"Richard Russell (Dow Theory Letters): Why I am bullish on gold

“I started building my gold position in 1999. At the time gold was flat on its fanny well below 300 - what few gold mining shares were still alive were selling under $5. I wrote at the time that many gold shares were so cheap that you could buy them as if they were perpetual warrants. My gold position now is comparable to my market position back in 1958. My gold position represents maybe 30% of my total worth. Why have I done this again?

“For the following reasons:

(1) I believe gold is in a major or primary bull market. I believe the gold bull market is currently in its second phase. This is the phase where sophisticated and seasoned investors and the funds enter the market. I don’t believe the public is in the gold market to any extent. They are interested and watching the action, but they do not have the nerve to buy gold. In fact, the public doesn’t know how to buy gold, although ads are now appearing telling them of the ‘wonders’ of gold and how they can buy the coins (at huge premiums over spot gold).

(2) If there is only one bull market in progress, it will attract broad new coverage and attention - just as Thursday’s $70 rise in gold did.

(3) I believe the bear market in stocks will continue erratically and the deflationary trends will persist. This will drive Fed Chairman Bernanke up the wall, and I think he will stop at nothing (including massive printing of dollars) in his effort to halt deflation.”

Source: Richard Russell, Dow Theory Letters, March 20, 2009."