>Gold still a keeper - 500 Beiträge pro Seite

[peter.wedemeier1]

STEWART BAILEY: Now, looking at an upturn in global equity markets. If you consider the gold market as an independent entity, that tends to thrive on uncertainty in equity markets. If things start to level out in the US in particular, is that going to be bad news for the gold market?

DARRYL CASTLE: I don`t think it`s necessarily bad news for gold shares because the US equity market is different to the US economy and I think the US equity market is still overvalued from the excesses of the internet bubble and the five years leading up to 2001. So, I don`t think the US equity market`s going to be particularly strong. So on that basis it doesn`t mean that people will be investing in the equity market rather than gold. And I think the underlying threat of some sort of terrorist attack or something happening in the market is still there, and you probably want to be holding gold as a diversifier or as a type of insurance against something like that happening. Rather than just holding it purely because you think the US is going to fall in a heap and "I want gold for that reason".

STEWART BAILEY: So looking into a diversified portfolio, what percentage should be held in gold?

DARRYL CASTLE: I think at this stage in a general equity portfolio you`re probably looking in the range of 4% to 10%, depending on where you think the short- and medium-term movements are going. And I mean this is quite different to two years ago when investors were looking at, say, 0% to 3% in their portfolios. So the sentiment has changed. People recognise the need for gold as a diversifier in the portfolio.

STEWART BAILEY: And that big stock, big liquid stock argument – does that go for the gold market as well?

DARRYL CASTLE: I think it definitely does. And that`s why you`ve seen the big gold shares have performed better than the smaller shares. People want to be able to get in and out quite quickly as they see the shorter-term developments happening in front of them.

STEWART BAILEY: Just to put you on the spot here. Hedged or non-hedged?

DARRYL CASTLE: I would go non-hedged. There`s almost no reason to hold a hedged share, if you`re holding it as a diversifier. You would just end up having to hold more of it to diversify your portfolio to the same extent.

STEWART BAILEY: Will the time come again where hedge players are in fashion?

DARRYL CASTLE: Absolutely, I don`t, no market goes up for ever. When the market`s going down and things are looking negative for the gold market, you want the hedged players.

STEWART BAILEY: There you have it. The hedges will have their time again. That was Darryl Castle from Stanlib Asset Management.

MININGWEB: And that was Stewart Bailey form theMiningweb.com.

[peter.wedemeier1]

...renewed investor interest in gold equities would be a key driver of the gold price in coming weeks...
The recent weakness in the gold price will be seen as a needed correction and expect further gains in gold equities and gold prices in the coming weeks, largely on the basis of a continued downward trend in global equity markets.
Consequently, Naqvi predicted the coming weeks would be more indicative of the sentiment towards gold than in the past couple of weeks, and that gold equities would rally. "Support for gold may once again come from renewed interest in gold equities over the coming weeks," he said.
Naqvi pointed out that gold equities had fallen sharply since their peak at the end of May.
After running extremely strongly this year, arguably too far ahead of the gold price, many gold equities have now returned towards `fair value` and should we see further weakness in `traditional` equity market sectors then there is clear potential for a resurgence of buying interest in gold equities," he said.Uptrends in the gold price tended to generate buyer interest in gold equities, and movements in the gold equity indices were often used by gold traders as a trading tool for their gold positions. "As a result, movements in gold equities and the gold price can provide a momentum of their own, albeit normally relatively shortlived," Naqvi said.
Another potential boost for the gold price was the forthcoming release of gold producer June quarterly reports, which Naqvi said were likely to return "de-hedging" to the forefront of the gold market.
http://www.mips1.net/MGGold.nsf/Current/4225685F0043D1B24825…

[peter.wedemeier1]

Just repeat after me - Gold is in a Bull Market. Some weeks will be better and some will be worse. But, in the end, prices will go higher. And, sometimes, trying to decipher exactly what is really happening, or should happen, in these markets is about as difficult as attempting to predict just which dress my wife will choose at the store.
During the relevant period of time, open interest declined by almost 14,000 contracts as long speculators, both small and large, sold out of the market. Their sales were accommodated, primarily, by the short commercials, who were rather aggressive in buying back their positions at these new lower levels. Long-time readers of this commentary know how I feel about such actions. They understand that I strongly believe that such action is very bullish.
Many analysts, perhaps rightfully so, saw the gold market as previously overbought. We have now seen a significant decline in speculative long positions and these sales were bought by the trade, those who know the market best. Now it is indeed possible that there is still some irrational exuberance left to be wrung out of the market, but I think not based upon the decline of the USD in the forex markets. With physical demand now very apparent at price levels just slightly below current markets, I can see more upside emerging.

Speculative demand is usually transitory and fickle in its nature. It can, and does, move prices rapidly higher, or lower, as investor psychology rapidly shifts from one extreme to the other. But, now, it appears, such spec buying has run its course and the fundamentals of actual physical demand will emerge.
http://www.321gold.com/editorials/kaplan/kaplan07_09_02.html

[peter.wedemeier1]

...But some fund managers argue that, with supplies of the metal running low and international tensions high, gold`s rally could continue.
Increased deficit spending and negative real rates of return on U.S. Treasury bills should also drive the yellow metal higher.
Investors are battling with a bevy of negative influences, including: weak Consumer Confidence numbers, massive corporate layoffs, burgeoning trade deficits, analyst downgrades, the WorldCom/Vivendi-type debacles, a lack of trust in corporate accounting and CEO`s, insider trading accusations, Mid East turmoil, terrorism. etc. "Alternative" investments such as commodities and metals may not be so alternative anymore, and with gold up from $275 over the last several months, and with the recent CRB rally, the yellow metal is regaining some respect.
http://www.wallstreet-online.de/ws/community/board/threadpag…

[peter.wedemeier1]

http://www.321gold.com/editorials/gebhard/gebhard07_09_02.ht…

[peter.wedemeier1]

Has gold topped?
By Jake Bernstein from JakeBernstein.com 07-09-2002

Gold prices peaked in early June as they entered an area of long term resistance slightly above the October 1999 high. I previously advised you that the $US 325 - $US 335 area would likely serve as first resistance in a new bull market. So far, the forecast has been correct.

But which way now? Has the market topped or is this a buying opportunity? Here are my thoughts.

• Gold remains in a new long term up trend based on several cycles. As a result, the up trend should continue once the current correction has run its course
• The seeds of a new inflation have been sewn. Persistently low interest rates combined with rising commodity prices is a dangerous combination that should eventually lead to a new round of inflation which should, ultimately, result in higher gold prices
• The recent decline in gold has disappointed many gold followers resulting in decreasing bullish sentiment. This I view as a positive development since most bull markets climb a "wall of worry" as opposed to a steady stream of bullish news
• Current short term support for nearby gold futures is in the $US 300 area
• The $US 325 - 335 range remains resistance
• A weekly closing penetration of the $US 335 level could result in a fairly quick rally to the $US 380 area which is the next level of long term resistance
• There has been a seasonal tendency for gold prices to make lows in late summer to early autumn. This pattern may well hold this year. Gold prices tend to move strongly higher from late August to late September. As a result, weakness could continue until then, however, given the unstable economic and political climate, the summer lows could come sooner than late August

In conclusion, I remain long term bullish with higher prices coming once the current correction has ended.

[peter.wedemeier1]

August Gold:
In a late session burst, gold bulls pressed forward and the yellow metal closed at $316.5, up $4.0. The catalyst for the strength most assuredly was a weaker dollar, but as we know, there are a host of other factors supporting gold in the midst of this bull market. The NASDAQ remains near 5-year lows, the bears have the Dow bulls by the horns, the S&P is near yearly lows, and the dollar trend continues to look weak, all of which are supportive to gold bulls.

President Bush gave a speech on the rise of corporate scandals and what can be done to restore confidence and transparency to the markets. The initial reaction from the markets was a quiet yawn, but over time the markets will likely interpret these new policies positively. However, stocks began to spiral lower far ahead of these "book-cooking" revelations, and there are still many ailments that the economy and equity markets must contend with.

The other week we referenced how tangibles such as real estate and precious metals have recently gained favor. We also mentioned how Fed policies have driven housing demand, how banks are lending to just about anyone, how home prices relentlessly escalate and how over-leveraged the average homeowner isall of which infer a possible bubble in real estate, a la stocks of a couple of years ago. What would happen to gold prices if the last vestige of safe havensthe real estate marketsuddenly burst? Would metals be the only viable alternative left standing? It appears we aren`t the only ones ruminating about such things, as a recent "Review & Outlook" in the Wall St. Journal reiterates our musings. Here are some key passages. "Over the past couple of years housing prices have risen faster than incomes. To meet those prices, home buyers are resorting to greater levels of mortgage debt; down payments have been getting smaller and smaller, to the point that the average down payment by first-time buyers dropped to 3% in 1999 from 10% a decade earlier.

At the same time, mortgage payments are running as high as 42% of income -- way up from their normal range of 25% to 30%. The result: Housing payments are at the highest level as a share of disposable income since the Federal Reserve began tracking them, and are up 45% since 1980. The growth of mortgage debt has exceeded income growth over the past several years.

But the most troublesome sign is that credit standards are falling in an effort to keep people buying. An early sign of any bubble is when lenders start to use ploys they wouldn`t dream of indulging in normal times. For example, mortgage lenders are now offering interest-only loans for up to 15 years before principle repayment starts, and they are permitting higher and higher loan-to-value contracts."

