..
 Gold Stock Alert:
The most wonderful
feature of gold is that it's a bitch to print
Bob Moriarty
posted December 26, 2002
As those of
you know who have written me and asked my opinion on how a bit
of news affects gold or the gold stocks, I am not a believer
in the CNBC/GATA talking head approach to news and the markets.
News has next
to nothing to do with price movements of anything. It's only
something that talking heads use to explain price movements when
you would be far better off understand the underlying forces
in play. All things move up and down from day to day. In a bull
market prices move up more and more often than in a bear market
where they move down more and more often. But bear markets contain
violent bull moves and bull markets contain even more violent
bear moves.
I'm doing all
this convoluted explanation because we clearly are in a gold
bull market just as I have been saying for 18 months but commercial
shorts are getting near the level found at the end of bull markets
or at least at the beginning of strong corrections. People who
hated gold 18 months ago when I was a lone voice in the wilderness
have now jumped on board the train in the hopes of catching it
before it leaves the station.
Normally, with
things this bullish, I would be getting lighter or selling the
gold stocks I use for trading. But as bullish as some measures
are, all the confirmation information is not giving a danger
signal at all. Last week was one of the most bizarre weeks in
gold and gold stocks movements I have even witnessed. Gold shot
up to $355 (Wasn't someone predicting the collapse of the financial
system right around there?). A lot of fairweather gold bugs panicked
and couldn't unload gold stocks fast enough. That doesn't happen
at tops. Ever.
We have an interesting document produced for us weekly
by 4figureAU. It lists over 100 gold stocks. In the latest
report
only 6 showed a new high for the year. That is not the top of
a market. At the top of a market, you might see 80-100 new highs.
Gold bugs need a little more starch in their shirts.
So this bull
move has legs. But we are due shortly for a major correction.
For once, I will concede a bit of news may have a major, albeit,
short-term effect on the gold market.
It should be
obvious by now that the flock of chickenhawks ruling this country
are already at war with Iraq, they just haven't admitted it.
Our forces, together with British aviation forces, bomb Iraq
daily. Just because war hasn't been declared on Iraq doesn't
mean it isn't taking place. We are at war.
But one day
soon, probably in mid-January, the war will become official and
ground forces will formally enter Iraq. Since gold bugs believe
the war with Iraq will shoot gold to new highs, chances are it
will do exactly the opposite. Remember, these same gold bugs
were selling shares right into the highest gold prices in 5 1/2
years. Look for a formal declaration of war to ignite a short
and violent correction in gold and gold share prices. But lower
gold share prices will attract new buying and gold shares will
not go down as much as gold will. We could see a $20-$40 correction
in gold. It won't last long but it will be brutal.
As I write
this piece (Wed PM Dec 25th), the dollar is about to plunge through
103. It had major resistance at 104 which it went through like
a hot poker through butter. For the direction of gold shares,
watch gold. For the direction of gold, watch the dollar, the
two are connected at the hip.
I suspect the
fairweather gold bugs and sunshine patriots will wake up in a
couple of days and realize gold is indeed in a bull market and
gold shares are along for the ride. I think the next couple of
weeks could surprise everyone on the up side. The bump up to
$355 was nothing more than a little short squeeze in Japan. It
should be obvious that there is a very big player manipulating
(eeek, I've used that M word) the gold market higher, and if
he did it in Japan, he could easily squeeze the commercial shorts
here until the pressure makes their ears bleed.
I looked over
one of my stock statements this evening and even I was amazed
at how high the gold stocks have gone so far. It should be obvious
that gold stocks have far higher to run. They have been the only
game in town for two years and Joe Couch Potato still doesn't
even know they exist. So we are good for another 500-1000% before
the herd wants in on the game.
We are at the
easy-money stage. I know of so many red hot stocks I just can't
keep them straight. Here's a few.
1. Endeavour
[EDV] [website] Selling for $2.22
Canadian and probably has a NAV of $3.40-$3.50. This stock is
for gold bugs who want to own a fund and not even think about
gold shares. Buy it and put it away. You are getting one of the
best minds in the business at a 40% discount. It doesn't get
any easier.
2. Gallery
Resources [GRY] [website]
They are
waiting for colder weather to resume drilling on a bog in Newfoundland.
