The Fat Lady Isn't Even In The Building
Grandich Letter

Peter Grandich
Tuesday, March 29, 2005

Other than believing a correction was due at certain times, I've maintained a bullish long-term stance towards gold. The latest "step back" in what I've constantly described as a "two steps up, one step back" trading pattern for gold, has once again brought fear to the hearts of many gold bugs and brought bearish forecasters to the forefront of their attention. The very fact that this is the case reassures me that nothing long-term has changed. It's when these corrections are met with excitement and contentment (versus concern and uneasiness) that I will likely have to rethink my position.

There's always a "major concern" during the step back part and this time is no different. The latest hiccup is the belief that the terminally ill U.S. dollar has had a "miracle" healing and has begun a long rise back to stardom. Now, I can give you a laundry list of reasons why such a belief is fantasy, not reality, but I will just rest my case on the words of Lyman Beecher who said, "Never chase a lie. Let it alone, and it will run itself to death."

The fall of the U.S. dollar as the world's reserve currency has already begun! The latest blip up is nothing more than a countertrend rally in a secular bear market.

Gold $425.50 - A picture is indeed worth a thousand words

Since turning bullish on gold in the spring of 2003, I have constantly stated that $500 an ounce was to me, a question of "when?" not "if?" Perhaps it's time to show you why I have felt this.

The chart above is the monthly gold chart going back to 1975. As you can see, the $500 level has capped all rallies for over 20 years. At the same time, a rounding (or a W-like) bottom was formed between the years 1997 and 2003. This bottom was built over a multi-year period and the uptrend line (indicated on the chart as "up") from the 2001 bottom has never been violated, despite periods of fear and calls for the end of the gold bull market. These factors together continue to give me cause to believe that the $500 level is a reasonable and justifiable target.

Unless we break below the uptrend line, I see no reason to change my $500 target.

Peter Grandich
Grandich Publications
P.O. Box 243
Perrineville, NJ 08535
phone: 732-642-3992
email: Peter@Grandich.com

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