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Gold/Mining/Energy : Gold Price Monitor

GDXJ 114.21

-0.4%

4:00 PM EST

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To: Abner Hosmer who started this subject	7/8/2000 10:40:28 AM
From: Crimson Ghost	Read Replies (3) of 116815

Interesting post on gold from the BEARFORUM. I am a bit of a gold bug, but I would strongly recommend against buying gold stocks on margin. Gold should only be viewed as a long term hedge against the Dollar. The reason I like AU is because the 7% dividend yield makes it much easier to hold for the long term. People have been saying for years that the gold bull market is just around the corner. While cleaning out some files tonight, I found an e-mail response I had printed from an intelligent and sincere man named Del E. Johns. In November 1997, I had posted on the Kitco board that gold may stay depressed for another 2 years. This was his response: =========== Aren't you assuming that nothing will happen to stimulate the investment demand for gold over the next two years? There is a current 1500 tonne annual supply shortfall already and a 8000 tonne short position from outright short selling and forward sales. The central banks are selling 500 tonnes a year outright so the short position has to grown 1000 tonnes per year to keep the prices at their current level. The current short position amounts to about 25% of the international monetary reserve. This is not sustainable for another 2 years in my opinion. If confidence is lost in the U.S. $ as a monetary reserve, then gold will start to move. The central banks have about 700 million oz. left to sell. At $300 per oz. it would only take $210 billion of new demand to soak up the entire world monetary reserve. The hedge funds have $150 billion before leverage (10x leverage = $1.5 trillion). Any kind of sustained increase in demand in this thinly traded market will run the shorts and cause a massive price increase. The fuse is lit. It's only a matter of time. ========== When this note was written, gold was at about $310/oz. Now, 2.5 years later, gold is at $285/oz. My intent is not to criticize, but to point out that things can take a lot longer to develop than we think. Markets do not listen to logical arguments. The gigantic trade deficit will EVENTUALLY catch up with the Dollar. Trying to guess when is futile. Original Fred

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