SUMMARY: My current outlook for gold mining shares has improved to MODERATELY BULLISH. My current outlook for gold itself has improved to SLIGHTLY BULLISH. Gold mining share prices are now anticipating a sharp drop in the gold price, which is therefore likely to occur. The current spread between HUI and spot gold is about 233, whereas the historic average is closer to 200. Therefore, a drop in gold to $316.65 per ounce is being anticipated by HUI, which closed at 116.65 today. This implies that gold mining shares have relatively limited downside risk, since gold is unlikely to go much below $316.65, assuming it even drops that far. Of course, in the initial stages of a sharp drop in the gold price, it is quite likely that gold mining shares will initially drop further. Once gold mining shares rebound consistently on consecutive trading days from early morning lows, it will be time to step up purchases of these shares. So far, this has not yet happened, but it could occur in the very near future. On a calendar basis, gold often bottoms just before the March full moon, which this year is due on Tuesday, March 18, 2002. One likely scenario is that gold itself falls sharply in the near future, but gold mining shares hold up quite well, refusing to break below important support levels from 2002.
truecontrarian.com
Updated @ 6:25 p.m. EST, Tuesday, March 11, 2003. |
