Dale,
My favorite gold share is Durban Deep, DROOY. DD has the capability according to my good friend Jim Blanchard of 20 times the current price if gold gets to $500 and stays there for a year. and in a private phone conversation the other day he thinks 50 times ain't
unreal. I have been in the bowles of DD and know the prople that run
it. DD is now the result of the merger of DD, West Witts. Bufflesfontein and Blyvoors, this should be a powerful combination.
There is a big consolidation in the SA mining industry and it ain't like it used to be, be careful what you buy.
See the enclosed article from Forbes,
The Case For Gold
Forbes - Jan. 1998 by John Brimelow
THE YEAR 1997 was ghastly for gold bugs: Large central bank sales, rumors
of larger sales and even of German and Swiss intentions to mobilize'-that is,
to sell or lend out their gold reserves-have sent the gold price reeling down 25% this year. At a recent $281.40, gold is at a 17-year low. Damage to gold share prices far exceeds that done by the bear market of 1992. The Bre-X fiasco, along with other scandals, demoralized investors and combined with tax-loss selling of unprecedented savagery to devastate gold stocks. John Brimelow is director of international equities for Donald & Co., a New York brokerage firm.
A significant gold price rally is probable early in 1998. Gold shares are so beaten down that any such price move could cause a multiplication in many equity values. Gold market professionals agree that over shadowing the various species of short-sellers, mine-hedgers and lesser central bank disposals, there has been a truly immense seller. This seller has brutally crushed several promising rallies, nullifying usually dependable technical indicators and enormously encouraging major short-sellers, who are now confident that they can easily cover their positions. The culprit is widely suspected to be the Dutch central bank, perhaps with accomplices.
What's the Dutch game? A good guess is that the Netherlands Central Bank fears that the European Central Bank coming on stage in 1998 will vote to ban the conversion of gold into income-producing assets. The Dutch supposedly want to beat the deadline, expected to be very early in the year. At any rate, European bank-related selling in 1997 might well have approached 1,000 tons. Outside the ECB zone, only the U.S. and Switzerland have this much gold in reserve and for constitutional reasons the Swiss cannot sell before 2000, if then. To duplicate the 1997 debacle, a implausibly long line of lesser central banks would have to sell most of their reserves in 1998. Research by my friend and client Frank Veneroso, of Portsmouth, N.H.-based Veneroso Associates, underlines the improbability Of Such Continued selling pressure.
Veneroso believes that central bank lending of gold already exceeds 8,000 tons-25% of all central bank holdings. He thinks virtually all of this gold has been absorbed into jewelry and is therefore not now available to repay these loans. Central Bank mobilization has gone much further, faster, than widely realized. As understanding of this spreads, Central Bank behavior is likely to become more
measured. Fearing diminished selling, professional gold bears are alleging that Asian demand for gold is collapsing because of the currency crisis. Actually, the
main Asian buyers, China and India, are not affected. China has not devalued and is reflating, A slight Indian devaluation more than offset by the recent adoption of gold import barriers. And Japan's banking crisis has triggered strong gold-buying by the
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public-which I think is likely in the aggregate to offset Southeast Asian weakness.
Once tax-loss season is behind us, a significant gold price rally is probable for early
1998.
Recent data, in fact, indicate physical gold demand in the East and even in America is surging. Quite predictable since gold is at a 25-year low in real terms. There are some massive hedge fund shorts out there. They will no doubt defend their gains before year-end. But the logic of the situation is that they and gold mines not wanting to see their hedging profits disappear must buy back aggressively as the cessation of exceptional selling. A return to a modest $350 level would produce dramatic share-price gains.
I especially like South Africa's Durban Deep ( Nasdaq, DROOY ) and Randgold
( Nasdaq @RANGY ) ; North America's explorer Golden Star ( Amex, GsR ) , junior producers, TVX ( Amex,TVX ) and Royal Oak ( Amex, RYO ) , and large-cap Homestake ( NYSE, HM ) .
Tax-loss selling in gold and gold shares will be considerable this year, but by
the time YOU read this, that selling will be nearly over. A good bounce looks
extremely likely.
Forbes - January 12, 1998
Ray DeMoss, HAPPY NEW YEAR!!! |
