Bill Bonner

Quoting Bill Bonner:

Now, let’s look at the gold market. Gold went down $30 yesterday.

Is it too late to join the party?

Investors don’t know what to do. They were buying gold this week because the Fed is putting on its annual shindig at Jackson Hole, Wyoming. Everybody knows the Fed sees itself as a booster for Wall Street. They know, too, that QE2 came out of the Fed last summer. That program didn’t do anything for the economy...

..but what a gift to gold holders!

Gold is up 33% so far this year. And by the look of the chart...it could easily finish the year above $2,000. Maybe above $3,000.

But — remember we’re just guessing — gold looks like it has gotten ahead of itself. It looks over-bought. Besides, investors may be expecting too much of the Fed.

Of course, if the Fed comes out with some more high-octane market hooch...this party could really go wild. But, it isn’t likely. Everybody’s watching. Bernanke needs to give the markets enough juice so they don’t fall apart on Friday...but not enough so the gold market goes blind.

Most likely, he will encourage investors. But he won’t cause a panic. Not yet.

And most likely, gold will fall.

Look, we’re gold bugs here at The Daily Reckoning. We have more faith in gold than we do in the fellows running the world financial system. Not that they’re not nice men. And they’re plenty smart. It’s not that we think they’re stupid. It’s just that we think they’re human. They put on their pants one leg at a time, just like everybody else. And just like everybody else, if you put them under pressure...they’ll crack.

But not yet. Our views on the stock market were severely tested during the big rallies of the ’00s. Now, it is the gold bulls who face a test. Gold has gone up every year since 2000. It’s been too easy. So, it’s time for Mr. Market to pull a fast one on gold buyers.

The process of de-leveraging the private sector, following in Japan’s footsteps, will be long, slow and hard. The feds will fight de-leveraging. They’ll zombify the economy. They’ll make a bigger mess of things...

..but they won’t create conditions for the real Third Phase of the bull market in gold. Not yet.

Yes, dear reader, you pried it out of us. We were trying to be coy. We wanted to hold off. We thought that maybe if we gave it to you all at once, well...maybe you wouldn’t respect us.

But there...we’ve gone and done it anyway. You have our Big Prediction on gold right in front of you. And it didn’t cost you a penny.

We’re gold bugs. But we’re not always gold bulls. And our guess now is that Mr. Market is going to throw us a curve. (Bugs...bulls...curves...why the hell not?) Yep. He’s drawing in millions of Johnny-come-lately gold buyers into the market. And now he’s going to massacre them...and test us.

Because gold is going lower...not higher.

Yep, you read it here first. Stocks are going down. But so is gold.

“Bill, you’ve been saying that gold is going higher for 11 years. Are you now really saying that it’s probably going down?”

“Yep.”

“But didn’t you just urge readers to sell stocks and buy gold?”

“Yep.”

“So you now think it’s going down, right? “

“Yep.”

“So, are you selling your gold?”

“Nope... You think I’m crazy? This is just a temporary setback...maybe a few years, that’s all. This bull market in gold won’t end until gold and the Dow meet.”

Our guess is that gold goes down...shakes out the speculators and weak investors...and then — perhaps a couple years from now...perhaps longer — begins its third and final phase.

Regards,

Bill Bonner,
for The Daily Reckoning