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Smart money indicators still give green light for gold stocksClif Droke
GSR snippet
A subscriber writes, "Contrary thinking is what makes you money. I should be loading up on US dollars and getting rid of my Canadian dollars because the euphoria surrounding my Canadian dollar and the absolute death knell for your US dollar has been overwhelming in the media over the last few weeks." He's got a point. Here are a collection of major headlines from the Financial Times over the past several days: "Grim prospects for dollar" "Dollar undermined by US home sales numbers" "Dollar hit as homes data show oversupply" "Dollar sinks as gold rises to a 27-year peak" "Dollar index sinks to lowest ebb" Such gloomy headlines focusing attention on the dollar's plight are typical near major bottoms. While the dollar is likely undergoing an intermediate-term bottoming process, it's equally likely that it could be several weeks or even months before the dollar is able to make any significant headway to higher levels. In other words, it's not hard to envision a scenario where the dollar index moves more or less sideways near its lows for a while before consolidating enough strength to turn up again. This scenario wouldn't necessarily be extremely beneficial for the price of gold, though it would be somewhat beneficial. More to the point, however, it would be more beneficial for the gold stocks since all it takes for a buoyant gold stock market is a relatively stable and buoyant gold price -- not necessarily a rising gold price. Even if the dollar is in the process of putting in an interim bottom, there's still room left for the gold stocks to rally. This is especially true for those golds that haven't been able to participate fully in the previous rally. Another factor worth examining are those gold shares which have a pronounced tendency to rally in the fourth quarter from a seasonal standpoint. There are a few on our list... ###
--Clif Droke 321gold Ltd |
