Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude, and T...
Hold On to the Commodity Bull
08/27/2008 12:00 am EST
Curtis Hesler, editor of Professional Timing Service, says we’re just in a correction and the commodities bull market is intact.
My outlook is for gold to recover to at least $1,600, and I think we may see $1,600 during 2009. Some experts are calling for $1,200… this year. Short term, gold has corrected back down to its long-term up trend line, and it’s a good time to be invested in precious metals.
Hang on to your mining shares and precious metal ETFs. If you have available cash—perhaps because you are liquidating financial/paper based assets in the stock market rally—this is an excellent time to invest in gold and silver issues. I would not sell the juniors you may be holding, but I continue to advise that new money should be directed toward the majors.
Crude oil hasn’t been raided by the bears like gold has, but I still think we could see the $108.00 level basis December futures. However, nothing has changed fundamentally that I can see. All the whimpering and handwringing about the US economy aside, China looks strong—even factoring in the intentional slowdown orchestrated for the Olympics.
The last I saw, Chinese retail sales were growing at 15% a year net of inflation. That’s the fastest rate in nine years. Gasoline sales are growing at a 55% annual rate. Incomes are rising by 8% a year. I think you would find similar numbers throughout Asia.
Essentially, it is more important that crude oil tends to put in a seasonal low in August. Longer term, you will see $160.00 crude oil … perhaps even this year.
We called for this stock market rally when everyone was in a fit of panic, but we did not advise the beginning of a new bull market in stocks. That just isn’t going to happen. The Standard & Poor’s 500 index should be limited to 1,350.
I pulled up charts of the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite index from1980 to 2000. That was one heck of a bull market—and not unlike the commodity bull market we are currently experiencing.
Along the way during those 20 years, there were serious corrections—much more severe than the recent correction in gold, for example. I traded through 1987 up close and personal. The market topped out in August that year, gained downside momentum, and totally melted down in October. The Dow collapsed 25% in one day alone.
Corrections come along during bull markets. They always look like the end of the world, but they are actually the beginning of an opportunity. The commodity bull has a long ways to go. You must hold tight when you are right. The commodity bull will last until the Dow/gold ratio—currently 13x—falls under five.Subscribe to Professional Timing Service here…
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