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Other than an expectation of either a pullback
or correction, I’ve maintained a very bullish stance towards
gold and most other metals for two years now. However, a
few weeks ago, my staunch support for gold was severely
tested. Numerous subscribers and the usual “loose-cannon”
anonymous Internet posters were calling into question my
reasoning to believe the Euro’s decline would not be the
death blow to the bull market in gold. Everywhere you looked,
there were predictions that gold would break below $400
or even go to $375.
I have contended that $500 gold was not a
question of “if?” but “when?”. I said the second leg of
the bull market should take us there and we would know it
when gold began to rally against most currencies (including
the U.S. dollar) not just when the Euro rallied. Well, in
case you’ve been missing for the last couple of weeks, let
me be the first to tell you – The second leg has begun!
When the Euro began to fall out of bed, many
people thought a short gold position was a no-brainer. The
daily mood in the gold pits was that it was only a question
of when gold would break below key support around $410 and
then below $400. However, when gold held above it and even
began to stick its head up despite further erosion in the
Euro, the shorts began to cover. This was followed by reports
that physical buying of gold was very strong, as The World
Gold Council (www.gold.org)
reported very strong demand for the first quarter of 2005.
The combination of the short-covering and physical buying
gave new wind to the longs and we have since picked up a
head of steam that appears it can take us to new highs above
$454 this summer.
Silver – Key resistance is in the $7.50
area. The commercials bang the heck out of it when it gets
around that level. They may not be so lucky next time around
and we could see a big run to above $8. I’m not a big silver
bull as I do think most metals will see their highs for
2005 in the next few weeks. However, it’s not going to fall
off the cliff, either.
Copper – Has held up surprisingly well
given a belief that an economic slowdown was apparent worldwide.
Continuing low supply and the real estate bubble that hasn’t
officially burst yet (signs are already apparent, at least
to yours truly) has lent support to copper. A short squeeze
is underway IMHO, but I’m afraid once it runs its course,
the highs for 2005 and maybe even 2006 should be in place.
The upside is $1.75 but the downside is $1.25. Enjoy it,
though, while it lasts.
Platinum and Palladium – The most consistent
metals in terms of maintaining a tight trading range. And
there’s nothing on the immediate horizon to expect otherwise
- although I suspect Palladium could surprise by getting
above $200 and staying there.
Uranium – I’ve been “hot” on Uranium
for some time (but was bearish on uranium shares until now).
Believe it or not, I’m even more enthralled now. The recent
news of a company going public whose primary purpose is
to buy and sell uranium has, IMHO, opened the door for similar
companies to be formed that can become almost self-fulfilling
prophecies in pushing up uranium prices. I hadn’t given
much thought of uranium getting past $50. However, on the
belief that hedgefunds and sophisticated speculators will
see Uranium Participation Corporation (U-TSX-V) has a model
to play the uranium bull market, $100 is now feasible.
Cobalt – This is my sleeper metal.
The hybrid car market may just become the main car market
faster than most think. And the use of cobalt in hybrids
can greatly boost its upside potential.
*****
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