Update on the Metals
Grandich Letter Special Alert

Peter Grandich
Jun 16, 2005

Other than an expectation of either a pullback or correction, I've maintained a very bullish stance towards gold and most other metals for two years now. However, a few weeks ago, my staunch support for gold was severely tested. Numerous subscribers and the usual "loose-cannon" anonymous Internet posters were calling into question my reasoning to believe the Euro's decline would not be the death blow to the bull market in gold. Everywhere you looked, there were predictions that gold would break below $400 or even go to $375.

I have contended that $500 gold was not a question of "if?" but "when?" I said the second leg of the bull market should take us there and we would know it when gold began to rally against most currencies (including the U.S. dollar) not just when the Euro rallied. Well, in case you've been missing for the last couple of weeks, let me be the first to tell you - The second leg has begun!

When the Euro began to fall out of bed, many people thought a short gold position was a no-brainer. The daily mood in the gold pits was that it was only a question of when gold would break below key support around $410 and then below $400. However, when gold held above it and even began to stick its head up despite further erosion in the Euro, the shorts began to cover. This was followed by reports that physical buying of gold was very strong, as The World Gold Council (www.gold.org) reported very strong demand for the first quarter of 2005. The combination of the short-covering and physical buying gave new wind to the longs and we have since picked up a head of steam that appears it can take us to new highs above $454 this summer.

Silver - Key resistance is in the $7.50 area. The commercials bang the heck out of it when it gets around that level. They may not be so lucky next time around and we could see a big run to above $8. I'm not a big silver bull as I do think most metals will see their highs for 2005 in the next few weeks. However, it's not going to fall off the cliff, either.

Copper - Has held up surprisingly well given a belief that an economic slowdown was apparent worldwide. Continuing low supply and the real estate bubble that hasn't officially burst yet (signs are already apparent, at least to yours truly) has lent support to copper. A short squeeze is underway IMHO, but I'm afraid once it runs its course, the highs for 2005 and maybe even 2006 should be in place. The upside is $1.75 but the downside is $1.25. Enjoy it, though, while it lasts.

Platinum and Palladium - The most consistent metals in terms of maintaining a tight trading range. And there's nothing on the immediate horizon to expect otherwise - although I suspect Palladium could surprise by getting above $200 and staying there.

Uranium - I've been "hot" on Uranium for some time (but was bearish on uranium shares until now). Believe it or not, I'm even more enthralled now. The recent news of a company going public whose primary purpose is to buy and sell uranium has, IMHO, opened the door for similar companies to be formed that can become almost self-fulfilling prophecies in pushing up uranium prices. I hadn't given much thought of uranium getting past $50. However, on the belief that hedgefunds and sophisticated speculators will see Uranium Participation Corporation (U-TSX-V) has a model to play the uranium bull market, $100 is now feasible.

Cobalt - This is my sleeper metal. The hybrid car market may just become the main car market faster than most think. And the use of cobalt in hybrids can greatly boost its upside potential.

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

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