Grandich Letter Special Alert
Gold and Markets Update

Peter Grandich
Grandich Publications
August 3, 2005 11:00 AM EDT

Gold - While the argument of gold suppression by a "cartel" is a good one, I think rather than concentrate on gold's inability to blossom so far, one should look at the clear, solid foundation that gold has put in -- one that should lead us to $500+.

After reaching multi-decade highs in late 2004, many former gold bulls have either tempered their outlooks or even turned bearish. The weakness in the majority of mining shares likely added to their concerns (more on mining shares shortly). I have remained aggressively bullish for several reasons, but none more than the fact that gold has been making higher lows since that peak in 2004. In February 2005, we bottomed near $410. Around June 1, we bottomed around $415. And then in July, we bottomed around $420. It's important to note that all of this occurred while the U.S. dollar was rising (a rise I have stated was nothing more than a countertrend rally - more on that shortly).

I believe that gold has been building an intermediate bottom in the $410-$420 area and now has enough footing to challenge the November highs. Yes, if there's a "cartel" out there they should make the old highs their line in the sand. But don't dismay, there are an overwhelming amount of bullish factors for gold right now and no group is big enough to stop them permanently.

Mining Shares - I believe we're on the cusp of a marked increased of mergers and acquisitions in the mining industry, particularly regarding gold. Mine supply is once again declining while demand is still increasing. In fact, it appears Central Banks are going to have to sell more than allowed in the Washington Accord if demand is to be met without a big price spike. Mining executives have been making it known that there just haven't been enough discoveries of multi-million ounce deposits in the last several years for them to keep growing internally. Therefore, one should expect them to seek acquisitions. Goldcorp increasing its buying power comes as no surprise. Companies like Bema Gold, Cambior, Golden Star, Meridian Gold and Virginia Gold are good targets.

Silver - Wants to challenge key resistance at $7.50. I believe we'll see $8+ without seeing $6 again.

Platinum - After being as exciting as watching paint dry for many months, the market has popped over $900. Could get to $1,000 but I would sooner see it just stay around here.

Palladium - Once again, trying to muster enough steam to get above $200 and stay there. Some day it can, but in our lifetime?

Copper - In a near parabolic formation, a sharp sell-off is not too far off. We may hit $1.75 first since no one wants to step in front of this, but the long-term fundamentals don't support a price above $1.40-$1.50

U.S. Dollar - Bear market rally is ending. We'll know for sure if and when the dollar index closes below 87. We'll look back and see the Chinese currency revaluation as the death blow to the U.S. dollar's days as the dominant currency.

Oil - The market is too bullish on the belief that supply disruptions are so big that no one should sell into it at this time. The contrarian in me says a sell-off is possible and longer term; lower prices are the likelihood (I'm preparing a special alert on oil shortly).

Follow-up to some mining share comments:

Rubicon Minerals - Have spoken extensively with the company since purchasing a "trading" position. The company's interest in Africa may be worth substantially more than I first believed. The stock is basing but not likely to rise sharply until we get near or at the closing of the most recent financing, which is slated for August 16. I'm optimistic a $1+ share price is in the not-too-distant future (biases included).

Mustang Minerals - I still believe the $.60-$.75 area is where speculators should consider positions.

Radius Gold - The same range applies for RDU as Mustang but if I had to pick one over the other it would be Radius.

Kinross is starting to look interesting.

Peter Grandich
Grandich Publications
P.O. Box 243
Perrineville, NJ 08535
phone: 732-642-3992
email: Peter@Grandich.com

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