Let’s hope the coming year is as exciting
and prosperous as the year just finished.
Extracted from the January 1st issue of Resource
Last year was an exciting time for gold investors,
with the 20% gain in the bullion price helping to generate
some big moves in the equity prices. I fully expect the gold
price to continue to ratchet higher, driven largely by the
continuing slide in the value of the U.S. dollar.
The weakening dollar has a two-fold impact on
the gold price. The most immediate impact, of course, is the
inverse relationship between the dollar-denominated gold price
and the value of the dollar. In essence, the apparent value
of gold increases as the measuring stick shrinks.
The declining confidence in the dollar is also
beginning to have a more immediate impact on the gold market.
Demand for bullion is increasing as investors are switching
a portion of their dollar-denominated investments into bullion.
So far, gold investors have been largely individuals. It appears
that we're now seeing more institutional investors coming
into the gold market.
The trend to more institutional gold holdings
should continue, especially as it becomes easier to buy and
sell bullion. For example, Gold Bullion Securities are now
traded on the Australian and London stock exchanges. Each
share provides effective ownership of very nearly one-tenth
of an ounce of bullion. Prices closely track the bullion price.
Gold Bullion Securities has a market value of
$426 million. That represents a pretty substantial investment
pool. However, that is only 1.02 million ounces of gold, less
than 1% of the annual physical market in bullion. Growing
support for Gold Bullion Securities will likely come as the
gold market develops a higher degree of stability.
There is an updated gold price chart on the
next page, just as a reminder of the reality in the gold market
over the past three years. I fully expect the two major features
of that trend line to continue into the future. That is, the
gold price continuing to move upward, but with periodic corrections.
Any correction in the bullion price will be
reflected in equity prices. In the face of a strong uptrend,
the corrections should be seen as buying opportunities.
Even if the bullion price doesn’t gain
another dollar, the gold producers need to replace reserves.
The hunt for new deposits will pay off in a very big way for
junior companies that are able to deliver large gold deposits
to the hungry majors.
here to listen to a recent radio interview with Al Korelin
discussing this topic
Gold will continue to be the focal point for
an exciting 2004. In addition, several of the other metals
will also provide an opportunity for profits.
Wishing everybody a happy and prosperous New Year,
here to listen to Lawrence’s recent radio interview
discussing majors replacing gold reserves
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