Richard Russell (Dow Theory Letters): Gold frenzy lies ahead

The following is an excerpt from Richard Russell's Dow Theory Letter, February 11, 2009: By Richard Russell, Dow Theory Letters

“There’s only one item that is bought through both fear and greed. That item is gold. Are you worried about the viability of the dollar? Then buy gold - (fear). Are you afraid that the gold market is getting away from you? Then don’t wait - buy gold (greed).

“Those subscribers who have heeded my advice - ‘buy gold’. They are doing OK today. Of course, for years I advocated buying gold coins and hiding them away and never looking at them or thinking of selling those little beauties. Now if you want gold, you have to buy ‘paper gold’ in the form of GLD. Which is probably OK. Below we see an up-dated chart of GLD. And we see the breakout today at 92.29. This completes a huge base, which started at the 69 box and since has been building and building.

“Today, with the upside breakout at the 93 box on the P&F chart, we’re forced to buy gold in the 944 (April futures) area. For those who missed out on gold when it was in the 700s and 800s, this is a scary proposition. So question - is it too late to buy GLD or high-premium coins if you can find them? As I see it, the frenzy, the speculative phase of gold, the rush of a frightened public lies ahead.

“Big bull markets always find a way to keep you frightened and OUT. Big bull markets are devils with no conscience - to get in you have to ‘close your eyes, and just do it’. Not easy, but in this business nothing is easy except losing money. ‘There’s no fever like gold fever.’ And I’m beginning, just beginning, to feel the fever now. When I look at the chart below, I can sense the fever rising.”

Source: Richard Russell, Dow Theory Letters, February 11, 2009.

Hat tip: Investment Postcards