I suppose it depends on who you ask. What do I personally think? Do I believe the gold bull is “spent?” I always like to look at the past & see what prior historical events teach us. Let’s go back to the great gold bull market of 1970 to 1980. And remember that during this epoch gold began at 35 an ounce & climbed as high as 850 an ounce in 1980.

And as we look at pages past were there set backs to the gold price the last time it was marching to 850 between 1970 & 1980?

“The most chilling set-back began from the peak at $200 on January 1, 1975… It terminated a year and a half later in the summer of 1976, when gold bottomed at $103.” Dr. Richard Appel, 4-25-2004

How about that!

On the way from 35 to 850 between 1970 to 1980 gold suffered periodic setbacks. Sounds like what is occurring today, huh?

“It was a grueling, nerve-wrenching period, but it was followed by gold’s march to its ultimate $875 peak in February, 1980.” Dr. Richard Appel, 4-25-2004

And for those who had the patience to stay in the game what were their rewards?

“…in the end, massive profits accrued to those who stayed the course & rode the Bull Markets to or near their conclusions.” Dr. Richard Appel, 4-25-2004

And as the good doctor goes on to tell us these types of price swings & fluctuations are part of the norm for powerful bull markets. So what is our conclusion concerning gold’s present correction?

Stay the course!

Of course that is easier said than done but if you read these commentaries for any length of time you will hear me “preaching” repeatedly to take profits when you are able. While the strategy I often recommend is not the only selling strategy it is better than none at all. I advocate the investor to devise his or her own formula for when to sell a portion of their profits.

Maybe at a 25% gain or 50% or even 100% gain. 0r maybe selling a portion with only a smaller gain such as selling a portion when your stock climbs a humble 15%. But the principal point is not to begin looking at your stock portfolio as a “fixed” bank account that will only go up in value as time moves forward. Stock valuations are always constantly “liquid” & where they may be tomorrow no one with certainty can say.

That is why you must learn to devise a personal selling strategy that you adhere to automatically if your stock issue climbs in value. How much you sell & at what percent gain that is for you to decide & figure out but this you must eventually learn for yourself.

Remember, you only have made money on a stock issue when it is sold & the proceeds are sitting in your bank account or under your mattress at home.

And before we finish digesting & absorbing Dr. Appels' advice lets listen to probably the most potent advice he can give to the gold & silver investor today.

“You had better get used to it!” Dr. Richard Appel, 4-25-2004

And of course he is referring to these wild & violent price swings in the gold price. Is this a tough route to follow? Of course it is but I will always be the first to tell anyone that the road to significant wealth is not easy & its path is beset by many valleys that must be crossed.

And speaking of the journey to acquire wealth listen to the following quote about that journey.

“Everything we know, from the atom to the stars, calls us to leave our comfortable habitations which no longer comfort us…” Henry Robinson Luce

And leaving our comfortable lives to pursue wealth will involve sacrifice & sweat & strife. But if you are comfortable being poor & living a mediocre life then quit following the gold market & return to your evening dinner by the TV & simply await your monthly 401K statement.

And while this route may be “comfortable” & easy you will never increase your personal net worth to any great degree.

“Nevertheless, I for one am steadfast in my belief that we remain in secular Bull Markets in gold, silver, gold & silver shares, as well as in commodities in general. … When this correction has run its course, the gold stocks will likely rapidly rise from their bases.” Dr. Richard Appel, 4-25-2004

The following is a good nostalgic email from a reader!

Dear Mr. Vaughn,
Your reference to Spring in the South, reminded me of the time I went to school in Memphis--Christian Brothers College--1961.

It was spring and every house, poor and wealthy had tremendous Azalea bushes. The colors were stupendous. The Honey suckle at night was so strong that it could wake you from a deep sleep with the perfume. And in the fall the trees were covered with millions of Monarch butterflies migrating to the south for the winter.

Yes the South has so many memories.

Now it's the golden color of mining shares in old age that I enjoy looking at. And these are my Silver years.

Sincerely,
B. Meyer

And I know that a lot of you are worried about the decision in China to curtail spending & how this might affect the gold market, but read the following. Editor

“But in fact, whatever happens in the short term inside or outside China does little to dent the case for believing that metal prices - along with mining shares, which are essentially a geared play on metal prices –

“are set to resume their bull run. After 20 years of steady decline the supply and demand pendulum for some metals has swung so far that further tightening of the market seems inevitable.”

“Although two years of rising prices are now starting to stimulate the search for new sources of supply, the practical difficulties involved in bringing new sources of production on-stream means it is likely to be several years before a new equilibrium is established.” Michael Coulson, Jonathan Davis, Independent.co.uk, 5-1-2004

I love to read biographies.

