Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: kormac who wrote (73835)	9/19/2000 7:48:48 PM
From: isopatch	Read Replies (2) of 95453

Seppo/OT. No. IMO gold fundamentals are not priced into the market. Inflationary numbers reflecting the huge increase in petrochemical costs have been slowly working their way through the world manufacturing infrastructure but are yet to surface in our PPI or CPI. When traders get wind of that (perhaps via government leaks<g>) the golds will take off. In the meantime, such reliable gauges as the Columbia University survey have forecast for several months now that a significant boost in inflation is definitely in the cards and en route. My guesss is that "suprising" (to the "usual" experts) jumps in inflation stats will get major play on the small screen in your home before Santa arrives. During the inflationary episodes of the 1970s, I noticed there was quite a large lag between an important rise in oil prices and the bleed through into the inflation numbers. This time, I think the raw materials and mfg goods inventories overhang in Asia from their severe recession have made the lag longer. Remember folks, the Asian Tigers and China ARE NOT into "just in time" inventory management<G>. And because so many more of our mfg goods are now made there (vs the 70s) we have to take that into consideration when estimating the time it takes for the new higher priced raw materials to transit into and through their factory inventories and into finished goods that are exported and sold here. One other caveat. The gold market is very thinly traded compared to other markets which receive comparable attention from the financial press and the investing public. It takes vastly more capital to have an impact on the prices and ST trends of S&P futures, T-Bonds or Currencies than is the case in the gold market. As a result gold quotes can move very sharply up or down very quickly. In fact the moves can be so quick and volatile that even professional traders have difficulty getting positioned to play them. September 1999 was a good example. A friend of mine who has a great deal of experience trading Gold, Oil and NG on the NYMEX told me very few saw that move coming and either missed it entirely or got on board too late to make any serious money. That said, it makes sense to carry at least a partial position in the precious metals stocks well in advance of any anticipated rally. Am not over weighted in the golds but I do have a fairly large position in AEM. Isopatch

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