There is also a great article from this weeks Barron`s, "Is Anyone Making Money" by Erin E. Arvedlund, with some key thoughts on the stock market and goldsuch as "But some fund managers argue that, with supplies of the metal running low and international tensions high, gold`s rally could continue." "Increased deficit spending and negative real rates of return on U.S. Treasury bills should also drive the yellow metal higher." (For a copy of both articles email me at [e-mail]).

Investors are battling with a preponderance of negative info, including: weak Consumer Confidence numbers, massive corporate layoffs, burgeoning trade deficits, analyst downgrades, the WorldCom/Vivendi-type debacles, a lack of trust in corporate accounting and CEO`s, insider trading accusations, Mid East turmoil, terrorism. etc. And, has anyone noticed that the CRB index has rallied substantially in the last month, is this a precursor to inflation? Anyway, "alternative" investments such as commodities and metals may not be so alternative anymore, and with gold up from $275 over the last several months, the yellow metal is regaining some respect. Longs from $312 are in a great position, with support near $311 and resistance near $316.6. A close above moving average resistance near $317.2 targets $325.

[peter.wedemeier1]

AUGUST GOLD
316.50

Remember, gold is the one vehicle we should no longer worry about, no matter how severe or prolonged the pullbacks it experiences in this still-young bull market.

In the competition with other forms of money, bullion simply cannot lose -- is running a race against the cripples, oncological disaster-cases, and syphilis-ward specimens of the currency world.

We`d allowed for a correction to as low as 301-302, but yesterday`s strong rally makes a pullback of that magnitude an even more distant dream for the bullion shorts, as well as for those central bankers who continue to pray that bullion`s by-now indomitable spirit does not give away their game.

[peter.wedemeier1]

August Gold:
A stronger dollar kept a lid on gold, with the golden metal ending at $315.1, down $1.4. Yes, equities were conked on the head, which should have served to boost gold, but much of the blood was spilled after gold had closed. Expect gold to be stronger overnight and on the open tomorrow. The catalyst for recent strength in gold is most assuredly a weaker dollar, but as we know, there are a host of other factors supporting gold, such as a lack of investment alternatives.
Has anyone noticed that the CRB index has rallied substantially in the last month? Is this precursor to inflation? Anyway, commodities and metals may not be so alternative anymore, and with gold up from $275 over the last several months, the yellow metal is regaining respect. Longs from $312 are in a great position, with moving average support near $313 and resistance near $316.6.

A close above resistance near $317 targets $325.

[peter.wedemeier1]

United States Daily Economic Commentary

Foreign Investors, Get Ready To Be Paid Back In Cheaper Dollars
July 08, 2002

Well, it looks as though the fix is in. Greenspan has gotten the go-ahead from none other than his unbiased staff to step up US inflation. I am referring to the recent Fed staff study that everyone else is referring to these days, "Preventing Deflation: Lesson from Japan`s Experience in the 1990s." One of the conclusions of the study is that when inflation gets closer to zero, the odds of deflation increase. Duh! If a price index is exhibiting no growth, then, of course, it is more likely to contract a 1% than if it were initially growing at 6%. The study goes on to speculate that if interest rates also are near zero when there is price-index stability, then monetary policy could be rendered impotent if deflation should occur. Why? Because with nominal interest rates at zero and accompanied with deflation, then the Fed would not be able to lower "real" interest rates. This is the conventional wisdom. Of course, the Fed could crank up the money printing presses, even at a zero nominal interest rate, and create more inflation. This would lower the real rate of interest even with a zero interest rate.

But the last comment is mine, not those of the study`s authors. And it is the comments of the authors that Greenspan wants to hear. Now, judging from the nearly 8% year-over-year growth in M2 and the rise in commodity prices, as shown in Chart 1, there is little reason to be concerned about deflation here in the US of A. But, because we are the biggest net-debtor nation in the world, deflation could beget more deflation as it would make it more difficult for us to service our debt. So, as net debtors, we Americans want inflation, not deflation. And Greenspan aims to please us now, just as he did when he created the credit to inflate the stock market.

I said that we are the world`s largest net-debtor nation. Chart 2 shows that the rest of the world now owns almost 12% of our total outstanding debt - up from less than 2% thirty years ago. When foreign creditors - and domestic ones, too -- get wind of Greenspan`s intent to lower US inflation-adjusted interest rates, which today are only 0.55% in terms of the fed funds rate -- by stepping up US inflation, how do you think they will react? My bet is that they will run to the currency that will give them a positive inflation-adjusted return on their short-term money. And if all central banks join in with the Fed in pushing inflation-adjusted interest rates into negative territory, then there always is gold.

[peter.wedemeier1]

AUGUST GOLD
315.10

The closest impediment is a Fib-based resistance at 319.90, but we should expect it to be easily brushed aside if yesterday`s dive out of non-bullion shares persists for another day.

[peter.wedemeier1]

August Gold:

As stocks were folding the last few sessions, bullish pressure in gold was accumulating, and late in the session today, some of that pressure finally exerted itself on the yellow metal, with gold ending at $317.6, up $2.5. Stocks mostly traded in the red today, and the dollar was weaker, which fueled the gain in gold.

One must also consider the distinct possibility that we`ll attack Iraq before the year is over. In fact, it`s certain we will, but "when" is the question. When it does happen, are financial markets going to rejoice? Doubtful. Will gold rally? Likely. Also, notice that the CRB index has rallied substantially in the last month. Is this a precursor to inflation? Anyway, with gold up from $275 over the last several months, the yellow metal is regaining respect. Longs from $312 are in a great position; we closed over moving average resistance at $316.6, with the next level of support/resistance at $315.6/$324 respectively.

Be sure to protect profits, after all, if stocks/dollar bounce, gold could dip again and give us another buying opportunity.

[peter.wedemeier1]

AUGUST GOLD
317.60

Gold`s skittishness was somewhat puzzling yesterday, since it failed to rally when non-bullion stocks were tanking. Perhaps it was merely being astute about the bullish divergence which developed intraday between the Industrial Average and the Nasdaq stocks, which uncharacteristically held their ground?

Regardless, the closest impediment above is a Fib-based resistance at 319.90, and a close above it would all but clinch a test of the June 24 high near 328.

[peter.wedemeier1]

August Gold:
Lethargic and anemic - that is how best to describe today`s action, as gold lazily drifted lower to settle at $315.9, down $1.7. Retail sales were a bit stronger than anticipated, the dollar was a smidgen stronger, and stocks at the very least didn`t collapse. On the week, gold is higher about $3.5.

President Bush is coming under pressure to shore up the equity markets, which of course isn`t really possible. President`s aren`t legislated a magic wand last time I looked. Besides, the market needs the "medicine" it is getting, as his budget forecasts shortfalls for a few years. The shortfall can be blamed on increased defense spending, increased social spending and a shortfall of capital gains tax revenue. After all, if everybody has been losing in stocks, there aren`t any capital gains to be taxed! So, don`t be surprised to see some political maneuvering intent on lifting stocks ahead of mid-term elections. This might lift the dollar as well, which would hurt gold bulls.

For gold to continue with another substantial run soon, we`ll need to see more ground removed from under the dollar and equities. Longs from $312 should protect profits and be out on a close below $315.7. After all, if stocks/dollar bounce, gold could dip again and give us another buying opportunity.

Look to $319 as resistance, there is lots of congestion there.

[peter.wedemeier1]

Gold & Property Finding American Investor Favour
12.07.2002 12:23
Falling stock prices, investigations of corporate deceit, and money market funds that yield little more than inflation have pushed investors to real estate and precious metals as a shelter for their cash.

US homebuyers are increasing down payments as a share of property values, and consumers are becoming reacquainted with gold pieces such American Eagles and Krugerrands. Bullion has won converts among younger Japanese investors, even as the government is trying to entice them into bonds with ads by a movie star.

Tangible assets such as homes may become even more attractive to US investors, who this week saw the Standard & Poor`s 500 Index drop to its lowest level since 1997. Bristol-Myers Squibb joined the list of companies, including WorldCom Inc. and Adelphia Communications Corp., whose financial and accounting practices are under federal scrutiny.

“I want to be able to understand where my money is,” says Martha Kumar, a political science professor at Towson University in Towson, Maryland, who recently made a down payment worth thirty six percent of the value of her new home in Washington, D.C. “In real estate, you can see that.”

[peter.wedemeier1]

AUGUST GOLD
315.90

Nothing new to add. The closest obstacle is a Fib-based resistance at 319.90, above which the futures would be a strong bet to test the June 24 high near 328.

[peter.wedemeier1]

Gold was up $4.60 for the week, putting in a rather robust performance, and now putting some distance between current prices at over $315 and the $310-$312 where solid physical demand is apparent.
One forgotten feature of gold is that it is the only asset that is not someone else`s liability. As promises are being broken in the financial markets, as expectations of riches are being dashed, investors will inevitably seek an asset that will not break their hearts. Yes, they are willing to accept losses, but they will hunt for an asset that will not lie to them, that doesn`t suddenly make announcements of corporate malfeasance. Proof that we are seeing a shift in investor psychology is, as one might expect, first showing up in the real estate market in the United States. As paper assets become less desirable, the very first hard asset that comes to the mind of an investor is real estate. Housing prices continue to rise in the United States, and median down payments for repeat home buyers have risen to 25% from 19% in 1999, a clear demonstration that investors are beginning to place more assets into this investment venue. The acquisition of precious metals will take a bit more time, but as we move into the future, the number of investors should rise.

