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Lawrence Roulston

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Happy New Year

By Lawrence Roulston            Printer Friendly Version
January 13, 2004

Let’s hope the coming year is as exciting and prosperous as the year just finished.

Extracted from the January 1st issue of Resource Opportunities


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.

Click 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,

-Lawrence Roulston

Click here to listen to Lawrence’s recent radio interview discussing majors replacing gold reserves


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