Tom Scollon
Chief EditorThis is a headline I saw this week in the financial section of a major daily. And I thought, ‘someone is dreaming again’. But immediately my next thought was ‘No – they are talking up their own book!’
The report was a quote from a well-known hedge fund manager who is long gold (at the moment) so why wouldn’t he talk the talk? He was one of the early hedgers to back resources, particularly gold, and you can bet he will be one of the first to leave gold too.
Technically I can see gold going beyond US$700, but the question no-one can answer is when, and what will it do in the meantime?
On a serious note, it concerns me that some unwitting investor will actually accept this sort of information at face value and naively assume the gold price is going all the way, non-stop, straight up to US$1,000 and on that basis, rush out and buy a truckload of gold shares or bullion.
Those who have had even a cursory look at any strongly trending futures or shares chart will know there are always going to be pullbacks along the way. You do not have to be an expert technical analyst or highly successful trader to recognise this typical market behaviour.
Everyone is challenged at some time by the question – "Will I get back into the market/have I missed the big run?" These are ‘mind’ issues that Sinan has alluded to many times.
The answer is no, you have not missed the big run. And anyway, even if the answer is yes, what are you going to do? Commit hari kari?
I have previously spoken of the ‘resources super cycle’ and yes, we could be seeing it all around us right now. But super cycles last for many years and even within those cycles there are mini cycles that play out as economic elements unfold and the perception of what is happening changes.
It is possible when markets are running hard, as they have been, to see dips, and we may even see many of them before we eventually see the big pullback. The dips are caused by investors thinking they have missed out, or others who believe in the super cycle theory buying in.
Markets, after all, are made up of people.
Enjoy the ride
Tom Scollon
Chief Editor