Holiday Shopping
December 17, 2004

I was riding a mule and flicking bugs off my shirt in the jungles of Mexico last week while examining the investment potential of a couple of exploration companies. It was only when I called my broker from the airport in Mazatlan, on my way back, that I found out the gold price had declined from $455 an ounce to $435 an ounce. You can probably imagine my delight.

The stock market is often soft during December due to tax-loss selling, but I did not expect the gold and silver markets to play along. The combination of declining metal prices and tax-loss selling is adding an additional dimension to Christmas shopping this year.

The gold price is still just reflecting the US dollar exchange rate -- nothing has changed. The fundamentals for the US dollar remain very bearish. But I'm not going to go into that today. We've discussed the problems facing the United States, its economy, and the dollar at length this year. Nothing I can say today is going to make any significant contribution to our collective understanding of the situation.

The dollar will continue to decline in busts and spurts and the gold price will continue to rise with similar volatility. Before long, gold is likely to reach seven, or eight hundred dollars an ounce (or more). If the gold price is going that high, say, in the next five years, does it really matter that it declined twenty dollars last week?

Relax; spend some time with your family and friends. Take a look at stock prices from time to time and treat the declines you see as holiday season discounts. When you see a bargain you like, buy it.

I don't know how long it will take for the dollar to resume its destined downward trend and, quite frankly, I don't care. The longer it takes, and the lower stock prices go, the better the deals. And if prices start going up soon, that's okay too, since by now I am assuming that anyone with an interest in gold (and silver) is already way long.

I will resume my regular commentaries next year, and I wish you all the Season's Best.

Paul van Eeden

PS Brent Cook, who is now a regular contributor to my paid newsletter, recently wrote an article about geology and geologists that you might find interesting. Look for "Beware of Geologists" on Kitco.

Paul van Eeden works primarily to find investments for his own portfolio and shares his investment ideas with subscribers to his weekly investment publication. For more information please visit his website ( or contact his publisher at (800) 528-0559 or (602) 252-4477.


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