|
• This is not the final blow off for gold but
could be a major consolidation and pullback that could last from
two months to two years (like 1974-76)
• Gold mining dehedging will be a stabilizing
factor for gold as many companies try and close out horrible hedge
book positions and cover. This will be a strong influence to halt
any major price declines.
• Since all the metals are getting hit hard
at the same time, this appears to be big fund action and now momentum
players will follow and exit.
• If there is any central bank that wanted to
add some gold to the kitty without upsetting their colleagues they
will show up in the next few weeks or months.
• The gold correction should be looked at from
two basic global technical aspects. 1) Using a base of approx $400
gold for all of 2004, one could expect a 33% retrenchment of the
move to $700. 33% of this $300 move , would be $100. So a target
here would be $600 gold. 2) Using the shorter term base of 2006
( Jan- March of approx $570) then the move to $700 would be $130
and using a short term 50% retrenchment (due to the short term nature
) would be $65 or a target of $635. These numbers work for traders
as well as jewelry buyers in Asia and India. So a $600-635 price
target may be reasonable.
• The major move in gold will occur years from
now when inflation is everywhere and at very high levels (8-12%)
and people from China, France, the U.S. and other countries are
stampeding into gold. The last few years are only the first leg
of gold catching up with toothpaste, donuts and coffee. The big
move is coming later.
• Major mining companies are in acquisition
mode and this is a long term bullish sign as these players are extremely
conservative and rarely speculate (as opposed to small exploration
companies) ABX taking over PDG. Teck-Cominco merger and now Teck-Cominco
going after Inco. There are others. They know the supply-demand
equation for the metals is long term very favorable.
• The dollar needed a rest from its 8% sell
off in the last 10 weeks and is rallying. Gold is responding to
this. The other base metal sell offs are more likely to respond
to other factors and that is why this coordinated selling is most
likely fund driven and many funds are new to this arena…so
expect plenty of volatility.
• 50 day moving averages will probably bring
in some support. I would suggest that long term investors in this
sector protect profits, raise some cash and remain at least 60%
invested as we are still in a bull market in the precious metals.
But caution is advised. All metals are very pricey. The easy stuff
is over.
• A hard look at 1974-76 would be a smart thing
to do. This was a tough time for gold and the mining shares but
it was only a rest from the 1968-73 run up and a prelude to the
blast off from 1976 to 1980. This may be a re-run.
• Remember gold mining stocks that can mine
gold at $250 gold or lower make fortunes at even $500 gold …so
don’t throw out the baby with the bath water just because
a much needed correction is now showing up.
Please visit our website for other articles on gold
and the mining sector. www.kengerbino.com
Kenneth J. Gerbino
*****
| 
