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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 680.27

-0.5%

Dec 1 4:00 PM EST

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To: pater tenebrarum who wrote (25966)	9/15/1999 10:35:00 PM
From: Fun-da-Mental#1	Read Replies (1) of 99985

Heinz, you make some interesting claims about gold. I'm curious to do some research and find out more. Meanwhile I have some counter-points for you to ponder. You say 4 years worth of newly mined gold supply are sold short. To me this means the consensus from those in the know is that the price of gold will continue to fall. You mention that gold miners trade at low P/E. This is because they have extensive hedging programs whereby they locked in contracts to sell gold for a few more years at the $300-350 level. As those contracts expire their profits will drop and the market knows it. Meanwhile those hedging agreements are an incentive for the gold miners to produce more than the market really needs. Last month I attended a talk by Gerald Harper, the president of the Prospectors and Developers Association of Canada. He said he expects that gold will rebound... ten years from now. He said he expects it will go to $200/oz and stay there for a while before it comes back. I don't remember the statistics he used to back this up, but basically he stated that the supply of both new and old gold is far outstripping demand, and this won't change until we have some major mine closings, which hasn't happened yet. He said some metals are bouncing back this year, but not gold. This guy has seen mining cycles come and go, and believe me he wasn't telling the audience what they wanted to hear, but it was the truth as he saw it. I am all for commodity investing, but gold is the exception. I'll buy into gold some day, but not for a few years I think. Fun-da-Mental

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