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Gold Stock
Alert:
Hand grenades
and the price of sprouts
Bob Moriarty
January 13, 2002
We are at an interesting junction.
Based on sentiment, gold and silver should be at a top. The bullish
consensus peaked at 90% last week and that is almost always a
sure sign of a top.
'Close' and 'almost' only counts
in horseshoes and hand grenades. Because many other indicators
are saying it's a great time to sit on your hands and make money.
The first thing I want to emphasize
is that price is always right. It's only opinions that are wrong.
I know there are ten million people who think they are smarter
than price but they end up collecting unemployment checks and
working at McDonalds if they don't learn.
For much of the last seven
years, when nothing happened, the price of gold and silver went
down. If there was nothing else affecting the metals, they went
down. I don't know if you have noticed but since the middle of
December, you can't keep gold down. It will drop $5, looking
like it wants to leap off a cliff and the next thing you know,
it's right back
up 6 bucks.
Gold not only wants to go up,
it wants to stay up. We have extremely high bullish consensus
numbers, the number of silver and gold contracts sold short is
off the charts and the metals want to keep climbing.
Three weeks ago, 6 out of about
140 gold stocks we track, courtesy of 4figureAU,
hit a new 52-week high, and two weeks ago, it was about the same
stocks and the same 6 new highs. Last week we had 12
new highs, this week we have 11
new highs out of 140.
That isn't a top. So while
there are many signals saying caution, there are also many signals
saying full speed ahead. Faint heart never won fair lady. We
are in a bull market, if you don't catch every single minor top,
just sit on your hands, gold and the gold stocks will be back
for another run.
I don't know anyone who can
actually predict the price of any commodity from day to day.
I know
a lot of fools claim they
can, but all it takes to prove them wrong is to put some money
down on what they say to do. After you lose money a dozen or
so times in a row, you'll figure it out. But trends can be called
in advance. You don't have to be a brain surgeon to realize a
bullish consensus of 90% is pretty high and means people are
getting
Awful Darned Bullish.
When you are faced with a variety
of conflicting signals, the best way to sort them out is to figure
out what the smart money is doing. Right now there are some powerful
signals being given which probably mean a lot more than the 90%
bullish consensus on gold.
For all the screams of pain
and whining from the "Conspiracy is King" crowd, it
should be obvious to everyone with eyes that we are in a gold
bull market and have been for three years. And the drop in the
value of the dollar is largely responsible. Gold is a currency,
it competes directly with the dollar and when the dollar goes
up, gold goes down. When the dollar goes down, gold goes up.
If you invest with blinders
as many do, looking at gold could convince you we are at a top.
Take the blinders off. If you look at a chart of the dollar,
you will realize it fell over the cliff, there are many many
reasons why it's going a heck of a lot lower. So ignore bullish
consensus and watch the smart money. They are bailing out of the dollar
which means gold is going higher in the next few months and gold
shares are going much much higher.
How do we know the dollar is
going down? Well, that's easy, look at bonds. For most of us,
bonds are something that little old ladies with purple hair clip
the coupons off, down at the bank, as they mumble about the absurd
price of sprouts. But bonds are truly the smart money. The level
of sophistication in the bond market is far higher than with
common stocks. The big money is in bonds. Take a look at bonds
for the last couple of weeks. Ten days ago, bonds dropped 2 full
points in one day. That's the equivalent of a 10% move in gold.
Nobody noticed. Actually, the
smart money did, the smart money was dumping bonds so they could
dump the dollar. Bonds are going down, it's probably foreign
money, it's probably very big, very significant and it has caused
little more than a ripple. I'll bet you didn't even notice.
And smart money is buying the
heck out of the silver stocks. Not the metals stocks in general
but the silver stocks specifically. To me that suggests silver
is about to cast off its chains and rocket out of the chute just
when no one expects it to. Actually the smart money expects exactly
that so now we will have to see.
So my last commentary, ...gold is a bitch to print, was
to buy, keep loading up. Those stocks are all higher but still
remain great value.
We might, but small might,
have a little correction. But I suspect the surprises will be
on the upside.
Bonds are headed south...
The dollar went off the cliff...
And gold will go higher.
When 100 out of 140 gold and
silver stocks hit new highs, sell or lighten up.
There will be a big correction
down the road.
-Bob Moriarty
January 13, 2002
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 321gold Inc Miami USA
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