[peter.wedemeier1]

Forget technology -- gold is the future, says top money manager
`Everybody wants to believe technology will come back`

Paul Vieira
National Post

Monday, July 15, 2002
National Post
Frank Holmes says for gold to replenish itself, "it has got to trade at a higher price."

Investors still haven`t fully embraced gold stocks or come to believe in a rally in the price of the precious metal because they remain convinced technology stocks are set to rebound, says a leading U.S. money manager.

Frank Holmes, chief executive of U.S. Global Investors Inc. -- manager of two of the top gold sector mutual funds in the United States -- said all the pertinent indicators, including a fall in the U.S. dollar and cuts in exploration, point to higher gold prices in the months and years ahead.

Investors, however, have a different take.

"People don`t believe in the gold story because everyone wants to believe technology will come back," said Mr. Holmes, during a visit to Toronto to meet gold analysts and mining executives. "They want to believe that -- and if they want to believe something, it`s going to take a long time in to get them to change their minds."

He added: "Gold is still a four-letter word for investors."

U.S. Global Investors, a San Antonio, Tex.-based firm with 13 funds and US$1.3-billion in assets, has had some outstanding performers of late.

Its Gold Shares Fund, rated four stars by Morningstar, has posted a one-year return of 86.5%, as of June 30, and a three-year gain of 15.56%; the World Precious Minerals Fund has a 12-month return of 97.5%; and the Global Resources Fund, another four-star fund, has a 22.9% one-year gain and 7.12% over three.

He said a number of factors are pushing up gold prices, from a weak U.S. dollar to unwinding hedge positions.

Moreover, due to a long bear market in gold, companies have cut back on exploration and there limited new supply in the offing.

"For gold to replenish itself, it has got to trade at a higher price," or a "dynamic equilibrium" as he described it, which is US$375 to US$400 an ounce. "Otherwise, you are going to have continuing consolidation in order to survive."

Gold closed Friday at $315.60.

He said his forecast has the stock market hitting bottom some time between now and the U.S. Thanksgiving, adding the key point will be when companies see their growth rates align with their price-earnings ratios.

"If we have a next couple of quarters of rising earnings and the stock market doesn`t do much, then we are going to have price-earnings align with growth rates. We are getting there," he said.

"This is a great bear market, a classical bear market," he added. "People can`t handle losing money for two years, so what happens? They decide they are going after Wall Street, and blame the analysts. Sure, there`s some bad analysts, there`s bad people everywhere.

"We can manage that. But no, people have decided to engage in what I call the `blame game.`"

[peter.wedemeier1]

Booming gold market still out of bounds for many investors
Reuters
July 15 2002 at 11:05AM

London - Gold looks like a first-class investment in uncertain times, rallying this year amid stock market and foreign currency turmoil. But this booming market still remains closed to many ordinary investors.

Gold prices have gained 18 percent this year, bucking a two-decade downturn for the precious metal and putting gold back onto the radar screen of major funds and speculative cash desperately seeking refuge from sinking equities, dollar weakness and fears of a repeat attack on the US mainland.

"Gold is a most phenomenal investment but the doors are closed. It`s like a football stadium showing the most amazing match but the teams are playing in front of empty seats because no-one is allowed in," said Ross Norman, metals analyst at TheBullionDesk.com.

Apart from gold jewellery, coins, gold mining shares or the odd unit trust linked to gold indices, the options are indeed limited.

Ordinary investors have also been more interested in rallying stock markets since the 1980s, turning their back on gold as a relic from an earlier time.

Global retail physical investment in gold remains tiny compared to stocks and bonds.

Albert Cheng, head of retail investment at the industry-backed World Gold Council, estimates that gold investment ranges between 275 and 310 tons of the metal each year, roughly worth an annual $3 billion but dwarfed by the daily trillion-dollar turnover in global stock and bond markets.

"The problem is availability.
The price of gold has been relatively disappointing in the last 10 to 15 years and that has deteriorated the distribution system," Cheng said, referring to a fall in the gold price from above $400 in the early 1990s to below $260 in early 2001.

"Banks in Germany have the product available but less people were asking for it. So now, the person in charge of selling might not know how to sell it... We need to re-educate banks and consumers and that is a very difficult job," Cheng said.

Demand for the metal has increased in Britain after a decision two years ago to remove value added tax (VAT) on sales and purchases of the metal and fanned by wilting stock markets since the burst of the technology bubble.

"There`s been quite an upsurge in buying gold. There`s been greater interest in private investors coming into gold especially as it is now free of VAT," a spokesman for bullion merchants Baird & Co said.

But after the September 11 attacks, many people who wanted to buy gold from their retail bank were turned away, analysts said.

"Selling gold through the banking system was not attractive for many years so banks did not pick it up. Only a few gold merchants and coin dealers were selling gold in London. But these businesses often are not structured to deal with the investment product and cannot offer a competitive price. Smaller dealers often have high charges and handling fees and it might not be as viable," said Cheng.

Small investors could also purchase gold on the Internet but cross-border taxes and transport costs made this a less attractive option, Cheng said, adding he had bought one ounce of gold for around $320 online and had had to pay $50 for delivery.

Although the purchase of gold is possible in principle in many countries, this does not mean that small investors can trade it on the market and cash in on changes in the gold price.

"The big bullion banks have shrunk their desks. They are not even serving small industrial clients any more, just central banks and hedge fund managers, the producer base and some whole-sellers," TheBullionDesk`s Norman said.

"It needs someone who can electronically organise all small deals and present them to the big trading houses. There needs to be a middle market which can cope with small trades and the credit issues involved," he said.

Most people buying bars and coins at his firm were interested in longer-term holdings and not in actively trading the metal, the spokesman for Baird & Co said.

"For trade on a day-to-day basis, we would not be the people to go to, unless people want to invest a substantial amount," he said.

But Cheng said the gold market had become more volatile and hence more conducive to active trading as well.

Some German banks were offering clients securitised gold products. Purchasers leave their actual gold at the bank, receive a certificate and can call their bank with buy or sell orders similar to calling a stockbroker. - Reuters

[peter.wedemeier1]

August Gold:
President Bush spoke again and the stock market tumbled again! If you are long gold you should encourage him to keep talking, as the yellow metal was up $4 to close at $319.9. As the metals were in session, the EC (Euro) reached parity with the DX (Dollar), and the Dow was off over 300 points. Gold had no choice but to rally, but gold bulls might find cause to be just a bit disappointed that the magnitude of the move in gold wasn`t greater. One might have reasonably expected gold to have rallied $10 today. It appears any political maneuvering intent on lifting stocks ahead of mid-term elections has so far been painfully ineffective.

Of course we all know that equities have been sinking since March of 2000, and what politicians say day-by-day is ultimately of little consequence to the market, it will seek out equilibrium regardless. We mentioned last week "for gold to continue with another substantial run soon, we`ll need to see more ground removed from under the dollar and equities." Wouldn`t you know it, both happened today. Recall what James Grant said in a recent Forbes article, it appears time is proving him correct. That the S&P is a lot cheaper than it used to be is small consolation. It used to be uniquely overvalued.

Richard Russell of the "Dow Theory Letters," also has similar thoughts to Mr. Grant and us. His newsletter has proven quite accurate over a lengthy period of time, and his expertise is much admired in our office. In a recent MarketWatch.com article by Peter Brimelow, Mr. Russell lays out compelling arguments against stocks, and some strong reasons for getting bullish gold. Here is quite a powerful excerpt from the article:

"In a geyser of commentary in the past few days, Russell argues we are entering the second phase of a bear market, which may not continue down as dramatically and may even begin with a rally, but which is usually longer than the first phase and results in total investor despair (cf. 1974). He muses about the "death of debt," the possibility that the U.S. economy may be entering into a period of outright deflation, and urges subscribers to get liquid. But he also urges them to hold gold ("the only money that is free of debt... in a debt meltdown, the price of gold could go to the moon") "

In other words, stocks will be in a bear market for several years to come, but don`t despair, as there are alternative opportunities. As we mentioned last week, equities are still bloated and they need their medicine, meaning they have further to drop before they are healed. (If you`d like a full copy of the article, email me at [e-mail]).

One must also consider the distinct possibility that we`ll attack Iraq. In fact, it`s certain we will, but "when" is the question. When it does happen, will gold bulls gain further momentum?

With gold up from $275 over the last several months, the yellow metal is regaining respect. Longs from $312 should protect profits and be out on a close below $317.2. I`d be targeting $325.3 as the next major resistance. With stocks and the dollar collapsing even further after the COMEX session was closed, one might expect gold to be strong overnight and on tomorrow`s open.

[peter.wedemeier1]

Tue, Jul 16 2002 1:50 PM AEST
Gold industry performing well

The gold sector continues to perform well, with a survey showing capital spending and employment up on predicted economic forecasts.

The Australian Gold Council`s survey shows the industry will spend more than $7.5 billion on capital works, production and exploration in 2002/2003.

This is a jump of almost $1 billion on the last financial year.

Most of the 23,000 people employed in the gold sector work in regional areas.

Gold council chief executive officer Tamara Stevens says this is good news for towns dependent on the gold sector.

