Let's turn to gold
Richard Russell
Dow Theory Letters
Jun 19, 2003
Extracted from the 18 June 2003 issue of Richard's Remarks
Let's turn to gold, which was hit today, probably because the dollar was stronger. The point & figure chart (click) provides a good picture of where gold is. The rising blue trendline depicts longer-term support.
You can see that gold is rather laboriously building a rising or bullish structure. The next technical "victory" for gold would be for gold to reach the 376 level and the "victory of the year" would be gold hitting a new high on this chart at the 392 box. The way things are going, it's not going to be easy.
Many subscribers write that aside from Newmont, the leader, they want an interesting speculative gold stock. One that I've mentioned is WHT or Wheaton River Minerals which I show on a daily chart below courtesy of Big Charts. The rising volume as the price advances is an encouraging indication for WHT Wheaton River Minerals Ltd.
Further note on gold -- It does seem to me that in the very short-term, the metal, gold, is a "football" that is easily manipulated by the Commercials and the gold banks. Of course it's a lot easier to manipulate one item than it is to manipulate dozens and dozens of items, and I'm referring to the metal as opposed to the many gold shares.
Therefore, I notice that the gold shares have stopped "jumping" to the tune of every daily swing in the metal. For instance, as I write this morning that gold is down six dollars yet the leading gold share, Newmont, is down only 33 cents. XAU is down only .97 and HUI is down less than a point.
I also want to emphasize that the gold situation is a long-term picture, a situation based on the US heading into a crisis of overspending and undersaving, a crisis where the viability of the dollar will ultimately come into question. It's a crisis-situation where the US is now running a trade deficit of $40 billion a month or over an incredible billion dollars a day.
The coming dollar crisis seems almost set in stone. The US is in a position that no other nation has been before -- the US is the world's dominant military force, we've become policeman to the world, and at the same time we've become the world's largest debtor. The US is slated to spend $380 billion on its military next year. This is the formula for a collapsing currency -- the only question is timing.
And on top of our coming international mess, we're facing horrendous domestic problems via our aging population and our unfunded and out-of-control Social Security and Medicare expenses. All these difficulties have, so far, been handled via the wholesale production of fiat dollars. Ultimately, it's the viability of these paper dollars that must come into question. Can you carry debt with infusions of more and more debt? You can? But for how long? Oh, until the next administration and the next Fed chairman take over? I see,
Conclusion -- Investors holding gold or gold shares will have to be patient. And you'll have to learn to ignore the erratic changes in the intra-day and even daily changes in gold. The gold shares already seem to be learning that lesson.
More follows for subscribers . . .
Richard Russell
Dow Theory Letters
© Copyright 2003 Dow Theory Letters, Inc
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