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While not crowded at all (a contrarian bullish
sign?), the recent Las Vegas Gold Show proved to be quite
worthy for me (not counting the losses suffered in the area
they call a casino, but I turned into the Mirage building
fund). Not only was I able to get several updates and learn
of new companies of interest, but by spending a lot of time
with attendees, I was able to get a feel on how the typical
retail player is thinking these days. The good news is also
the bad news. What? I found many of the people to be disenchanted
with the junior resource market, particularly when compared
to how well metal prices have done relative to their shares.
So the bad news is that the crowd doesn’t seem prepared
to be buying with both fists anytime soon. The good news
is that that means the speculative fever last seen in 2003/early
2004 is now gone and going to set us up for a much better
2006 once some serious tax-loss selling is completed in
the next 120 days.
Gold –
We began the week in a fairly overbought condition technically
while the U.S. dollar was oversold. Sure enough, gold pulled
back and the dollar bounced. This is actually healthy for
those of us who don’t live and breath gold’s
every tick up and down.
I’ve said it over and over again but
it’s always worth repeating – the longer we
move sideways to up (we’ve made three succeeding higher
lows in 2005), the bigger the base we’ll have to challenge
and surpass $500. Don’t lose sight that the gold market
has never managed to stay above $500 for any real length
of time. Therefore, a solid base above $400 should give
it the foundation necessary to break this ultimate resistance.
News that global demand for gold jewelry reached
a record $38 billion in the year ending this past June (according
to the World Gold Council), bodes well for those of us who
continue to be impressed by the strong physical demand.
I can’t emphasize enough how different this bull run
has been from those in the 1990s and before. Back then,
the paper market (Comex) would continue to rise but physical
buying of gold dried up. This would eventually limit the
rally and cause sharp sell-offs that lasted for many months.
Now, any sharp sell-off is almost immediately met with strong
physical buying and before we know it, the lost has been
more than made up.
Silver –
“The poor man’s gold” continues to play
second fiddle to its namesake and while it can have its
own moments in the sun, it will continue to need a higher
gold price to help lift it up.
Platinum and Palladium
- Watch paint dry. It’s more fun.
Base Metals
– I greatly lowered my overall opinion a few months
back on the belief that we would see an overall slowdown
economically worldwide. Industrial output has risen in only
four of the 23 leading economic countries in the past 12
months compared to the previous year- a sign we’re
indeed slowing. I see copper back to $1.25-$1.40 but if
you remember how not too long ago that was a great price,
you shouldn’t get too disappointed if I end up right.
U.S. Dollar
– The party is over long term. Anyone who doesn’t
conclude that the days of being the reigning worldwide currency
are numbered should immediately become a card-carrying member
of the “Don’t Worry, Be Happy” crowd on
Wall Street.
I’ve noted that the 86 area on the U.S.
Dollar index is the key support and we have now bounced
from there twice. So long as we don’t take out 92
to the upside, the 86 area should prove to be the level
we end up taking out on the way down to the critical 80
area by early 2006.
Oil –
Given the enormous damage, it’s hard to imagine that
such a devastating event like Hurricane Katrina ended up
being at least the short-term water mark for energy prices.
But, I think it did for the main reason I turned bearish
on oil before the hurricane – there was too much speculative
interest and only a one-way mentality that had gripped the
market. Now, I don’t see $25-$40 oil again, but I
do think the heavily-overweighted-towards-energy mentality
was way overdone and in need of some significant correction.
*****
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