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The Summer Doldrums Won't Last Long Contributed by Olaf Sztaba NA-Marketletter www.na-marketletter.com July 23, 2004 INTRODUCTORY SUMMARY: In our latest gold comment we underlined the possibility of one more setback before the yellow metal switches to rally mode again. Indeed, gold and gold stocks spent the summer, as usual, in the shade. But don't allow this meandering to turn your attention from gold. Stay alert because underneath the surface, gold and gold stocks are preparing for a big ride ahead. GOLD NOW: After experiencing a brief rally, gold backed off. There was no sell-off or panic, just a continuation of summer jitters. As a result, the yellow metal is coming back to its 200-day moving average and currently sits at the 50-day moving average. Both averages are trending upwards, confirming the long-term direction. One more refreshing dip is still an option but don't count on any extra discounts. Be prepared, as no invitations for the rally will be sent out. GOLD STOCKS: Gold stocks are still lingering behind gold - the sign of a correction in progress. Neither the HUI nor the XAU rose to the occasion and, unlike gold, they finished their mini-rally at the previous tops (please see charts). The main gold stocks indices remain below their 200-day MAs, but are holding above their 50-day MAs. The on-going correction may cause the indices to fall further into the buying zone (please see chart). That's all right. There are still many weak hands sitting around nervously holding gold stocks bought at the top of the last mega-rally. As the gold sector refuses to rally and indulge in the summer doldrums, anxiety grows among speculators, propelling them to abandon the sector. This process of disappointment takes time to complete. The golden bull market is eliminating the weakest hands from its ranks. In the meantime, gold stocks are still trailing behind gold. Watch for a reversal as the on-going correction runs its course. THE INTERMEDIATE-TERM: While gold hangs onto its 40-week MA, the major gold stock indices remain below their longer-term averages. While in correction mood, one more sell off in the summer months would be highly beneficial. It would wipe out all those waiting for a quick, painless profit and allow this sector to clear the air before the next major up-leg. The summer doldrums won't last long. Mark the August-September period on your calendar and have your shopping list ready. To guarantee a ticket for the next ride, consider shopping now. FINAL SUMMARY: The market is in the midst of a major multi-year bull. Gold and gold stocks remain in the re-accumulation zone. The size of the sector doesn't allow big players to enter all at once. They need time to get every single stock from an undisciplined, impatient crowd. Only then can they let it go high - very high. For individual gold stocks recommendations, sign in for a free trial at www.na-marketletter.com. July 23, 2004 Contributed by Olaf Sztaba Email: osztaba@na-marketletter.com Website: www.na-marketletter.com About NA-Marketletter 321gold Inc