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(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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