Gold's floodgates open, finally
Above $300, metal's rally to spark mania, some say
cbs.marketwatch.com
By Thom Calandra, CBS.MarketWatch.com
Last Update: 3:15 AM ET Feb. 9, 2002
SAN FRANCISCO (CBS.MW) -- Adrian Day, a Maryland money manager who has specialized in gold mining companies for 30 years, swore to himself years ago he would bite his tongue if he ever caught himself saying, "This time it's different."
Yet there Day was, watching from his Annapolis office as the spot price of gold this week pierced the $300 level for only the fourth time in four years. "What really is different this time is the previous runs were provoked by a single instance, like Placer Dome buying back its hedge book," says Day, president of Global Strategic Management, which has $60 million under management. "This is not a short, sharp rally. It has been a nice slow trend up since January 2001, and it has not been provoked by one incident."
Gold's longtime believers are hoping the metal's rally this time around will be different. Some, like mutual fund manager John Hathaway, predict gold will surpass $1,000 an ounce in coming years. Others, like Pierre Lassonde, soon-to-be president of industry leader Newmont Mining (NEM: news, chart, profile), see gold mining stocks, already the best-performing sector in most of the world's stock markets, doubling again as gold goes to $350 an ounce
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"Gold is the best leading indicator of monetary conditions," says currency analyst Kenneth Landon at Deutsche Banc in Tokyo. "It is also one of the least understood factors. That's what makes it so fascinating and potentially profitable for people who truly understand gold's significance."
Gold: an obsession
Newmont's Lassonde, who has been in the mining business for three decades, believes gold's rally this week above $300 will usher in a long bull market in the metal. In some cases, however, the belief among other gold bugs is a swaggering one that comes from a decade or more of frustration.
"Has a bull market in gold shares begun? Is the Pope Catholic?" notes Bill Bonner of The Daily Reckoning, one of dozens of investment newsletters that are promoting bullion's rise. His comments came just as the spot price of gold this week closed above $300 for the first time since February 2000
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The spot price of gold rose as high as $307.80 Friday in New York. A London fix of the metal's price at $305.10 was the first setting above $305 in two years. In Tokyo, as rumors swirled about a possible government freeze on bank deposits, December's gold contract hit its highest price, in yen, since August 1998.
If the rally continues, gold's believers may soon be calling themselves the next investment craze. Bill Murphy, the former Boston Patriots football player who founded what may be the world's most rabidly fanatic gold Web site, www.LeMetropoleCafe.com, this week was flashing the message, "Gold headed for $600 an ounce."
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"My guess is we will not see gold at $300 bid for very long. It could go $350 to $400 bid in a week as the short-sellers panic," Murphy told me confidently from his Texas office. "That will shine the light on GATA big time." |
