Caution, Caution, Caution
How many times
have you read prognostications where the analyst would say something
to the effect "If it goes up past 140 it will go up more
and if it goes down past 125, it will go down more."
people try to cover all the bases because no one has a crystal
ball, we are all just guessing. But some guess better than others.
So it's about
time I come up with a nice ambiguous call because I'm not liking
what I see in gold stocks. Bear with me and realize I could be
totally wrong. But follow along.
Sure enough, both physical gold and gold shares got clobbered in the January-March period with many juniors down 50% from their yearly highs as gold retraced all the way back to the low $320 range. We did hit a bottom and have come up from there. As luck would have it, my call in late March was not bad.
But with another $35 move higher in gold, the gold shares as measured by both the HUI and XAU have barely budged higher. They are higher but not by much. And that's with the dollar doing a swan dive and Iraq waking up and not particularly liking the American definition of freedom. Gold's up but don't get carried away thinking this is all there is.
I think we
are a lot weaker than we ought to be. And if gold shares don't
want to move on a $35 move, the dollar falling out of bed, bonds
busting through the rafters and the Canadian peso acting like
it's on Viagra, you might want to show some caution.
Richard Russell says about gold, "Buy and hold." And he's right; if you have bought gold or gold shares in the past two years, you probably haven't done badly and can count on doing far better in the future. We are a lot closer to the bottom in gold than to the top. I firmly believe the actions of the Bush administration and the Federal Reserve have pretty much destroyed the future of the dollar as an international reserve currency. When the rest of the world realizes there is nothing supporting the dollar but hot air, look for the dollar to go a lot lower and gold a lot higher. For all purposes, the neo-cons have declared war against both China and Saudi Arabia in public. By dumping their dollar holdings, either country could turn the US into a 2nd World nation in six months. And they might just bite the bullet and do it.
on the other hand suggests you trade gold shares and gold. Actually,
he almost insists on it. So if you believe him and my warning
makes sense to you, you might want to lighten up on the gold
shares. But within the next 2-3 months, there will be an extraordinary
opportunity to buy gold shares cheap. So keep your powder dry.
If you don't agree with me, you need do nothing. But I am seeing
warning signs and I want to point it out. I could be dead wrong.
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