(excerpt from issue # 179 The Ormetal Report)

It should be clear in your mind. Although we are in a long term secular bull market in gold, commodity and mining stocks, we are in a cyclical bear market in gold, many commodities and stocks. Gold stocks, as measured by the most popular indexes, topped in December 2003, silver topped in April 2004 and gold topped in early December 2004. The long term trend as indicated by the 200 day moving averages is slightly going down for stocks and silver and is just rolling over for gold. That is the current picture.

Last week, gold broke down to new two months lows after more than a month in a tight trading range near US$425. It is now at US$414 just $2 above its 200-day moving average. I think that this is the last sequence in this decline. What is not clear is where it will end its course. Most fundamental analysts are suggesting that gold will not move much lower that US$410-$414. Most technical analysts are calling for much lower numbers anywhere between US$349 and $409. I am picking the US$399-$411 range.

This decline will subsequently give birth to a very decent rally where gold will challenge the very important US$433 level. Although I do not think that we will move to new highs in the first 9 months of 2005, this rally in gold will be part of large consolidation that will lead to a resumption of the secular bull market by the end of the year. Over the intermediate and long term, most fundamental analysts I read are very bullish and most technical analysts are very bearish. The year 2005 will certainly be a solid test for all who care to express opinions on the direction of the precious metal markets. Obviously, I stand with the first group.

In my opinion, gold stocks will be the first to bottom sometime this summer or early fall. Then gold will come back closing the year slightly above US$456. If you have been reading me for many years, you know that I am not making a prediction here. I am guessing based on my experience and years of observation. Obviously, I could be wrong, the technicians could be right and the resumption of the long term secular bull market could be delayed to sometime in 2006 or even later. Nobody has a crystal ball, and everybody is guessing. I hope you clearly understand that. The precious metals markets are highly cyclical, volatile and speculative, I guess that is why I love this market sector.

But there is also another thing that should be clear in your mind. Although few are selected and very few have staying power, junior exploration companies that deliver good exploration results will give you the best performances in this market sector providing both excellent trading and long term investing opportunities. This claim is again supported by the fact that the stock of my favorite exploration company closed again at a new all time high this last Friday. Select wisely and place your bets, the game is still very young.

Claude Cormier
Editor, The Ormetal Report
Bruce Robbins
Consultant geologist

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