I picked up & began reading a biography of an individual who was considered to be the greatest publisher of the 20th Century. After skimming a few pages I saw where this great & fantastically successful publisher divorced his first wife for another woman he fell madly in love with. And of course that love flame was followed by several other infatuations before he departed from this world.

And he eventually died divorced to all & lonely & unhappy.

In reading so many life stories for years & years about successful made men & women I have found that an even greater achievement than making a vast fortune is to remain married happily to the same spouse for a life time.

Maintaining a successful & happy marriage is a 1,000 time more difficult than amassing any sum of great wealth.

Again, when these market fluctuations & corrections occur lets listen to what the experts have to say.

The following is a quote from an expert financial & gold analyst who has been around for a very long time & who knows what he is talking about. This fellow, Doug Casey, wrote a best seller over 20 years ago that became the largest selling financial book in history.

Let’s listen to what the respected & venerable, Doug Casey, has to say about the recent gold correction.

“These moves have apparently scared a lot of people (mostly latecomers in the market) and they're wondering if the steep drop signals an end to the metals bull market.”

“People with such a short time frame shouldn't be in the markets; they should go to casinos. The skilled speculator and the experienced investor, however, take a longer view.”

“The key is to identify major trends in the markets, understand why they're occurring, and stay with them for as long as possible.”Doug Casey,

Is our economy truly turning around & is it safe now to burn our gold stock certificates? Let’s listen to what Warren Buffet feels is awaiting our economy right around the corner.

“Buffett Says He Has Increased Bet Against U.S. Dollar”

“May 1 (Bloomberg) -- Billionaire investor Warren Buffett said he increased his bet against the U.S. dollar on concern that the country's trade deficit will weaken the currency.”

“We think that over time that the dollar is likely to decline in value against some of the major currencies,'' said Buffett, 73, in an interview before Berkshire Hathaway Inc.'s annual shareholder meeting in Omaha, Nebraska.”David Plumb, Brett Cole, James Greiff, Bloomberg, 5-1-2004

Personally, I have no desire to bet against the second richest man in the world. And what else does the world’s second richest businessman have to say about the direction our economy is heading in?

“I think were starting to see (inflation) heat up in this country.”

“The companies that will be best suited to cope with rising inflation, he said, will be ones that have unique products & services…” from wire reports, USA Today, 5-3-2004

And traditionally gold & gold equities perform excellently during inflationary cycles.

Let me share a principal about wealth building.

“While the country seemed mired in a permanent economic morass, Time Inc. was making money, more than $700,000 in the terrible year 1932. Over one third of Times subscribers still earned more than $10,000 per year – perhaps 1 percent of the nation’s families did so.” Henry R. Luce, Robert E. Herrnstein, 1994

One important concept to grasp is that regardless of how bad the economy ever becomes that there will always be some sector of the economy still doing well & there will always be a minority of the nation’s population making good money. 10,000 dollars in 1932 was equivalent to a 6 figure income today.

“While the stock market plummeted, Billing’s Time Inc. shares continued to appreciate.” Henry R. Luce, Robert E. Herzstein, 1994

Now really what is the secret to investing? Or to put it another way what is the secret to success in any type of venture whether it is pursuing a favorite vocation or a personal business venture?

“The chief wonder of my life is that I dare to have so good a time…” Bradford Gamaliel, DL Moody, 1927

I suppose the point here I am relating to is that it helps to enjoy & believe in what you are doing. If investing is merely an act committed in drudgery then your chances of success are going to be very limited.

Are you only going to be happy when the market is up & your portfolio is looking good? No successful businessman ever achieves success without first going through dark valleys & experiencing violent market swings. And the successful view these down cycles as opportunities & play them accordingly.

And these reasons are why the ranks of the successful are so very small. Also, those that complain the most are those who refuse to ever consider selling even a portion of their gains when times are good & hence are not even prepared to take advantage of prices when they are low.

Actually, I like to see corrections like we have seen this past week because they remind all of us to practice conservatism. And one piece of conservatism & excellent advice is to use a good broker whose specialty is the gold mining business. You do not need to invest in this business blindly & a good broker familiar with the gold sector will walk you through these corrections.

“We live in the Information Age. Information is priceless. A good broker should provide you with information as well as take the time to educate you. … A broker is your eyes & ears to the market.” Robert T. Kiyosaki & Sharon L. Lechter, CPA, Rich Dad/Poor Dad, 2000

Yes, a good broker familiar with gold mining stocks can walk you through these corrections & minimize your losses. And in conclusion let’s listen to the words of a prominent gold mining analyst.

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David N. Vaughn
Gold Letter, Inc.

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