Metals Update
Grandich
Letter Special Alert Wed Feb 2, 2005 snippet
Peter Grandich
February 4, 2005
If someone said back in 2001
that gold would manage to stay above $400 an ounce come 2005,
they would've called for the men in the white uniforms. While
those same men are not yet needed, the mood within and around
the gold market is quite glum and somewhat depressing. Hulbert
Digest recently reported that the percentage of newsletter writers
who were bearish was at levels last seen during the depression-like
markets of the late 1990s. The percentage of large funds on the
Comex short hasn't been this high since 2001. Sentiment has almost
turned 180 degrees to the bearish camp since I moved to the sidelines
in late November. But, has the long-term fundamental pictured
changed since then?
The term "secular bull
market" has often been used to describe gold's rise. While
I don't disagree with this assessment, I think it's very important
to note that the rise itself has been mainly on the back of losses
in the U.S. dollar. The real gold bull run will be evident if
and when gold is rising in most major currencies. Such a scenario
appears most likely to begin in the second half of 2005 and into
2006. For now, the dollar is merely correcting a deeply oversold
position and rallies should be contained in the 85-86 area basis
the U.S. Dollar index.
Now before you buy into the
"mouthpiece" of the "Don't Worry, Be Happy"
crowd on Wall Street, Mr. Larry Kudlow of CNBC-TOUT-TV and think
that Uncle Sam's peso impersonation-the U.S. dollar, has found
new long-term legs, consider the fact that both Warren Buffett
and Bill Gates continue to predict and bet on the dollar's decline.
All those who think Kudlow has a leg up on these two gentlemen
need to be told the following:
- · Santa Claus, The
Easter Bunny and The Tooth Fairy are not real
.
· Elvis died
.
· NHL hockey is not dead (okay, maybe this one isn't 100%
correct)
I'll side with Gates and Buffett,
thank you.
Because this week is chock
full of economic and monetary releases, and Friday's employment
release is likely the single most important news to the gold
market this week, I'm going to suggest that unless that report
shows far above expected job growth, gold is making a very important
bottom. Even if they can massage that number, any wash-out caused
by such a feat should also lead to a major bottom. Either way,
the correction gold has been going through seems to be nearing
an end.
I have raised my opinion of
silver on the basis that it should act like the poor man's gold
if and when we move towards $500 an ounce on gold. I do believe
gold and silver deserve equal billing with base metals after
suggesting that one overweight towards base metals during most
of 2004.
The one metal that looks like it should only work its
way higher is uranium.
Peter Grandich
Grandich
Publications
P.O. Box 243
Perrineville, NJ 08535
phone: 732-642-3992
email: Peter@Grandich.com
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