"Certainly other industries associated with it, like the drilling industry, for example, which has had a terrible time in recent years on the back of an historic exploration low, so certainly a buoyant, optimistic gold industry means good things theoretically for towns like Kalgoorlie that have been built on the back of the gold industry," she said.

[peter.wedemeier1]

BARRON`S, July 15,02.
An Interview with Seth Glickenhaus.
By Sandra Ward.(Page 28.)
Sober words from a Wall Street lion.
STILL TRADING.
We`re in a consolidation period, say an88-years-old contrarian, and depression lies ahead.
Q.How low do we go?
A.The Dow could go down to 8000, possibly to 7000 or 6000, within a year or two. The multiples are too high.
Q. Are you concerned about the weakness in the dollar?
A. The dollar weakening against all other currencies has double effect. Foreigners will reduce their exposure or just sell their dollars investments outright and take back their money to invest locally. On the other hand, it will help our multinational companies. But, overall, it is more negative than positive.
Q. How does this compare with other bear markets?
A. It`s an entirely different market than any that existed since the `Thirties. The bear markets we`ve had for many years now have been very short in duration and often had a crisis involved. In the `Sixties, the Cuban crisis triggered it, then there was the oil embargo in the `Seventies. There were several wars.
But this is different. This is a full-fledged business-recession-inspired bear market.
This is going to be comparable to what happened in the `Thirties.
This is very bleak picture I`m giving, but unfortunately it is what I believe.

If you have an health insurance, should`nt you get a Wealth Insurance too? Reach for the Gold!

[peter.wedemeier1]

August Gold:
Greenspan had better luck at assuaging equities than Bush did, and as equities and the dollar paused from their recent descent, gold weakened by $2.4 to end at $317.5. The Dow was down about 400 points yesterday and gold bulls were cheering. But, a sharp late-session recovery ensued and released some wind from the gold bulls` sails.
We mentioned last week"for gold to continue with another substantial run soon, we`ll need to see more ground removed from under the dollar and equities." We`ve seen some backhoes at work, but more excavation is likely necessary before a lasting recovery can be made. Recall what James Grant said in a recent Forbes article, "That the S&P is a lot cheaper than it used to be is small consolation. It used to be uniquely overvalued."
Bulls should be out on a close below $317.2, and I`d be targeting $325.3 as the next major resistance.

[peter.wedemeier1]

* If the precious metals run is to continue it would appear that we are still in the infant stages of such an event.
* The buying in gold and silver stocks could well be the "smart money", judging by those involved in the accumulation process. Larger brokers and institutions are building positions in low-priced stocks.
* Mainstream investment in gold/silver is still negligible, although press attention is increasing steadily.
* Market participants are still hopeful of a Nasdaq recovery, whilst the jury is still out in terms of gold/silver.

The recent activity in gold/silver has increased the hopes of the precious metals bugs worldwide that the speculative juggernaut witnessed during the great Nasdaq boom will again re-emerge in their own backyard. Despite having share prices appreciate into the stratosphere many will inadvertently throw away their money management principles and may ultimately suffer both the psychological and financial consequences of their actions. Bull markets have the uncanny ability to create more bankrupts than they do millionaires.

[peter.wedemeier1]

AUGUST GOLD
317.50

The futures will need to close above a Fib-based resistance at 319.90, or trade more than two points above it intraday -- to be ready for a run at the June 24 high near 328.

[peter.wedemeier1]

James Turk

"Gold, it is a great money but a lousy currency."

"A lot of environmental factors now are the same as they were in 1971. Let`s assume there is going to be a 1:1 ratio (gold to the Dow) again in the future. The question I pose is, is it going to be $10,000 gold and a 10,000 Dow? Is that any more outrageous than the perspective from 1971? And is it going to be gold in a digital form, whether it be a securitized digital form, which seems likely, or in some kind of monetary form?"

[peter.wedemeier1]

http://http://www.mips1.net/mgdld.nsf/Current/85256BCD005228…

>Gold`s secular run in early stage - HSCB


By: Stewart Bailey

Posted: 2002/07/17 Wed 17:05 ZE2 | © Miningweb 1997-2002

[peter.wedemeier1]

>Gold`s upside potential $100 to $200/oz - HSBC


By: Stewart Bailey

Posted: 2002/07/17 Wed 19:28 ZE2 | © Miningweb 1997-2002
JOHANNESBURG – Global investment bank HSBC has published a report on the gold market in which commodities analyst Alan Williamson predicts the bullion price will peak at $350/oz in the final quarter of this year. The bank`s London-based commodity research team also says the gold could "potentially…be looking at the most bullish scenario in twenty years", with a potential upside of between $100/oz and $200/oz.

The bullish outlook will be published in HSBC`s Senior Gold Book which is to be released later this week and is based on the bank`s own currency, general equity and macroeconomic forecasts. It comes as the bank increased its average gold price projection for the year to $313/oz, up from its previous forecast of $305/oz. It expects gold to average $325/oz next year. Williamson says gold`s peak will coincide with a "final trough in global equity prices" at the end of the year.

"Into next year prices are likely to be volatile as the positive impact of a weakening dollar and ongoing improvements in supply and demand are at odds with the negative effects of a stock market recovery. Over the longer term, however, the risk to prices remains firmly on the upside," said Williamson.

Interestingly though, HSBC says this upside potential for bullion could be as much as $100/oz to $200/oz if gold benefits from the confluence of a bearish equity market, rising investment demand for bullion and an assertion of bullish supply-demand fundamentals.

"Potentially the gold market could be looking at the most bullish scenario in twenty years. If a more bearish macroeconomic scenario than HSBC expects does eventuate and new supplies deteriorate and investment demand continues to increase, there remains considerable upside to gold prices. With all these planets in alignment the pull on gold would be irresistible. Gold prices USD100-200/oz higher than currently could materialise," said HSBC.

Williamson says the drop in the dollar of 9.8 percent this year has triggered a spate of investor buying and has added an estimated $18/oz to the gold price. He says rising bond yields have added another $11/oz to the price, while weak equity markets – the S&P 500 is down 37 percent since the technology boom in 2000 and the Nadaq is down 72 percent over the same period – have given gold a $25/oz boost.

The fall in equities may have been the biggest single contributor to gold`s improved fortunes over the past year, but HSBC says a recovery in general equity markets starting next year, is likely to put downward pressure on the gold price.

But Williamson concedes that the view is premised on the fact that investors will play by the same rules which have governed the gold market in the past, with their behaviour reinforcing the negative correlation between general equity performance and the gold price. In this respect, the net long position held by funds and speculators on the Comex presents a threat as some bears believe a sell-off of the net large non-commerical positions could force gold lower. Williamson says the longs are at around four million ounces, up from a net short position of six million ounces last April. "This 10 million ounce-plus buying interest has had a significant impact on bullion prices," he says.

That may be so, but risks here are glaringly obvious. The higher dollar gold price will no doubt depress elastic consumer demand for the metal, limiting the attraction to new buyers. Similarly, the longs could easily become disillusioned with a stagnant investment threatened by a large overhang and begin a shake-out which could also drive the gold price mercilessly lower.

"However, this presupposes that the existing `rules` under which the gold market has operated remain in force. The bulls would argue that this is no longer the case and that the changes in mine output and producer hedging plans, in turn a direct response to the recent period of low prices, will see the gold market enjoy a sustained change in investor attitudes in the metal," said Williamson.

Another bull convert

Another recent convert to the bulls` ranks is Martin Jankelowitz, head of market and economic research at South African-based fund manager Investment Solutions. Jankelowitz is less sanguine about the prospects for equity markets going into next year.

"I think the risk (for global equities) continues to be very much on the downside," said Jankelowitz. His view is based on the overdone performance of stocks over the past 18 years, during which time he said US equities consistently delivered annual returns in excess of 15 percent.

"Its going to take a long time to work those excesses out of the system," he said. In this context and against a bearish backdrop for global currencies as central banks pump liquidity into the system to maintain competitive levels against a weakening dollar, Jankelowitz says gold and commodities are the investment class of choice.

"I think gold is a very good safe haven investment to have in this environment," he said.

[peter.wedemeier1]

AUGUST GOLD
317.70

A retracement down to the 0.618 Fibonacci line would imply a short-term cycle low near 313.20, a decline that should be considered likely if non-bullion shares remain buoyant over the next 2-3 days.

Otherwise the futures will need to close above a Fib-based resistance at 319.90, or trade more than two points above it intraday, to be ready for a run at the June 24 high near 328.

[peter.wedemeier1]

August Gold:
In spite of volatility in equities, currencies, financials and fresh economic data, gold was asleep, ending at $317.7, up 20-cents. Intel laid off 4,000, new home construction dipped in June, Apple shares sank on poor revenues, Motorola posted the largest quarterly loss in history and continues to let workers go, the Dow was down as much as 250 points, Treasury`s were higher... Yet gold was catatonic.

By the way, if you`re wondering why we reference equities, the economy and the dollar so often, it`s simply because gold is reacting inversely to their status, so if you can determine where stocks are headed, you can likely determine where gold is headed.

We had referenced the other day that stocks and the dollar might be oversold and to be aware that politicians will be attempting to talk the markets back up. Well, Bush tried and didn`t gain much ground, and in Greenspan`s semi-annual address to the Senate Banking committee, he had some terrifically vague insights, as usual. He also gave no indication of raising rates, so the dollar could continue to suffer, which could be beneficial to gold bulls. However, an article by Chris Plummer of MarketWatch.com, is noteworthy as it references the Fed`s Stock Valuation model, and according to Plummer:

"There are caveats to that calculation, but the "Fed stock valuation model" is the same formula that determined stocks were 50 percent overvalued when the bubble burst in 2000 -- and 34 percent overvalued before the crash of 1987."

