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Thursday, December 10, 2009

WHY THE SEASONED INVESTOR ISN'T CONCERNED ABOUT GOLD


Yesterday, we took the "long view" on gold. We saw how gold could decline all the way down to $850 an ounce and remain within the confines of a big bull market.

Today, we offer another common-sense view as an antidote to the ridiculous mainstream commentators asking, "Does the recent decline in gold mean the bull market is dead?" We take a look at the old "50% rule."

The 50% rule is an old Wall Street maxim that bull-market moves often give back 50% of their gains before making a new push higher. These declines serve to shake off the latecomers and frustrate as many people as possible.

Starting in September, gold made an enormous run from $955 an ounce to its December high of $1,218 – a $263 jump. Using the 50% rule, we see it would be perfectly normal for gold to decline down to $1,086. Common-sense perspectives like the "long view" and the "50% rule" leave the seasoned investor unconcerned with the recent decline in gold.

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