August 25 2006

Boring...

Gold remains drearily range-bound, awaiting the end of summer. But instead of merely trying to stay awake while we watch our quote screens, we should take this last opportunity to pick up some bargains.

Yes, I know: Those who complain about how boring and unexciting the gold market is should be careful of what they ask for. They could get the type of excitement they don’t want to see.

But with that said, there’s no questioning that watching the gold price in recent days has been about as fascinating as watching paint dry. The metal is stuck in the mud, awaiting the return of legions of buyers and sellers who, apparently, are wringing the last bit of sun and fun out of the summer.

As I rush the kids off to school, weave through countless idiot drivers on my way to work, and spend the day breathlessly juggling projects, watching the markets and keeping up with hundreds of resource stocks, I can’t help but envy those unnamed investors who are burying their toes in the sand one last time.

I don’t know who they are, but apparently there are a lot of them. This massive wave of indifference could not have been generated by the apathy of just a few.

I do know one thing, though: When these shadowy hordes slide their rested, tanned bodies back in front of their computers, they’ll see that they missed the bottom of this market. And they’ll realize that a few hard-working investors (namely, us) were there, awaiting with their bids.

The End of Summer’s Slumber

As I’ve stated in my recent columns, I think gold hit its summertime bottom on July 24, at $605.70, and is headed up from here. I’ll repeat that prediction, but with the same caveat as before: I could be wrong, and gold could drop through $605.

In doing so, the metal would be deviating somewhat from its typical summer pattern. But it would also be reinforcing another well-established trademark of this bull market: a tendency to correct a bit further than the bulls expect. Over the past five years, for example, gold has repeatedly probed downward toward its long-term averages. But, rather than bounce off those averages as the technicians would expect, it has pierced them, dropping a bit below the obvious supports to whipsaw as many bulls as possible out of the market.

The good news is that gold has also surprised in the other direction. Just when hope appears lost, the metal has invariably taken off on stunning rallies.

Again, as I’ve stressed even while making these ultra-short-term calls on gold, the short-term doesn’t really matter that much. The longer-term trend will be upward, and our quiet shopping season for exploration and development shares will soon end.

That means you need to take advantage of the current bargains, while you can. I’d advise you to do this carefully, mindful of the thin trading volumes that still characterize the junior gold share markets. But don’t wait to at least begin building your positions, in preparation for a fall rally.

Brien Lundin is the editor and publisher of Gold Newsletter, a publication that has ranked among the world’s leading precious metals and resource stock advisories since 1971. To learn more about Gold Newsletter, visit www.goldnewsletter.com.

Mr. Lundin is also the host of the famed New Orleans Investment Conference, the world’s oldest and most respected gold investment event. This year’s New Orleans Conference will feature Steve Forbes, Jim Rogers, Dr. Marc Faber and Dennis Gartman...plus dozens of today’s top gold and resource stock analysts...and a blockbuster debate between Doug Casey and Newt Gingrich. To learn more, visit www.neworleansconference.com.