AU...IMO
For those of you who have been to a gold show -- you will have seen this. It could be New York, San Francisco...or Las Vegas. Hundreds of glitter bugs wandering around from booth-to-booth ..gathering up brochures to qualify for a chance to win an ounce of gold ..or a diamond. Ian McAvity might be standing by a booth having a conversation with someone, and within minutes a crowd of 20...and soon over 100 will be hanging on to his every word.
Quite sad most of the last 20 years actually -- waiting for him to say something to fill up their enthusiasm tanks that have been running on fumes for so long. And smart with statistics beyond belief..like most of Ian's colleagues... but mainly wrong with only about 6 years of ups, and around 14 of downs since the early 80's. Still waiting for that run to 800 plus just once more. Lately, Ian has a whole new audience of perhaps tens-of-thousands thanks to Thom Calandra, at CBS.MarketWatch.com.
Do you think the boomers that bought Nortel at $100.00 plus will be as loyal to the tech market 20 years from now...assuming they are still alive? Look to the long-term-thinking Japanese. Death showed up on a slow train waiting for their banking system to improve. No wonder gold sales are up around 400% over there of late. And in India, which is the world’s largest consumer, gold soared to a 6 year high last week.
Evidence is mounting to show that the largest cohort of North American investors will probably give up (like some of the Japanese are already doing) over the next 6 months and do for gold what they did for Worldcom. Just in time for more hedge/short covering. So how much time do we have left in this rally? While it is true, that the past does not equal the future -- the 3 runs (82 to 83, 85 to 87, and 93 to 96) may offer some clarity.
The 93 run lasted 43 months, while the average for the previous 3 bull runs were 31. We are currently in month 20, and there are dozens of signs to indicate that it has just begun. Gold prices were up an average of 35% over the 3 runs, and are only up 19% as of now. Have you noticed how many new analyst's have moved their short term target up to 340 and even 350 over the last few weeks? Do they finally get it?
Predictions and talk mean very little at this stage...what matters is what people are doing. Hedge-hogs like ABX are suffering from negative investor sentiment while NEM and GFI are soaring. NASDAQ stats from March 31 show the following: 268 institutions bought 92,318,112 shares of NEM, while 95 sold 9,597,911 shares, and 82 new institutions bought 14,093,149 shares. Compare that to ABX where only 39 institutions bought 12,411,554 shares, and only 20 new ones bought 6,111,254 shares. The April and May numbers are going to be even more drastic. Another great stat is that GFI is up almost 500% in the last 18 months. ABX is up only about 70% in the same period.
NEM plans to, "aggressively replace reserves while selling off low-grade assets." This needs to be done to reduce their 7.3 Mil. ounce hedge book that they inherited from Normandy. There are only 2 ways for ABX (and NEM to a lesser extent) to unwind their short positions. They need to quickly buy very large amounts of physical gold -- or acquire production. Seem as how they are in the business of selling gold.. buying production is one of their only options. One or 2 mergers and the trickle down excitement is going to drive the small cap gold stocks wild. My guess is that we will see 6 to 12 mergers and acquisitions by year end to over the next 2 years.
Other reasons why gold remains buoyant:
- Conflict between India and Pakistan
- Middle East tensions
- Increased fears of further terrorist attacks in the US
- Funds flowing out of US - no sign of a rebound in profits
- Gold continues to be sensitive to currency moves
- US $ hit a 28-month low last week against the Swiss franc
- Yen rose to a five-month high against the dollar
- Euro rose to an eight-month high.
- Non-stop gold buying in Japan
- Fall in global gold supply
- Boomers buying gold to protect savings and retirement accounts
- Scandalous investigations continue to hurt Wall Street
- Loss of confidence in equities and accounting
- Mounting fear that NASDAQ will test lows by fall or sooner |
