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Pro Timer: Hesler's Golden Outlook

 June 16, 2010 11:21 AM

As the summer gives into fall, paper/financial assets are destined to find lows below those set during 2008, but gold will be finding footing and heading higher.  

Gold beginning to correct here and that's fine with me. From a purely technical perspective, I look for a retrenchment to $1,150-$1,180. However, weakness will be an opportunity to add to positions.

The currency crisis in euro-land will cycle but it has a long way to go. Off and on, short sale covering and government currency intervention will bounce the euro. When that happens, the U.S. dollar will sell off.

Remember, dollar strength is an illusion. Some 50% of the U.S. dollar index is represented by the euro. When the euro falls it falls in relation to the dollar.

The see-saw effect here makes the euro look weak and the dollar strong as a result. In actuality, the euro and dollar are both falling in relation to gold – the euro lately more than the dollar.

It costs more today than last year for an ounce of gold in euros and it also costs more for an ounce of gold in dollars.

Regardless of the illusion of strength of late in the dollar, it will still buy fewer groceries, insurance, education, medicine, and ounces of gold than it did when it appeared to bottom out last year.

Keep in mind that all currencies sink. Some sink faster than others at any given point in time.  1,000 days from now, gold will cost more in U.S. dollars, more in euros, more in Canadian loonies, more in Yen, more in Rupees, more in Pounds, more in Pesos, more any fiat currency.

From time to time there will be wiggles in terms of U.S. dollars, and when the wiggle drops the price of gold and the mining shares, it is time to be a buyer.

We continue to look to lower prices in order to buy Goldcorp (GG), Eldorado Gold (EGO) and Royal Gold (RGLD). I believe we have a very good chance to buy them at lower price as gold corrects.

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