Alas, there is more optimism from former Reagan economic adviser Arthur Laffer of the "Laffer Curve" fame, we all recall graphing those in economics class, right? Estimated stocks, by his measure, are 48 percent undervalued. Laffer ended his piece by saying, "From where I`m standing, it looks as those we`re in a very nice market, indeed."

Now, to throw a wrench into these prognostications, recall what James Grant said in a recent Forbes article, "That the S&P is a lot cheaper than it used to be is small consolation. It used to be uniquely overvalued." Robert Prechter of Elliott Wave fame, in his new book "Conquer the Crash" also makes the argument that we are in the midst of a larger bear market. Other fine minds make similar prognostications, such as Richard Russell of the "Dow Theory Letters."

An old market axiom "a difference of opinion is what makes the markets" is obviously evidenced by the few references we`ve mentioned. Optimists will jump to embrace the Fed`s valuation model and thoughts such as Laffer`s. Pessimists will likely remain steadfast bearish on the economy and stocks, and therefore remain bullish on gold.

Gold is range bound, and even though it might drift lower, I still see much more opportunity on the long side rather than the short side. One does however have to wonder what it will take to kick it in the pants again. An attack on Iraq perhaps? Bulls should be out on a close below $317.2, and I`d be targeting $325.3 as the next major resistance.

[peter.wedemeier1]

August Gold:
What can one say about a session with $1.4 range? Seemingly on Valium, gold languished and settled at $317.1, down a meager 60-cents. There was a sharper than expected drop in jobless claims, the dollar was generally flat, notes were marginally stronger, and stocks were fiddling around on both sides of even. Basically, there were many mixed extraneous signals, so it seems gold traders decided to do nothing.
Greenspan, in his semiannual address to the Senate Banking committee, was terrifically vague as usual, but equities weren`t as volatile when he spoke. He also gave no indication of raising rates, so the dollar could continue to suffer, which could be beneficial to gold bulls.
Gold is range bound, and even though it might drift lower, I still see much more opportunity on the long side rather than the short side. One does however have to wonder what it will take to kick it in the pants again, an attack on Iraq perhaps? The quiet close below $317.2 likely gave some bulls cause for exit, which is fine. If it dips again be ready to buy, and if it rallies, one can always buy on strength. The $325 area is the next major resistance zone, with recent lows near $310 as nearby support.

[peter.wedemeier1]

AUGUST GOLD (317.40): No change. A retracement down to the 0.618 Fibonacci line would imply a short-term cycle low near 313.20, a decline that should be considered likely if non-bullion shares turn buoyant again. Otherwise the futures will need to close above a Fib-based resistance at 319.90, or trade more than two points above it intraday, to be ready for a run at the June 24 high near 328.

[peter.wedemeier1]

>Morgan Stanley "name" backs gold


By: Tim Wood

Posted: 2002/07/18 Thu 17:40 | © Miningweb 1997-2002
NEW YORK -- More famous for punting Japan and other exotics, Morgan Stanley global strategist Barton Biggs is lately a gold bull, and a convincting one.

In a report circulated on Wednesday, Biggs wrote: "…I have never believed in gold, for all the conventional reasons, but now I am changing what`s left of my mind. I think there is a plausible case that a professionally managed portfolio consisting of the metal itself and gold shares could realize returns of 15% real per annum in the difficult environment ahead."

Biggs is a bare-minimum bull on bonds and equities, and thinks mid-single digit returns are going to be the norm going forward. "Large portfolios are going to have to be imaginative and unorthodox to beat 6% nominal in my opinion."

The Biggs turnaround is thanks to Peter Palmedo, boss of low profile research and money management outfit Sun Valley Gold, one of the most powerful "lurkers" on the gold investment circuit.

Describing Palmedo as a true believer, Biggs says: "Peter`s style has always been to focus intensely on one thing, study it, build models on it, and develop an analytical edge. He came up with gold because it was complex, misunderstood, under-researched, and susceptible to his option-pricing theories."

Unwittingly, Biggs stumbles into the gold conspiracy mother lode – ex Treasury boss Lawrence Summers seminal study Gibson`s Paradox and the Gold Standard. "The conventional wisdom is that gold is a barbaric metal, it has a negative yield, and its only role is as a hedge against inflation and the apocalypse. By contrast, Summers and [co-author Robert] Barsky argued that the relative price of gold is driven by (and is the reciprocal of) the real rate of return from capital markets and that this relationship has strengthened since the price of gold was floated."

A Sun Valley research report written by Palmedo concludes that it is not the dollar that predicts the gold price, but the stock market. "Since 1988 the price of gold has had a negative 0.85 coefficient of correlation with the S&P 500 and an R squared of 72%. As things got crazier since 1994, the negative correlation rose to 0.94, with an R squared of 88%."

Gold`s advantage in the current circumstances is that such a tiny proportion of metal is available to the investment market. "Only 18% of the gold mined throughout history is held in investment form, or slightly more than $200 billion. The investable capital markets of the world are estimated to be about $60 trillion. In a low-return cycle for stocks and bonds, monetary and investment demand for gold turns positive, and there is a dramatic shortage of available metal," Biggs writes.

"This large differential can only be solved by much higher prices. The point is that it is not inflation or deflation that is the principal driver of gold, but the return from other long-term financial assets, particularly equities."

Sun Valley`s modelling suggests that when capital markets offer a 10% return, gold will slump by 8%, but when capital markets are at par, gold should return 17%. The firm believes the "long-term equilibrium or inflation-adjusted price of gold in today`s dollars is about $500/oz, as compared to the current price in the low $300s."

The much maligned Summers and Barsky report also gets rehabilitated. Far from being a blueprint for manipulating the gold price, it points to a "secular trend toward a higher real and nominal [gold] price."

"Population and income growth exceed the constrained growth of the physical stock of metal, which has been a mere 1.75% over the centuries. In addition, in the modern world, monetary growth far exceeds economic growth, " Biggs summarises.

Biggs recommends large funds should have 5% invested in "professionally managed gold", but even modest gold bugs will say he`s being way too conservative.

Welcome to the nuthouse, Mr Biggs.

[peter.wedemeier1]

Learning From History
The Speculative Investor

Steve Saville
posted 19 July, 2002

Here is an extract from commentary that was posted at www.speculative-investor.com on 11th July 2002.

Markets are complex. Over the short-term they often do the exact opposite of what they `should` be doing based on conventional wisdom. This is partly because the financial markets are always trying to anticipate tomorrow`s news rather than react to today`s news, but it is also the nature of markets to keep the majority of participants off balance most of the time.

We`ve been using the gold stock rally of the early-1970s as a rough guide as to what could reasonably be expected from the current bull market (the one that began in November of 2000). As we`ve shown in the past, the path that has been followed by gold stocks since November of 2000 is remarkably similar to the path that was followed by gold stocks during the rally that commenced in January of 1972. Furthermore, the correction in the gold market that began in late-May of this year lines up quite closely with the 3-month correction that began at the beginning of May in 1973. Via the following chart, let`s now take a look at how the gold price, the Dow Industrials Index and the US$ moved in relation to each other during 1972-1974, paying particular attention to what happened between May and November of 1973.

The above chart shows that the gold price trended higher throughout 1972-1974 as the Dow and the Dollar trended lower (we`ve used the Swiss Franc-US$ exchange rate to represent the performance of the Dollar). This is, of course, what we would expect to see and also matches what has happened over the past 18 months (most people mistakenly think that Dollar weakness is something that has just happened over the past few months, but the Swiss Franc actually began trending higher against the US$ in October of 2000). Now, zooming in on the period beginning in May of 1973, what we see is:

1) The gold price peaked at the start of May, 1973. The gold price then spent the next 2 months drifting lower (period `A` on the chart) even as the Dow continued to fall and the US$ plunged.

2) Between July and November of 1973 (period `B` on the chart) the Dow and the $ experienced counter-trend rallies while the gold price continued to consolidate.

3) Between November of 1973 and January of 1974 (period `C` on the chart) the gold price began the next upward leg in its bull market even as the $ continued to move higher.

There are obvious similarities between the first stage of the 1973 gold market correction and what has happened to date during the correction that began in late-May of this year. As far as we know there was no cartel of bullion banks to blame for the apparently anomalous behaviour of the gold price during May and June of 1973. Furthermore, the US and the IMF didn`t begin their gold sales until 1975 and the swapping/lending of gold was not popular at that time. So, why did gold and gold stocks fall during May-June 1973 even though the stock market and the US$ continued to weaken? How about the simple fact that markets don`t go up in a straight line. Even the most powerful of bull markets experience substantial corrections from time to time and these corrections often happen when the fundamentals appear to be more bullish than ever.

Studying what has happened in the past doesn`t tell us what will happen in the future, but it does help us set our expectations as to what is both possible and reasonable. It should also prevent us from being surprised when markets don`t do the obvious.

Steve Saville
Hong Kong
19, July 2002

[peter.wedemeier1]

Gold closed strong

August Gold:
Asian stock markets, the dollar and US equities slumped overnight, and when COMEX gold opened it was higher and promptly rallied, ending the session victoriously for the bulls at $323.9, up $6.8, and on the week, gold settled $4 higher. Today, the US trade deficit was reported as the largest in history, the Dow slipped below 8,000 and gold was markedly stronger.

