more articles by

Stewart Thomson

Click to enlarge Click to enlarge


Gold Volatility: Your Profits Door Key

By Stewart Thomson      Printer Friendly Version Bookmark and Share
Apr 8 2011 3:32PM

  1. Battle time is here. Another day begins anew and you step into the market boxing ring for the big gold fight against the dollar. Unfortunately, because you have no access to the gold futures market, you can’t fight. By the time most investors get out of bed, their opponents in the market are already richer. 

  2. Click this link now to view the US gold futures chart. Now click this  ETF trading link to view a typical gold ETF in action.

  3. The difference is dramatic.  Basically, the ETF fighter is wrapped in duct tape, while the futures market fighter is buying and selling their way to victory.

  4. There is a solution, and you don’t need to trade futures to achieve victory. Most investors think gold stocks are leveraged to gold bullion. That assumption is correct.  Unfortunately, there is great confusion between the leverage of gold stocks and the volatility of gold stocks.

  5. Volatility of gold stocks is not just a “leveraged to bullion? move.  Volatility is really about the number of whipsaw actions that occur within a given timeframe.  During a given timeframe, gold might trade between $1420-1440 while GDX-NYSE rises from $60-62. Such a move sees gold rises approx. 1% and GDX rises approx. 3%. 

  6. Investors speak of that action as the showing the greater volatility of gold stocks to bullion, when the situation is really showing the leverage of gold stocks to bullion.  It is the same on the downside. If GDX falls from 60 to 58 while gold falls from 1440 to 1420, investors tend to think that action describes the greater volatility of GDX, when it really is related to the leverage of GDX to bullion.

  7. Few investors realize that within that within a given a price price area, during the trading day, gold might rise and fall ten times by .2%, while GDX does it fifty times!  Now you are talking….volatility!

  8. Investors are leaving a gargantuan amount of money on the table by focusing only on the greater leverage of gold stocks compared to gold bullion, while ignoring the much greater volatility of gold stocks compared to gold bullion!

  9. This situation would not be too horrible, and might not even exist, if you were investing in an economic boom. Unfortunately, you are in the throes of perhaps the greatest financial crisis in the history of the world.  Current trading volumes on many gold stocks are lower now than in 1999!  

  10. In terms of price, many gold stocks are trading below where they were at gold $700!  This fact has totally demoralized most gold stock investors.  It is understandable that time is required for companies to recover from the 2008 implosion of the financial system, but incomprehensible that many high quality juniors are still below the highs of 2006 with bullion at $1400!  Some of your junior gold & silver stocks “should? be ten or twenty times higher than where they are now, given the price of gold bullion at $1400!

  11. Volatility is the dominant market theme of 2011, and those who can embrace it stand to make legendary profits. Failure to understand the difference between the inherent leverage of gold stocks to the gold bullion price and the inherent volatility of gold stocks on a daily basis, not a trend basis, is a recipe for disaster. 

  12. When GDX rises or falls in an intermediate move, it is related to the leverage of GDX to gold bullion. When GDX trades between 60.20 and 60.40 thirty times while bullion sits at $1420 like a rock, that is volatility. 

  13. Harness the volatility, and you can consistently grow your accounts. Operate in a crisis that will last for decades with only with the gold stocks leverage tool is dangerous and could be financially fatal. The gold stocks leverage tool has failed to work properly because we are in a crisis, not a boom!  All crises are about destruction of wealth through destruction of leverage, and that means destruction of “houses on a credit card? leverage, as well as destruction of “gold stocks to bullion? leverage. All leverage is hammered, with no exceptions. 

  14. All crises are about volatility growth, so it makes sense to embrace volatility, and cool it on the leverage, in what may be the greatest and longest crisis, in the history of the world.  Gold juniors are not an exception to the destruction of leverage that comes to life after a quadrillion dollar marked to lies otc derivatives blowout.

  15. This crisis (wealth transfer) has only just started, and the damage will not just last for months or years.  It will last for decades.  We are a long ways away from the waning of this crisis.  Unknown to Elmer Fudd public investor and team Leveraged Fundster, this crisis is acceleratingThe only solution to the crisis is unprecedented destruction of leveraged wealth that sends millions of citizens to the breadline.  No breadlines = no end to the crisis.

  16. The points where most investors get disappointed with gold stocks is the point where you need to get interested. Think volatility, not leverage. This is crisis is about people getting permanently poorer, and all investment assets will be sold seemingly “out of the blue?, to meet daily bills, at an exponentially growing rate as this crisis accelerates. That action can affect your stocks, as even large investors throw in the towel, and end a lifetime of failure in the market. 

  17. Use the mine reports to decide how much capital to allocate to a gold stock, not to decide whether the current price is a good buy or not. There are no good buy points in a crisis. There are only those who understand that gold stocks can continue to trade far below what seems rational and those on fire. Which one do you want to be?  Be satisfied with small gains for a portion of your position and be prepared for a much longer grind than you envisioned wen the crisis started. 

