.
8,133 tons of gold = 287 million ounces.
287 million ounces x $1,000 = $287 billion held in gold reserves.
If $287 billion is 70% of total U.S. reserves, then total U.S. reserves = $410 billion.
Total U.S. government debt, not including unfunded obligations, comes to $14 trillion, so total reserves (of all categories) as a percentage of debt = .029.
And the gold component of those reserves, as a percentage of total government debt = .02.
I think the technical term is a “drop in the bucket.”
Even so, one doesn’t want to be naïve about these things – 29,000 tons of gold is roughly the equivalent of seven years’ supply. Which is another way of saying that it would be a mistake to completely discount the possibility that desperate governments won’t eventually attempt to dump their gold to defend their currencies, as counterproductive as that might be, given that it would send the price sharply lower.
For the time being, however, the central banks are net buyers – and so very supportive to gold’s price.
To stay in the loop about gold and silver – as well as gold-related investments that can give you up to 4:1 leverage to the actual metal – check out Casey’s Gold & Resource Report. At $39 per year, it’s a must-read.  Learn more here.

Money Game

Gold continues to be stuck, violently darting in a range from around $1230 to $1260, waiting for a major move. Today gold is selling off amid the flight to the dollar, though we wouldn’t be shocked to see it turn on a dime at any point during the day.

Jeff Clark, Senior Editor, Casey’s Gold & Resource Report
While a few mainstream outlets are coming around to at least acknowledging gold’s stellar run, most remain skeptical or outright bearish. And the blasphemy they purport is that gold is in a bubble.
Let’s settle it, right now, and shut these naysayers up.

Gold returned 10 (and as much as 14) times your money in the 1970s bull market, and the Nasdaq advanced over 1,900% during its run. Our current gold price is up about 400% (when measured on a daily basis, not monthly as in the chart).
In fact, the Nasdaq gained 182% in the final year of its peak, and gold surged 80% in four weeks during the blow-off top of January 1980. None of this is happening to our current gold price.
Note to doubters: we’ve got a long way to go before we start legitimately using the “bubble” word.
Besides, the fact that these skeptics aren’t buying – and don’t even own any gold in the first place – is further proof we’re not in a bubble. Ever notice none of them claim to own it?
And they definitely need to catch up on world affairs. The World Gold Council (WGC) reported that Russia, Venezuela, the Philippines, and Kazakhstan all bought gold in the first quarter. Central bank sales, meanwhile, remain depressed.
Russian President Medvedev won’t quit his quest to move international reserve assets away from the dollar. And his country’s central bank is backing up his words; it increased its gold reserves by $1.8 billion and decreased its currency reserves by $6.6 billion so far this year.
China, the world’s largest gold producer, already buys all the gold produced within its country. But the WGC recently forecasted that overall gold consumption in China could double in the coming decade, a demand that production certainly won’t be able to match.
The Iran/Israel showdown appears closer almost every week. As further evidence that each side is preparing for conflict, Saudi Arabia recently agreed to permit Israel to use a narrow corridor of its airspace to shorten the distance for a bombing run on Iran – all done with the agreement of the U.S government. Simultaneously, the UN Security Council imposed a new round of sanctions on Tehran. Nobody appears to be backing down.
And the current run in gold is with no inflation. Core CPI has fallen to the lowest level since the mid-1960s – but what happens when inflation does set in? And what if it’s as bad or worse as the 14% rate we got in the ‘70s? Sure, deflation is the immediate concern, but with a U.S. federal debt of $13 trillion, unfunded future liabilities exceeding $50 trillion, and a current budget deficit of over 10% of GDP, a massive debasement of the dollar is virtually ensured, triggering an onslaught of inflation. It’s coming.
With all these concerns, these guys don’t want to own gold?
Bubble, schmubble. Stocks are vulnerable, bonds are toast, currencies are fiat. Other than cash, where are you going to put money right now?
Gold could correct, of course, and I frankly hope it does. I’m not counting on it, though. The price is just as likely to head the other direction. But if it does temporarily fall, while the bubble-heads are smirking, I’ll be buying.
Someday I think we’ll be reversing roles.

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How far could gold and silver fall? And precious metal stocks? Check out our annual Summer Buying Guide in the current issue of Casey’s Gold & Resource Report, which identifies buy zones for all our recommendations. You can try it risk free here…