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On the gold correction
and
Admiral Bay

Bob Moriarty
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 a tee. 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.

Alan Greenspan doesn't control the price of gold, the Chinese do. And when they want it to go up, it's going up.

The dollar 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.

Admiral Bay estimates their deposit may contain (repeat, MAY contain) 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 cap.

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 it wisely.

Bob Moriarty
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