On the gold correction
October 20, 2003
Where are we?
We are in a correction in a gold bull market. It is a bull market
and will go higher, much higher. But we are in a correction which
will probably last another couple of weeks. Tom McClellan of
The McClellan Market Report has been calling the moves in gold to
He is now calling for a bottom in late October and a strong rise
in gold into a major top in January. Before you disregard him,
you may want to think about the fact he has been the #1 timing
service in gold for the last five years.
It's been a strange correction. The number of contracts outstanding
in gold hit a record, the commercials were short in record numbers
in both gold and silver a month ago. The bullish consensus was
over 83% and that usually is enough to mark a top. I wrote a
piece the middle of last month listing
a number of stocks
I would really like at lower prices.
Well, I blew it.
I was hoping readers would be able to buy those stocks at lower
prices as the expected drop in gold took place. I called the
top in gold correctly but the stocks aren't cooperating, several
of them such as Canadian Zinc are up a couple of hundred percent.
So much for calling declining stocks.
But we have had a correction in gold, weak as it may have been.
We have made it though the weakest time of the year for the general
stock market without the major stock market crash I am expecting.
That doesn't mean I was wrong, (How many times have you heard
that from financial writers?) it hasn't happened yet. It will,
as sure as darkness chases the light.
If, as Steve
Saville predicts, we continue higher in the general stock market
for another couple of months, I expect the gold shares, especially
my favorite sector: the juniors, to explode. If you look at CDU
or NDM or CZ over the last month, tell yourself that that's what
they are doing in a gold correction. Imagine what they are going
to do in a strong market.
The fate of the dollar, and gold, and the US economy is no longer
in the hands of America or anyone in America. Our financial future
is now in the hands of the Chinese and the Japanese. If, (make
that when) they pull the rug out from under the dollar, it will
be all over for the dollar as a reserve currency. I see all the
signs right now. Russia is making noises about demanding payment
in Euros for oil (They are the world's second largest oil exporter
behind Saudi Arabia) The writing is on the wall. As much as Bush
and the rest of the Beltway Bandits would like to believe the
rest of the world will continue financing our greed and rampant
stupidity, it just ain't gonna happen. One day quite soon, the
dollar will fall from its lofty perch and land with a mighty
crash. And all the King's horses and all the King's men aren't
putting the dollar back together again.
doesn't control the price of gold, the Chinese do. And when they
want it to go up, it's going up.
is going to die. Or better put, people around the world will
collectively realize the dollar is dead as a reserve currency.
On that day, you might want to own some gold, some silver and
some precious metals stocks. If you look around you and realize
that buying gold and gold stocks today is regarded as the act
of someone very strange, actually it's even more strange that
69% of Americans are so brain dead that they believe Iraq had
something to do with 911. When that 69% wakes up to the benefits
of owning an asset which is no one's liability, there will be
explosions on Howe Street as the gold stocks rocket higher, making
the dot.com boom look like dot.boring.
Last March I mentioned a stock which was a
pure play on energy. Admiral Bay Resources (ADB-V, $1.22 Canadian:
website) has been basing since
last February and just started to break out. You should go back
and reread what I wrote about them as an energy company. Last
week, just for my own interest, I asked the company what the
gross value of their gas would be at today's price if you assumed
full production and high end on the resource estimate. Literally,
when I do math on natural gas, I get confused by the decimal
points and I couldn't believe the figure I was coming up with.
estimates their deposit may contain (repeat, MAY
up to 1 trillion cubic feet of natural gas worth $5.75 billion
dollars (US). And the company has a market cap of about $20 million
Canadian ($15 million US). That's absurd. Since March they have
used the time to stake more land, and their land position in
James Bay is up to over 100,000 acres. They intend to stake 250,000
acres before they are finished.
In the meanwhile, they have also picked up a 70% interest in
a major gold/silver property in Mexico. I came across some numbers
on the property and realized they were sitting, literally, on
a gold mine. They are in the process of updating the old figures
to 43-101 standards and that's in the works. But they show an
inferred resource of 122 million ounces of silver and 460,000
ounces of gold. It's a major project with 2 million gold-equivalent
ounces making the gold-silver side of the company worth several
times what the entire market cap is at present. The 122 million
ounces of silver is worth far more alone than the entire market
So those who buy Admiral Bay Resources are getting a gross market
value of several billion dollars worth of coal bed methane should
that project make it into production and a gold/silver play worth
a multiple of what the company is selling for today. Best of
all, the marketplace has not yet discovered ADB and you shouldn't
have to chase the stock to buy it.
We own shares
in ADB and they are an advertiser. We are not paid to write articles,
we do it for our readers. In all cases, it's your money, spend
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