  18. There is nothing “wrong? with the gold stocks. This is a crisis, so the traditional leverage of stocks to gold has been hammered. There are many more surprise hits to come, as the crisis impoverishes many more investors, and they are forced to liquidate to meet their daily expenses. There is no “third wave of excitement? coming to the gold market from a greedy public. There is only destruction of leverage and ongoing impoverishment of millions. 

  19. Stop me if incorrect here.  I’m going to make a wild assumption. I’m going to assume that your goal in this crisis is not to sell your gold juniors at a massive loss, use the carcass to pay bills, then hit the breadline, after the banksters destroy the bond market.  Instead, I’m going to assume that your goal is to get richer, asap!  To come out of this crisis richer, you need to face the volatility tool and put it to work.

  20. Let’s do it. Click here now to view the phenomenal GLDX Gold Explorers ETF.  Notice the tremendous volatility, while overall the price has gone nowhere since the inception of the fund. You watched Ben Bernanke drive rates to zero to battle the otc derivatives crisis forest fire. That tool failed. Then he tried a quantitative easing water gun. That tool just failed.  He is now bringing out the tool of gold revaluation. 

  21. You tried the tool of gold stocks leverage to profit from the crisis.  Now you understand that any major financial crisis is about leverage destruction. You need to embrace the volatility of gold stocks, not just their leverage. Do whatever is required to get the capital to play in the volatility market. Just start buying funds like GLDX and selling them for a small profit. This strategy isn’t about where junior funds like GLDX,, or GDXJ are going on the upside or the downside. It isn’t about targets. It’s about volatility.    

  22. This will be a totally new concept for some of you, just as gold revaluation is a totally new concept for Ben Bernanke, but it has to be done, or you risk blowing up.  Volatility grows exponentially, as the crisis grows exponentially.  From here on in, most market predictions are about as valuable as a Zimbabwe 2 dollar bill.  I’m averaging a hundred volatility trades a day and more now, so as always, I have my cash where my mouth is.  If I thought prediction would work going forwards, I’d be obsessed with prediction. What works going forwards is embracing volatility. Trade smaller and trade faster.  Don’t assume any price range represents some sort of bottom or top. Who knows how successful you will be in embracing volatility.  I do know that those who fail to embrace it have a high chance of being financially destroyed.

  23. That GLDX chart is a daily chart.  If you look at an intraday chart of GDX, which trades millions of shares daily, you will be stunned by the volatility.  Here is a one minute chart of the ultra-liquid GDX. I’m not talking about day trading.  Every one of the 100-200 trades I am doing each day, I am fully prepared to carry not just overnight, but overyear.  Day trading is for idiots who are doomed along with the rest of team leverage. Understanding volatility as the exponentially growing theme of the crisis is not day trading.  It is a critical tool to profiting from the crisis so you don’t find yourself in liquidation mode to pay bills alongside millions of investors who tried to predict their way through what may be the greatest crisis of all time!

  24. The banksters are rolling out the red carpet of volatility. If you blow up the GDX chart to show all the action within each minute, it is stunning. Here is the one minute GDXJ chart. You don’t need to be a technical analyst to make money from volatility. What you need to do is take action. Put a bit of capital to work buying and selling volatility, rather than price targets. Maybe you can buy every 1 cent down, or every 2 dollars down. It doesn’t matter, but this phase of the crisis is all about volatility, and almost no analyst or investor is really prepared. You can profit from volatility if you take action now!

Gridtime!  Many investors are just coming to grips with the reality that prediction may totally fail to work to make you money, from here on in!  When I started the PGEN based on price response vs price prediction, did I think we would really reach a point where volatility was the main KEY to profits? No!  But here we are, right in the thick of it!  One BENEFIT of this new THEME is a lot of your FEAR about price DROPPING and GREED for price RISE will be ELIMINATED because you can’t do anything but focus on the grid as you KNOW volatility is the THEME. When the bond blows, the whole volatility theme could go right off the charts!  See you out there!



Note: We are privacy oriented. We accept cheques. And credit cards thru PayPal only on our website. For your protection. We don’t see your credit card information. Only PayPal does. They pay us. Minus their fee. PayPal is a highly reputable company. Owned by Ebay. With about 160 million accounts worldwide. 

Written between 4am-7am.  5-6 issues per week. Emailed at aprox 9am daily.

Rate Sheet (us funds):
Lifetime: $799
2yr:  $269  (over 500 issues)
1yr:  $169    (over 250 issues)
6 mths: $99 (over 125 issues)

Stewart Thomson


To pay by cheque, make cheque payable to “Stewart Thomson?  
Mail to: Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada



Risks, Disclaimers, Legal - Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:  
Are You Prepared?