Gold is like a mama cat having kittens. Look for it in the most
inaccessible places, that's where no one looked before. Gallery
plan on resuming in mid-January. The stock is selling for $.10
Canadian. I'd buy a boatload if it came back down to $.09, the
low for the year is $.06. This is about as good a play as you
will ever find, it's barely above its yearly low. Gallery has
brilliant management firmly committed to the company (16 million
shares committed) and all the holes around where they are drilling
are showing just the precursors you want for a major epithermal
system. It's a stock which could run up 10-fold on a good hole.
3. American
Bonanza (BZA) [website] They have not one,
but two properties being worked on at this time. The decline
has begun at Copperstone in Arizona and and they are drilling
a likely prospect near Fallon. Simply great management. I really
liked the company at $.12 a share, now they are $.22 and about
to bust out to a new yearly high. They will be producing gold
from Copperstone this year. (not much, but some) and are perfectly
placed for a major run up with $400 and above gold. Anyone who
bought this when I first said so has done well and those who
really listened and bought more when it went down are up 100%.
4. Desert
Sun Mining [DSM] [website] closed on Tuesday at
$.83 after setting a new yearly high at $.93 last week. DSM has
a drill program in progress in Brazil. Expect new drill results
soon. Great management, great potential. I think I figured out
you were buying gold at about $3 an ounce. Expect them to increase
their resources from 3.6 million ounces to 10 million ounces
and either sell out a lot higher or to restart their mill which
shut down in 1998 due to the low price of gold.
5. Cardero
[CDU] [website] One of the year's
biggest advances. It has gone from $.27 to $1.65 on Tuesday.
I think Cardero has set 27 new highs since May. Big buying from
funds 'in the know.' This is going to be one of the biggest silver
stocks in the world. Really great management. Easy 10-bagger.
6. Candente
(DNT) [website] Joey Freeze has one
of the finest teams in the junior field. Prudent Bear owns 20%
of the shares and David Tice doesn't buy many bad companies.
This is one of my favorite juniors and I have been itching to
write them up for a year. But they don't have any 'knock you
out of your socks stories,' just good management. I want
knock you out of your socks stories to write, you should
want good management. There is none better and Candente are going
to blow the lid off the industry one day. This makes a really
great trading stock. Selling on Tuesday for $.50 Canadian.
7. Lakota
[YLA] Other than the fact they don't have a website
yet,
those in the know have been buying up this very tightly-held
stock. Lakota hold the property next to Sutton in Tanzania, in
elephant country. The stock split in December and the shares
have already doubled again. This one's a sleeper and will make
shareholders very well off. The stock is $2.90 a share
and finally showing signs of decent liquidity.
8. McWatters
and Apollo [MWA and APG] [McWatters website] and [Apollo website] Both are in production
and valued at a small percentage of what they were worth at $300
gold. If I remember right, MWA is going to be doing about 90,000
ounces and APG about 200,000 ounces. This isn't Kansas and gold
isn't $300 an ounce. The companies who will rocket the fastest
are those who are the most highly leveraged to gold. Both McWatters
and Apollo are highly leveraged to gold and in a bull market,
will soar.
It should be
obvious to anyone watching that the Fed has let the dollar sink.
The Fed is sending clear signals that (1) they don't care about
the dollar. We have a strong dollar policy the same way a marshmallow
makes a great bowling ball. When they start mumbling about this
wonderful new invention called a printing press, one of the alternatives
is that they are trying to tell you something. The most wonderful
feature of gold is that it's a bitch to print. Paper isn't.
And (2) "Sir"
Greenspan mumbling about how gold actually might solve monetary
problems is more than a hint. And the first sign that the US
Government might actually go to a real form of money, the gold
shares won't just rocket to the moon, they will make Amazon and
AWL during the dotcom hay days look like a kids' picnic. Every
gold share in the world could be bought today for $70 billion.
Once the government gets behind gold, mining will be the most
important industry in the US for the next 15 years and incredible
fortunes will be made.
There are three
ways to create real wealth. You can grow it. You can manufacture
it or you can mine it. Everything else is some variation of the
above three. We can't grow more, it's not possible, we don't
have the competitive edge. We can't manufacture that much more,
we have been exporting our manufacturing overseas for 30 years.
But we can
mine more. Nevada alone was one of the biggest mining areas in
the world for 80 years. It may well be again.
The gold rally
has legs. Maybe a week, maybe three weeks, but it has legs. Gold
shares will catch up shortly. I'll do my best to warn people
when I feel we are at a temporary top.
-Bob Moriarty
December 25, 2002
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 321gold Inc Miami USA
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