THE MICIK MARKET LETTER
Gold - What Is The Long-Term Consensus Today?

Alan Micik
Posted Dec 5, 2011

In 1993, silver traded under $4, and I bought it. It was a true “no brainer”, since Gresham’s Law would eventually apply. That first purchase was for 3 bags of 40% silver for $4300, when its face value was $3000. I knew it would be a long time before it would pay off.

In 1999 & 2000, I loaded the boat with silver. I was at a brokerage firm at that time, and I was denigrated for that by my peers.

The more my bullish opinion on gold and silver was ridiculed, the more I bought. It was, I believed, the perfect contrary investment to the then “internet craze”.

I sold my silver in the first quarter of 2008 between $17-20. It dropped to $10, and is much higher now. Since then, I’m far more interested in gold, and that’s what I replaced the silver with at that time.

As a former broker with Merrill Lynch & Kidder Peabody, I have seen customer greed and fear. It is always the same…it can’t go down, because; it can’t go up because. I have seen fortunes evaporate, and fortunes made. The fortunes made were always the contrary position to the consensus, at that moment in time. It will always be so.

So, what is the consensus on gold today?

After 11 years of UP, there’s not a bear to be found. All the forecasts are for higher prices, not lower ones. It’s just not that easy in markets for XYZ stock, or gold, despite the “because”. Something always changes the “because”.

It’s going to happen in gold, just like in every market. Extreme caution is now warranted in AU, unless this is indeed, the end of the financial world. I doubt it.

I ask the following questions for you to reflect upon, as I have:

• Where is the fear in owning gold today?

• Why is gold $100 below its last 90% bulls reading of 8/19/11?

• Gold registered another 90% bulls reading this last week…will gold rally thru recent highs with 90% bulls?

• With all the Sovereign problems, shouldn’t gold be at highs, or near them?

• Why have gold stocks (Goldies) gone nowhere in over one year when they are normally leaders at the major turns?

My thoughts regarding the above questions:

• There is no fear. Markets with a lack of fear go down. Fear will be created by a break of gold’s long-term uptrend line.

• Gold is lower than 8/19/11 / $1850 because there were no bears at that level.

• With another lack of bears, gold will proceed lower. 90% current bulls leaves no margin for upside action.

• The world is “blowing up”. Gold isn’t, and that is Mr. Market’s way of telling us the bulls case on gold has failed, for now.

• The goldies are simply forecasting the problem(s) with gold. They’ll bottom when fear returns to the gold market.

When fear returns, I’m a buyer.

Al

***

An Interview With Mr. Market on Gold (11/27/11):

Let’s ask a couple of questions of Mr. Market today, the final price arbitrator of all disagreements.

First, why are gold shares so underperforming the metal?

Mr. Market: Perhaps, gold has over-run itself for now, and the shares relative to gold, are forecasting a decline in the metal, opposite the expectation of most gold share holders, despite some recent dividend announcements. Dividend increases, you realize, often come at the top of an industry’s cycle, not the bottom. You don’t need dividends when your shares perform. Many have said the shares are cheap “relative to the gold metal”, but they miss that the shares surged before the metal around 2001, while gold stood still. The opposite is true now. The shares are once again, leading on the long-term.

A second question Mr. Market, is how can that be? It’s clear that Europe is catastrophic, and the U.S. is likely not far behind.

Mr. Market: Where have you been? I’ve rallied from $250 to a $1900 high…what do you think that was about? With the news you are describing I should be at a high right now, and I’m not. I already priced it in some time ago.

Alright, the shares are underperforming, but gold will go up, right?

Mr. Market: No, not until there is fear in owning gold…that just doesn’t exist right now. I will have to break the $1550 long-term uptrend-line for fear to return to my market. Then, it is time to re-evaluate.

###

Dec 3, 2011
Al Micik
email: atmmail@sbcglobal.net

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