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Monday, January 21, 2008
Stock Market has broken, we are in for a rough ride!!
 
Technically the Dow Jones has broken its major uptrend that has been in tact since mid 2003. The major moving averages will be broken with a close below 12,800 on January 31st, with the Dow hovering at around 12,000 it appears to be a forgone conclusion that a bear market will be in place. The fundamentals have told us for quite sometime now that the stock market would be coming down but now we are entering a bear market phase technically as well.

Why is this important to gold investors? Because the short term ramifications will  effect gold negatively as stocks are liquidated this causes pressure on all markets and generally a firming of the U.S. Dollar until the dust settles. Then of course the liquid funds will look for a new home and the Dollar isn't the safest place these days! Surely it won't get any better for the greenback either, as the stock market plummets it will force the fed to lower rates even further which in turn will cause the dollar to plunge to new lows. Bonds will rally sharply as the flight to quality? kicks in. Are U.S. bonds a flight to quality anymore?

Furthermore, this is effecting markets globally as U.S. Recession fears are hitting all markets today. Currencies are all being hammered. So where do we look? Gold has to be the best bet globally therefore we believe we should aggressively buy the panic drop in Gold prices as a true flight to quality. 2008 could be one of the largest shifts in wealth in modern history, from paper asset holders to hard asset holders. 

If nothing else, buy gold as an insurance policy, we are all in for a very rough ride.

JMC  
 
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