Richard Russell On Gold

November 25, 2009 --From yesterday's Associated Press: "Demand for gold held up as investors looked for safe places to park their cash. Gold is seen as both an alternative to a weak dollar and a safe-haven investment because of its stable store of value. That has helped drive gold prices to record highs this year."

This pre-Thanksgiving period seems more important than any other I can remember. The place where I park is empty, meaning that everybody has high-tailed it out of town. I note that the Christmas signs are up already -- lights, sales ads, reminders. Long ago I called Christmas "inventory reduction day." I've never seen the stores so anxious to unload their wares -- and their employees as well. And I wondered, "What would Jesus say about our modern merchandise-loaded Christmas?"

Despite what our government tells us, it's been a tough year. In the last day I've read five full-length articles regarding why the employment and unemployment statistics are an outright lie. Even the Prez admitted that employment statistics are an "inexact study."

Stock Market The Dow has been leading this market higher. Some of the other major stock averages are failing to hit new highs with the Dow. My main concern with the market action now is that volume has dropped off dramatically. This tells me that the big money, the institutional money, has moved to the sidelines.

I've been telling subscribers to be in gold rather than stocks. Why? Because gold is outperforming the strongest sector of the stock market, the Dow. No guessing here. The chart below shows the relative strength of the two. As long as the ratio rises, it's telling us that gold is the place to be. Why debate it? Charts don't lie.

Gold -- There's still loads of scepticism about the rising price of gold and the bull market in gold. It's been so long since the US public (since 1971) realized the gold was real, Constitutional money, that they don't know what to make of the gold action. They think gold near $1200 an ounce is expensive and they'd rather have dollar bills. I've coined the phrase, "dollar-bugs" for these ignorant Americans. I guess they'll have to get educated the hard way, which means holding on to their fading Federal Reserve Notes, no matter what. As far as I'm concerned, it's an amazing example of mass brain washing. "Hey, I'd rather have junk paper turned out by the Fed than the real thing -- gold." Pathetic. And the happy thought is that you can (legally) still swap your junk fiat paper for gold.

As I write the Dollar Index has broken to a new 15-month low. This must be driving the Bernanke-Geithner team up the wall. Despite their stupid protestations, the Administration wants a cheaper dollar. It's a battle in favor of rising exports against our collapsing currency. In his all-out war to halt the deflationary bear market, Bernanke may be losing a bigger battle -- our nation's currency.

Gold is the immutable standard of value. Everything I watch is now sinking in relation to gold. And I'm talking about stocks, the Dow, the S&P, almost all the world's currencies, all the world's stock averages, most commodities, bonds, real estate, land, you name it. My old friend, James Dines calls it the "great stealth bear market," and he's been very right.

I could include relative strength charts of gold against all of the above items, but what's the use -- you get the idea. Against the standard, gold, the world is deflating, and no amount of paper-creation has been able to change that!

For some long-term perspective, the chart below shows the Dow in term of gold going back to the year 1999, Take your choice, you can call it the "stealth bear market" in the Dow," or the "stealth bull market" in gold.

This is the reason why I have wanted my subscribers to be in gold rather than stocks or anything else. Gold is THE place to be. Period!

Richard Russell
Editor-in-chief - DOW THEORY LETTERS
www.dowtheoryletters.com

The inimitable and venerable Mr. Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.