Mark Hulbert, of the Hulbert Financial Digest, gives gold bulls additional fuel, he says in a recent MarketWatch article:

"As of the close on Thursday, the index (HFD) stood at 23.1 percent. That means that the average timer is allocating 76.9 percent of his gold portfolio to cash. This is bullish because it means that most timers remain skeptical that gold is in a bull market. On all other occasions in recent years when gold approached or exceeded $300 per ounce, gold timers fell over themselves jumping on the bullish bandwagon -- with the Hulbert Financial Digest`s gold sentiment index sometimes getting to as high as 90 percent.

This spring and summer, in contrast, the average gold timer has refused to turn bullish, even though gold has risen further than it has on any prior occasion of the last five years. During the current gold market, the highest level to which the HFD`s sentiment index rose was 45.8 percent -- or just half of its peak levels during previous gold rallies."

Yes, picking the tops and bottoms day by day is difficult, but, as we`ve stated, we still see much more opportunity on the long side rather than the short side. And, as they say, gold continues to climb a wall of worry, although it`s doing so at a very choppy and deliberate pace. If it dips again be ready to buy, and if it rallies, one can always buy on strength. Gold closed strong and equities sank, so we are likely to see a stronger opening in the yellow metal on Monday. A close over $325 would likely push us through stops above $327.6 and onto challenge highs at $330.7. The $315.3 area is nearby moving average support.

[peter.wedemeier1]

Ricchio Report
Jake Nelson
posted July 19, 2002

Will the New Bull Market Be in GOLD?

Keeping with my current fascination with the heavy metal I decided to do an analysis of gold 90 days forward.

Calculation of the Forward Rate for Gold

Spot Price $318.00

Lease Rate (1 yr) 0.63%

Eurodollar Rate (1 yr)2.72%

Forward Price (90d)$319.66

As you can see by the table above, I arrived at a 90 day forward price of $319.66 given we borrow funds at the year forward eurodollar rate and invest those funds in gold at the spot price of $318.00.

This suggests that going forward 90 days gold should appreciate. Keep in mind that I`ve ignored the bid ask spread. Including the bid ask spread will give us a slightly lower return on our investment but for simplicity I decided to exclude it.

This calculation coincides with what we at the Ricchio Report have stated all along. As people search for good investments in a market staged for a big sell off their best options are going to be in precious metals and cash. I have to admit in this case I am biased toward the yellow metal over greenbacks. Of course in the current situation Euros appear to be the currency of choice. (EUR/USD = 1.0115).

An interesting trend is developing in the market today

While the market continues its long ride to the bottom, treasury bonds are tanking as well. I was sure bond rates would continue to fall in the near term but with bullish fools playing footsy with the Nasdaq it`s hard to maintain value in the bonds.

Tuesday we witnessed the worst scene in the market for a long time. Some big players tried pumping up the Nasdaq at the expense of Treasury bonds and couldn`t close the index higher for the day. How pitiful have the bulls become to stoop to such "rabbit-out-of-the-hat" tricks? Their idea is that if they can put a rally on top of such bullish news as the President`s speech and Greenspan`s testimony others will follow, but the hard fact is that the individual has lost faith in the market. Sure they believe that the market will turn around but they`re leveraging up so much to boost consumer-spending numbers that they have no power or will to risk PRECIOUS capital by investing in equities.

The bears win!

The bulls are fighting a losing battle and by doing so they keep stretching the market bottom lower and lower. (If I hear anything else about capitulation I`ll go nuts!) The PAPA bears will continue to cover on low volume short selling whenever bullish news comes out to warrant such a move. (The strong squeeze the weak.) We saw this Monday, as if it was straight out of the textbook. You`ve got to love it!

A Contradiction of Sorts

I`ve got something to say about this talk of capitulation. Please excuse me for not letting it go.
A lot of value has been taken out of the market and this is good but for people to throw capitulation out there is insane. If anything we are seeing what I call a "reverse capitulation." A majority of the downside to date for the year has been on low volume selling. All of the big volume trades come in for the upside. This is the biggest reason the bulls are sweating. The market is whittling down and only a TRUE bottom can put an end to this.

GOLD! GOLD! GOLD!

So where do we go to preserve capital while waiting for value to return in equities? Gold of course! This market is set to stall for the near term while a bullish trend is gaining popularity for the long-term scene.

I`ll become bullish on stocks again once individual investors let go of their holdings. As we all know, the individual gets in the market at the top and gets out at the bottom. A harsh reality, but then again in the land of capitalism not everyone is a winner.

Jake Nelson

RicchioReport

[peter.wedemeier1]

Gold price rises above forecastsBy Adrienne RobertsPublished: July 19 2002 20:18 | Last Updated: July 19 2002 20:18
h_i2.gif

In March, metal analysts` average gold price forecast for 2002 was $290.70 an ounce, according to an FT poll. Mitsui`s Andy Smith made the most daring forecast, of $315 an ounce.

Little over three months later, Mr Smith`s view is practically the consensus. In a Reuters poll released yesterday, analysts expected gold to average $313.27.

Spot gold was $322.90 a troy ounce at the London afternoon fixing compared with $316.70 last week.

Comex August gold futures settled $6.80 higher in New York at $323.90 with $316.70 last week.

The metal put in a steady but unexciting performance during the week, until a sudden $5 an ounce spike on Friday, shortly before the New York open.

Some analysts linked the move to news of a record US trade deficit in May, while others pointed out few traders were active in the market.

Mitsui`s Mr Smith thought the spike was probably technical. "I think it would be too fanciful to link it to any specific news.

A market like gold moves that fast when there`s nobody there and when there are options. And there are options towards $330, so that creates a bit of upward pressure."

[peter.wedemeier1]

During the relevant week, gold was higher by a scant $1.60 and open interest declined by about 9,500 contracts. Trading volumes were light and, by all accounts, not much was happening. Short commercials continued to be buyers, thereby validating our precepts that it almost always pays to follow their lead, as gold prices rocketed on Friday. Large Long speculators continue to be steadfast and resolute in their positions, staying with their positions even as we had been in a consolidatory phase in the markets. I see this as most constructive.

I remain friendly to this market, but all will depend upon the actions of the USD and the equities markets. There is heavy resistance overhead and I cannot foresee getting through the $330 price level easily. To this end, discretionary accounts of the firm, and many clients, have judiciously sold calls at both the $320 and the $325 level, pocketing huge premiums available and moderating our formerly huge long gold position. These options expire in just a matter of weeks. I would now be looking to add selling some put options, if and when, we see just a bit of a retracement.

[peter.wedemeier1]

August Gold:
Just when we thought gold was anxious to continue higher on the back of plummeting stocks and a falling dollar, it stalled, closing today at $323.5, down 40-cents in relatively lethargic action.
Yes, picking the tops and bottoms day by day is difficult, but, as we`ve stated, we still see much more opportunity on the long side rather than the short side. And, as they say, gold continues to climb a wall of worryalthough it`s doing so at a very choppy and deliberate pace. If it dips again be ready to buy, and if it rallies, one can always buy on strength. A close over $325 would likely push us through stops above $327.6 and onto challenge highs at $330.7. The $316.4 area is nearby moving average support.

[peter.wedemeier1]

>Gold excluded from Worldcom party


By: Stewart Bailey

Posted: 2002/07/22 Mon 19:32 ZE2 | © Miningweb 1997-2002
JOHANNESBURG – Cracks began to appear in the bullish façade which has characterised the gold equities market for more than a year, as South African traders and analysts grasped for ideas to explain a retreating gold index. The JSE`s gold board took a 6.1 percent haircut during the day, despite a gold price which held up above the $323/oz level it reached in New York on Friday.

One senior analyst said gold investors had taken their cue today from a muted gold price which had not taken full advantage of the bedlam on global markets, which had floundered today in the wake of the weekend`s Worldcom bankruptcy filing. Although gold`s safe haven qualities have shown some resurgence, some punters are beginning to ask why the price has not reacted more strongly in the face of one of largest global equity collapses in recent history.

According to Bloomberg, last year 255 publicly traded companies put $260 billion under bankruptcy protection. The news wire said this was triple the previous record that had stood for more than a decade. So far this year, 131 companies (that`s before the Worldcom disaster) filed for bankruptcy, placing $150 billion in the red.

An interesting addendum to this tail of stock market woe is contained in the humorous e-mail sent to Miningweb`s office from a city gold analyst this morning. "If you had bought US$1 000 worth of Nortel stock one year ago, it would now be worth US$49. With Enron, you would have US$16.50 of the original US$1 000. With Worldcom, you would have less than US$5 left. If you had bought $1 000 worth of Budweiser (the beer, not the stock) one year ago, drank all the beer, then turned in the cans for the 10 cent deposit, you would have $214. Based on the above, my current investment advice is to drink heavily and recycle," said the e-mail. It may not be scrupulously correct, but it does make a good point.

With this in mind, some analysts believe generalist investors should be flocking to the bullion market, propelling the gold price to dizzy heights. "There is no doubt that there is some concern that if dollar gold did not break through the $330/oz level in this market, it`s going to try on the downside sooner or later," said the analyst. He said the pasting given to global equity markets this year had also provided bargain hunters with a wealth of opportunities in general stocks, which were diverting attention away from gold counters.

