Friday, December 12, 2003

The painful decline in gold stock prices is supposedly due to profit taking (see Mineweb: Global gold stock sell-off intensifies; $10-bn gone) and the seesawing rand (see Reuters: S.Africa stocks see-saw on rand, gold miners suffer).

I guess other investors don't have my faith, or whatever it is that keeps me holding on.

Tuesday, December 09, 2003

Gold Bullion Securities, Ltd, the exchange traded gold fund, is now trading on the London Stock Exchange (see Reuters: GBS debuts, gives all investors a shot at gold ). This is good news for gold prices, and it will be even better news when a gold fund finally starts trading in the United States.

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I've received word of a new investment blog, run by Charles Rotburg. You may want to check it out.

Monday, December 08, 2003

Karsten Junge at CurryBlog posted some interesting commentary about gold prices a few days ago.

Karsten suggests that central banks may compete to devalue their currency, resulting in what he calls "competitive devaulation", resulting in gold rising because it would be the "last man standing".

Karsten is a German blogger who focuses on financial markets, with a mostly contrarian viewpoint, so he's always worth reading.

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At Bill Fleckenstein's weekly Contrarian Chronicles column, he also talks about the falling dollar and the rising gold price. He seems bullish on gold again, although if you recall, a few weeks ago he surprised us with the announcement that he was selling gold.

Bill writes:

Gold, I would just note, recently demonstrated the most impressive display of strength in as long as I can remember. Early last Monday, gold traded as high as $402.50 an ounce, up $4.50, before a slide in the euro pulled it back under $400. Briefly negative on the day, gold nevertheless managed to turn around, grind higher and finish on the high tick -- even while the euro stayed red and stocks continued to move higher. Despite faltering at a level deemed to be important, gold basically went up on its own.

In times gone by, it would have been crushed on the back of such a sell-off as initially seemed to unfold. But not only was the sell-off short lived, gold closed, to repeat, on the highs of the day. It was almost as though gold had finally said: “OK boys, I'm not moving just in response to some other thing like stocks and the euro. I am my own man, I'm the strongest currency in the world, and you'd better pay heed to that.”

I don't want to make too much of one day's action, but it truly was impressive to watch the spectacle of gold shake off the yoke of being some erstwhile also-ran and charge to the fore as leader of the currency market.

Notice how Bill refers to gold traditionally being "crushed" after it rises. I guess he's talking about the rumoured cabal that conspires to keep down the price of gold. If such a cabal exists, they haven't been doing a very good job of late.

Sunday, December 07, 2003

Australian investment bank RFC Capital says that gold may be headed to US $1000/oz (see Mineweb: Gold headed for US$1,000/oz?). I guess that with the $400/oz resistance taken out, there's no stopping it.

The same article also mentions the prediction of Newmont Mining Corp's (NYSE: NEM) Pierre Lassonde, but he predicted a more boring price of $450/oz.

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And talking about predictions, my favorite astrologer and prophet, Mahendra, says that the Dow will drop 800 points (from 9900) by January 1st, and then for 2004 there will be a major market downturn reminiscent of 1929 (see Will histrory [sic] of 1929 of crashing stock markets be repeated?). Mahendra still says that you should buy gold.

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There's an article in this weekend's Barron's about the rising gold price (see Gold's Bugs - subscription required). The article is bearish on gold mining stocks.

It's tough, however, to make a bullish case for the gold stocks at current levels, even if the metal hits $500. The major mining issues look rich, based on nearly all conventional valuation measures, including earnings, cash flow and net asset value.

Newmont, for instance, trades at 55 times projected 2003 profits of 92 cents a share and 37 times estimated 2004 earnings of $1.35. Barrick fetches 75 times projected 2003 profits of 30 cents a share and 64 times estimated 2004 profits of 36 cents.

"These are the tech stocks of the commodity world," asserts Robert Marcin, head of Marcin Asset Management . . .

Tech stocks of the commodity world. That's harsh.

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