You knew we had to look at this one, right? It still boggles my mind how fickle and shortsighted the trading community can be, even among gold bugs (those who believe strongly, even fervently, in the long-term case for gold).

There’s been plenty of hand-wringing over the recent retreat from gold’s all-time highs. What I’d love to ask these nervous Nellies is, What are you so worried about? Nothing goes up in an absolute straight line… markets have to breathe, just like people. Inhale, exhale, repeat.

In the 1970s, gold had a massive — and massively painful — mid-run correction before going on to hit its all-time highs (which, adjusted for inflation, would be over $2,000 an ounce today). I don’t think we’ll see as much pain between here and $2,000 as we did between $500 and $1,000 an ounce back then. But even if we do, courtesy of Bernanke & co. throwing everything but the kitchen sink at gold, the volatility will make for some amazing opportunities.

The U.S. dollar chart, by the way, is as ugly as the gold chart is pretty. Think slip n’ slide right into the dirt. But, woo woo, maybe we can rally the buck back to where it was, umm, two or three months ago! (Jackie Mason voice: For this you get me excited?)

And finally, the prettiest chart of all — the iShares Brazil ETF.

Why is this chart so strong? Because Brazil sits smack-dab in the middle of two of the biggest trends of the decade: the rise of “stuff” and the rise of emerging markets.

What Brazil mines and grows and harvests, the world needs like never before. With a population just under 200 million, roughly two-thirds that of the United States, Brazil is also on the path of amazing local opportunity and long-term domestic demand growth.

When you look at a chart like this, and you see what’s happened over the course of years, is your instinct to say, “Meh… that’s probably just a flash in the pan.”I’d certainly hope not.

Admittedly, it would be one thing to be bullish on gold or Brazil or emerging markets in general without knowing what’s going on behind the scenes. If you don’t know the real drivers behind a move — if you don’t have a sense of them — then not even a long-term chart can always be trusted. But we do know what’s going on behind the scenes. We know what these moves are made of.

And because that’s true, we can also say with confidence that the fun is just beginning. Here’s a toast to “being right and sitting tight.”

Warm Regards,

JL

Source: Being Right and Sitting Tight

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