No follow through

Last week`s spike in bullion occurred in early US trade on Friday and sent the metal to an intraday high of $325.50/oz, bringing its gain for last week to $7.85, with around $6.50 of the rise coming from Friday`s price action. The run came against the backdrop of a slew of bearish trading outlooks given by blue-chip US information technology and telecommunications firms, but bullion traders in Johannesburg said the price action was largely due to short covering as a rise in the price to above $320 triggered a series of buy orders.

"The funds set their levels to buy back shorts and there are those in the market that effectively go searching for those levels. This rise was on stop loss buying rather than fundamentals," said the trader. He pegged resistance at $328/oz and support first at $315/oz and then at $308/oz.

Regardless of the reason for Friday`s rally, gold shares reacted well in South Africa where the index rallied 5 percent on Friday. Problem is, however, that the ever-present follow-through from US funds failed to materialise. Greg Potter, senior equity trader at BoE in Johannesburg, said: "There was no follow through from the US and now there could also be some overhang from the professional traders in the US."

Bulls still about

But a report issued this morning by Standard Bank should give bulls some hope.

"Technically gold`s short-term momentum is positive with the 9 day moving average at $318.50 well above the 18 day MA at $316.00. Good support is provided by the 40 day MA at $319.50, while there is a band of resistance between $325 and $330, which may prove difficult to penetrate unless there are further shocks from Corporate America or increased political tensions in the Middle East and/or the Indian sub-Continent," said the Standard Bank report.

Justin Pearson Taylor, commodties analyst at Standard Bank Equities, said the house view was still of an upward trend over the next year and a half, with an average of $311/oz this year. He said bullion was expected to average $328/oz next year and $336/oz in 2004.

Deutsche Bank`s commodities research team said in a report issued this morning that the net long 23,900 contracts on Comex was still well below the recent high of 46,900 contracts, "suggesting speculators have significant scope to add fuel to any rally". The view is an interesting corollary on the bearish stance on the long end of the market, which views the holders of bullion as a potential overhang and threat to the price. In this market, however, it would be a brave man who would sell his gold and face full exposure to this turbulent equity market.

JSE share price action

In Johannesburg, Gold Fields dropped 7.5 percent to close on R118.40 a share, while AngloGold lost 4.4 percent end the day on R525 a share.

Harmony Gold shed 3.5 percent to R149.31 and Durban Roodepoort Deep lost only 0.8 percent to R42.61. ARMGold, meanwhile, remained fairly stagnant, losing only 0.2 percent to R53.70 and Afrikander Lease dropped 2 percent to R5.00 a share.

Western Areas, the 50 percent owner of the South Deep gold mine, lost 5 percent to R36 a share.

[peter.wedemeier1]

Gold could double, says top US trader
Vernon Wessels
July 23 2002 at 06:35AM

Johannesburg - The price of gold could double from its current level of about $320, depending on how the political crisis in the Middle East develops and the role the US plays in diffusing the tension, according to Joe DiNapoli, a well-known US trader and author.

The threat of another terrorist attack against the US and the long-raging battle between Israel and Palestine was keeping investors out of US equities more than the nation`s economic troubles or corporate accounting scandals.

"A lot of the trouble in US equities is being caused by terrorism. People want to blame corporate accounting issues,
which are serious, but we know how to fix that. We can put a few people in jail and change accounting rules.

"But the US is not fixing the political situation, in fact everything we`re doing is exasperating it and a lot of people know that," said DiNapoli, who is in South Africa this week to host a series of lectures on his traders` manual: Trading with DiNapoli Levels.

He said the Dow Jones industrial average would find support between the 7 000 and 7 500 level while the tech-laden Nasdaq could expect to find support at 908.

And when the markets test those support levels, DiNapoli "will be looking for a place to go long, seriously, and wait for a nice move up.

"I buy dips in an uptrend, precalculate my profit objectives and sell rallies in a down trend on precalculated profit objectives. The leading indicators do not tell you the trend, but they do tell you where to get in," he explained.

"The beauty of what I do is that you know ahead of time where you want to get in and where you want to get out.

"The disadvantage of the technique is that you may want to buy at a certain level and it may come down very close but then run away. Some people cannot deal with that E I have no problem with it," DiNapoli said.

[peter.wedemeier1]

THE SPECULATOR

Prepared by Berkeley Futures Ltd.


How To Invest In Gold

(July 8, 2002) People have always been fascinated by gold. It is thought that the first example of the metal being used as coinage was around 630 BC. It was certainly minted by Darius, King of the Persians in 500 BC. Gold`s inert properties not only make it an ideal store of value, but its malleability and glittering color also make it an attractive metal to use for jewelry. The relatively high value of one ounce means that it can be used to transport wealth around in times of trouble and, for this reason, it is sometimes known as the currency without borders. Gold is also regarded as a safe hedge against inflation, which tends to devalue the worth of paper assets. In view of all these qualities it not surprising that, over the years, so much effort has been put into trying to find the elusive "philosopher`s stone"--a secret formula that would turn ordinary metals into gold.

Keeping gold under your bed does not, however, earn any interest. For this reason in the latter half of the 1990`s it came to be seen as rather a crude investment "safe haven." It was not just investors that tended towards Lord Keynes`s view that the metal was a "barbarous relic"--some central banks starting offloading significant quantities of their gold reserves onto the open market. By August 1999 the price had slumped to a 20-year low of $251 and 15 European central banks had to agree to limit their sales for five years. This announcement triggered a sharp jump in the price, but it was not long before the positive effects wore off and the price began to slide once again.

Early last year there were signs that the downtrend was beginning to bottom out as a result of the tightening market conditions. According to Rhona O`Connell, an analyst with the World Gold Council, around 70 percent of the annual demand goes into jewelry, 8 percent into the electronics industry and the remaining 22 percent is divided between production of bars and coins for investment purposes and medical use. As a result of the slump in the price, production levels have been cut back and for the last four years demand has been outstripping supply. The imbalance between the supply and demand equation was not in itself sufficient to drive prices higher. But the market was squeezed further when South African producers, who had sold their output forward on the futures market, began to unwind their hedges, starting a gentle uptrend. The move was given a sharp boost by the events of September 11th. It picked up more momentum later in the year when the Japanese, nervous about what would happen to their bank deposit accounts once the government`s unlimited guarantee ran out in March of this year, went on a massive gold shopping spree. Since then the unrest in the Middle East, tensions between India and Pakistan, and the general climate of economic uncertainty have all helped push the price back up to $325--its highest level for five years.

Gold has also benefited from the fall in the dollar. The $400 billion U.S. current account deficit means that capital inflows into the U.S. have to be sustained at a very high level in order for the exchange rate to hold steady. Any let up in the rate of inward investment into the U.S. and the currency comes under pressure--which is what we are currently seeing. Should investors not only stop putting new funds into the U.S., but also begin to sell their existing U.S. assets, what has started as a gradual decline could turn into a rout. This would imply a major change of trend for the dollar and, if that were to occur, we could be seeing the beginning of a more sustained uptrend in gold because there is a negative correlation between the dollar and gold. As the graph shows, dollar peaks in 1984/85 and 1989 coincided with a periods of weakness in the gold market and more recently the dollar`s strength in the late 1990`s saw the gold price come under steady downward pressure.

Gold Spot Price

Thomson Financial Datastream


With the price of gold having risen so sharply, it is probably not advisable to try and start buying now in the hope of catching the coat-tails of the rally. But for those with no gold assets it is worth considering whether or not you should look at building up some exposure to this asset. The objective would be to achieve greater diversification rather than short-term gain since gold often moves in the opposite direction to not just the dollar but most other asset classes. For example, during the U.S. depression of 1929-1939, when the Standard and Poor`s index fell by 63 percent, the price of gold rose by almost 70 percent. The past 12 months has also seen the two markets move in opposite directions to each other.

Gold should, however, represent only a very small proportion of your overall portfolio. The usual advice is that it should be kept to a maximum limit of five percent. Buying when the price has just risen so sharply carries obvious risks, but any pullback would provide a good opportunity to start a policy of gradual accumulation.

The means of establishing an exposure to gold range from the simple to the highly esoteric.

The cautious long-term investor can simply buy the physical metal. A bar or coin has a guaranteed minimum purity. Retail bars in the UK tend to be 99.5% pure an are available from most high street jewelers, banks or specialist dealers. You can also buy gold coins from specialist coin retailers such as ATS Bullion. The Maple Leaf (Canadian) and the Nugget (Australian) are 99.9% pure while the U.S. Eagle and the Krugerrand are 22 carat or 91.6% purity. Coins are also available in fine gold content of one ounce, 1/2, 1/4, and a one-tenth of an ounce. The coins will cost more than the value of their gold content with the fabrication premium ranging from 3% for a one-ounce coin to 10% for a one-tenth ounce coin. Bars and coins can either be stored at home (where they need to be insured) or they can be stored at an approved vault (which will usually arrange the insurance), but this facility involves a charge of around 1.0% plus VAT. The cost of carry charges--as well as the opportunity cost of having your funds invested in an asset which does not yield any interest--need to be taken into account when considering buying the physical metal. Since January 2000, purchases of gold that are technically designated as investment do not attract VAT.

Most other methods of investment or speculation require the investor to hold an account with a broker to effect the transaction.

Mining shares are another obvious route to acquiring an exposure to gold. Mark Twain`s observation during the 1849 gold rush that "a mine is a hole in the ground with a liar standing next to it" would be rather a harsh assessment in today`s regulated environment. But it does highlight the risks involved in buying into any one particular company. Mines are usually located in far flung, inaccessible parts of the world, making it difficult for analysts to check out the veracity of claims. Remember Bre-X, the Canadian company whose share price rocketed up to C$28.65 in 1997 on the news that it had found one of the world`s largest deposits of gold in a remote part of Indonesia, only for it to crash equally as rapidly when it transpired that the deposits were insignificant? A company`s management skills, cost of production, life of the mine, rate of return, yield and currency risk all need to be assessed.

The proportion of a company`s output that is sold forward will also affect the extent to which it can benefit from a rise in the spot price.

Mining is not, however, all share ramping and frauds. Over the past year while the price of gold has risen by 17 percent, the FTSE Gold Mines index has risen by 50 percent. Investing in a unit trust or fund that specialises in gold stocks helps spread the corporate risk.

Futures and options offer a more direct exposure to the price of gold than mining shares but, because of their gearing, they carry a much higher risk.

All futures markets trade on a margin. Usually it is around 10 percent of the value of the underlying contract, although some brokers require a higher initial margin. The margin system enhances returns; for example, a 10 percent move in the underlying gold price in your favour will, on a 10 percent margin, bring a 100 percent return on capital. However, should the market go against your position, the proportional losses accrue in the same way. Investors running futures positions which are showing losses at the end of the day will be "called for margin," i.e., they will be required to top up the margin held by the broker by the equivalent amount to the loss on the contract. It is therefore possible to lose more than your original margin payment.

Buying options involves a more quantifiable risk. The premium paid for buying an option takes into account its potential volatility and the consequent potential for profit. This is a function of both how long the option has to run, the volatility of the gold price and the price at which the option can be exercised. As the volatility has increase in recent months, so option premiums have risen.

Given the very short-term nature of futures and options contracts, they are not really suitable vehicles for achieving portfolio diversification. Futures trading and buying options are more appropriate for trying to capture precise shorter-term movements whereas writing options is a tool for enhancing yield during a period of relative price stability. Including gold in your portfolio is aimed at hedging risk over the long term and it is important to match a particular instrument with your investment time horizon.

During the raging bull market in equities in the 1990`s, investors have did have to think about asset allocation but, in the current uncertain environment, the emphasis has switched to capital preservation and in this context it is sensible to spread risks a little more.
July 8, 2002
Berkeley Futures, Ltd.
38 Dover Street, London, UK, W1X 3RB
0171-629-1133
www.bfl.co.uk

[peter.wedemeier1]

>Gold falling, but don`t panic...yet


By: Stewart Bailey

Posted: 2002/07/23 Tue 19:37 ZE2 | © Miningweb 1997-2002
JOHANNESBURG – South African gold analysts believe the retreat from gold equities by investors seeking bargains among the debris of general equities is premature. JP Morgan`s South African-based gold analyst James Wellsted, says the sell-off in local gold shares, which saw the JSE`s gold index shed 7 percent today, presents a buying opportunity in what was widely regarded as a radically overvalued sector only a month ago.

Joachim Berlenbach, senior gold analyst ay Citibank in Johannesburg, was similarly optimistic about the prospects for the South African gold index. "I think they (gold stocks) will come back. I really think sentiment is going to come back into this sector," said Berlenbach.

Despite a narrow trading range for bullion over the past month, the gold index has retraced much of its gains made earlier this year. The index ended the day on 2690 points, almost 25 percent below its year-high of 3741 and although the bull run of the first quarter has slowed to a trot, gold is still the year`s star-performer.

The gold index gained 2.8 percent for the June quarter, against a 3.2 percent drop in the All Share Index, while the metals and mining sector lost 10 percent and the mining finance board dropped 8 percent. Financials may have outpaced the gold counters in the three month period with a 6 percent climb, but the gloss comes off this achievement considering banks conceded 8 percent in the first quarter.

"It`s just way too early to panic; the fundamentals for gold are still good," said Wellsted. He said the fall in gold stocks this week – the index lost 6 percent yesterday – was based on the notion that global equity markets had bottomed out. "When we see real signs of a recovery and not a lot of guessing then maybe there could be a case for getting out of gold, but right now all the factors that pushed the price up are still very much in place," he said.

Of course he is right. Contangos are still lean, interest rates are as low as they were at the beginning of the year and although hedge buybacks may have slowed somewhat from the feeding frenzy earlier this year, producers remain unlikely to take out add to supply by taking out new positions. Wellsted also points out that the gold market`s demand-supply fundamentals are still encouraging and that the towering US trade deficit is still exerting as much downward pressure as ever on the dollar. Add to this the swirl of corporate uncertainty on equity markets and crackling tension in the Middle-East and Asia and question marks continue to hang over the wisdom of the apparent retreat from gold stocks.

"In terms of the political tension and the problems on the equity markets and it is clear that not much has changed. It just looks like people are getting used to it and that is just crazy," said Wellsted.

[peter.wedemeier1]

The move from bear to bull in gold is now gathering pace though it is strange that many of the leading investment banks did not pick up the vibes from the performance of the major gold producers over the past year. HSBC, for instance, has just published a report in its Senior Gold Book by analyst Alan Williamson in which he predicts that the gold price could peak at US$350/oz in the last quarter of the year. He goes on to say that the scenario is the most bullish in the past twenty years and the price could rise by between US$100 and US$200 /ounce to the US$500/oz region.. In other words he finds it very hard to let go of the side of the swimming pool as HSBC has only increased its average gold price projection to U$313/oz this year and US$325/oz next, but it is never wise to stick one’s neck out too far in these big banking houses.

[peter.wedemeier1]

ODJ CIBC Forecasts Gold Rally Off Of Weak Equity/Currency Markets

-- CIBC Says 2002 Gold Prices To Peak Between US$340-US$360 Toward Year-End

Winnipeg, July 24 (OsterDowJones) - The price of gold is seen undergoing a
substantive rally heading into the end of 2002, brought on primarily by a
lower U.S. dollar exchange rate, a report released by CIBC said Wednesday.
Gold is usually priced in U.S. dollars, and a lower dollar exchange rate
typically has a positive impact on the relative supply-demand balance for the
metal. In essence, a weaker U.S. dollar means that gold becomes cheaper with
regard to other currencies, which will increase demand around the globe,
according to Bart Melek, a senior economist at CIBC World Markets. The price
of gold has trended higher when the U.S. greenback falters, with a negative
correlation of 82% over the last 12 years, he said.
In terms of supply, a cheaper dollar means higher gold mining costs. The
price of gold is largely determined by the marginal producer, and as such
higher U.S. dollar gold mining costs translate into higher gold prices. On the
margin, a higher U.S. dollar production cost means that the price at which a
marginal miner is willing to sell an ounce of gold increases as the U.S.
dollar exchange rate falls.
Additionally, capital flows into the U.S. equity and bond markets have
cooled substantially from their extremely high levels in the 1990s, the report
outlined. In 2001, US$522 billion had been purchased in U.S. bonds, notes and
stocks, drawing away interest from the gold markets. Thus far in 2002, equity
markets have not performed well, and it is estimated that only US$350 billion
will be invested into stocks, bonds and the like. This will likely form
downward pressure on the U.S. dollar and increase investor interest in gold as
the year unfolds.
CIBC believes that gold prices in 2002 will peak between US$340 and US$360
per ounce toward the end of the year. Foreign investors are likely to avoid
U.S. equities, bonds and the dollar as the year continues.
However, as investor confidence returns to the U.S. equity markets in
2003, the possibility of gold falling back to the US$300-per-ounce mark is a
realistic outlook, Melek said.

---
John Nelson, [phone]
[e-mail]

FSN49276 CDMOT METALS STOCKS
2002-07-24 16:00:02 UTC
^^^^^

[peter.wedemeier1]

Gold Crisis Will Happen?
24.07.2002 13:45
South African gold analysts believe the retreat from gold equities by investors seeking bargains among the debris of general equities is premature. JP Morgan`s South African-based gold analyst James Wellsted, says the sell-off in local gold shares, which saw the JSE`s gold index shed 7 percent today, presents a buying opportunity in what was widely regarded as a radically overvalued sector only a month ago.
Despite a narrow trading range for bullion over the past month, the gold index has retraced much of its gains made earlier this year. The index ended the day on 2690 points, almost 25 percent below its year-high of 3741 and although the bull run of the first quarter has slowed to a trot, gold is still the year`s star-performer.

The gold index gained 2.8 percent for the June quarter, against a 3.2 percent drop in the All Share Index, while the metals and mining sector lost 10 percent and the mining finance board dropped 8 percent. Financials may have outpaced the gold counters in the three month period with a 6 percent climb, but the gloss comes off this achievement considering banks conceded 8 percent in the first quarter.

"It`s just way too early to panic; the fundamentals for gold are still good," said Wellsted. He said the fall in gold stocks this week – the index lost 6 percent yesterday – was based on the notion that global equity markets had bottomed out. "When we see real signs of a recovery and not a lot of guessing then maybe there could be a case for getting out of gold, but right now all the factors that pushed the price up are still very much in place," he said.

[peter.wedemeier1]

Gold in Transition to Currency
Reapplying The Gold Cover Clause
Q & A with Jim Sinclair
August 26, 2002

http://www.financialsense.com/editorials/sinclair/082602.htm