wanted to amend my response to your previous question:
depends how the trend breaks if it does and how the shares behave... etc etc etc. NO, was too final a word for this situation. speaking for myself of course.
here some undying gold love btw:
Multi-currency rally may boost gold
Sharp gains for explorers, even with bullion swoon
By Thom Calandra, CBS.MarketWatch.com
Last Update: 12:06 PM ET Mar 17, 2003
SAN FRANCISCO (CBS.MW) - Against a backdrop of war, signs are emerging the gold
market may be ready to resume the rally that made it last year's star
performer.
Wall Street banks are advising clients to take advantage of the weakness in
gold mining shares. Veteran gold investors are reminding their followers that
gold, and the accompanying mining equities, are by their very nature rocky --
and subject to swift declines and rapid rises.
Producer inflation in the United States -- largely a measure of prices for
basic goods -- is gaining, boding a possible spell of accelerated inflation for
consumers. The Producer Price Index is showing a 25 percent rise in heating oil
prices alone -- and a fair bit of food inflation, too. Inflation is almost
always a boost to gold, which is seen as an alternative to eroding currencies
amid higher prices for goods.
In addition, the metal, thanks to a mostly rising dollar in the past several
days, is gaining, albeit slowly, in the value of most currencies. Such a
multi-currency rally is, according to experts, one of the hallmarks of a
lasting bullion rally.
Usually, gold rises when the dollar falls, and vice-versa. A multi-currency
rally for gold may demonstrate that world investors are becoming increasingly
unsure of the financial outcome of a U.S.-led invasion of Iraq.
"Gold is up today with the dollar slightly off against G6 currencies, so the
dollar is weakening," Michael Darda, an economist at Polyconomics Inc.,
explained to me Monday morning -- before a powerful dollar and stocks rally.
"(But) last week the Thursday gold drop corresponded to a rise in the dollar.
The gold pop today has exceeded the dollar decline against G6 currencies in
percentage terms, though, so that means gold still is rising in other
currencies, just less than in U.S. dollars."
A powerful stocks and dollar rally by midday New York time had taken the wind
out of gold's sails -- and lent even more support to the dollar. With President
Bush expected to address the nation Monday evening, the dollar surged against
most currencies, with the euro falling below $1.06. Stocks also rose sharply.
Gold prices lost all of the morning's gains and were last at $336.10.
Earlier in the morning in New York, gold was rising as much as $6.20 to $343.30
an ounce after falling as low as $332 in the spot market Friday.
The dollar-gold story does not always unfold like clockwork -- as evidenced by
the rapid turnaround in markets Monday morning. War talk has the dollar jumping
up and down like a Mexican jumping bean in the past week. Darda at Polyconomics
is actually expecting a further drop in gold and a rally in equity prices,
especially if the Bush White House achieves what he calls a "bloodless victory
in Iraq."
And the gold-currency link?
"Gold is climbing against the other currencies, but only slowly," says James
Turk, a financier and longtime currency and gold analyst. "Gold is still below
520 Swiss francs per ounce." Turk, whose Freemarket Gold and Money Report takes
a detailed look at bullion's link to currencies, believes a full-fledged gold
rally will resume once gold gets above 520 Swiss francs. The Swiss franc is
seen as a politically neutral currency.
The gold price right now is 464 Swiss francs per ounce -- calculated on a $342
dollar gold price multiplied by 1.357 Swiss francs per dollar. "A break above
520 Swiss francs per ounce will be as significant as the break above $325 has
proven to be," Turk told me Monday.
Other views on the metal:
Gold shares, pummeled of late, may resume a sharp rally. As of Friday, the gold
price had slid fallen almost 4 percent since Jan. 2 while the Toronto Stock
Exchange's gold mining index has lost 21 percent. "The year-to-date gold equity
weakness has led to a sharp decline in valuations," says analyst Michael
Jalonen at Merrill Lynch. "The senior and mid-tier producers are now trading at
1.8 and 1.7 times net asset value, below the 2.5 times level seen in 2002."
"The gold indices will probably continue to back and fill for several trading
days, as gold itself may continue to decline, but the intraday lows should hold
for most gold mining shares," says Steven Jon Kaplan, one of several dozen gold
newsletter writers who have turned strongly bullish on mining shares in the
past week. "A sharp rally in gold mining shares is likely to begin later this
month." Kaplan of follows the Amex Gold Bugs Index (HUI), whose level he says
124.25 Monday morning was 2.2 percent higher than Friday's close.
Gold's biggest believers are sounding non-plussed about their stalled rally,
which produced 2002's biggest mutual-fund gainers. "Whether it's bombs
beginning to drop or bin-Laden being cornered in a rathole in Baluchistan, is
it any wonder that some would rather have some money off the table," says
Robert Bishop of , which has been tracking the industry over the span of three
decades.
Perhaps the most pleasant surprise for gold's hard-rock crowd is the stamina
shown by the smallest gold mining company shares: the so-called junior
explorers. Scores of the Canada-traded stocks have lost less than 10 percent of
their value in the gold swoon that began in early February. Larger producers'
shares, like Meridian Gold (MDG), have seen their values decline as much as 30
percent from their early February peaks.
"The high-quality juniors don't suffer as much from the metal's volatility
since the more sophisticated shareholders are content to ride out the
volatility; they understand why they own the stocks," Paul van Eeden of gold
service International Speculator tells me.
Why do they own the stocks? For many, it is the possibility of vast gold
discoveries that can transform a $10 million company into a $500 million one in
the space of a year or less. Consider Nevsun Resources (NSU), a Canada company
whose west African operations appear to be yielding not one, but two
significant mines. Nevsun shares are almost seven times their value of a year
ago, making the company the biggest gaining gold-mining stock in the world in
2002 and raising its stock-market worth to $161 million Canadian.
On Monday, shares of Wolfden Resources (YWO) rose 2 percent in Canada trading
to $2.30 Canadian. The company's shares (market cap: $58 million Canadian) fell
as low as $1.78 in Canada trading last week. The Calandra Report, a new
subscription service, updated the company's status on its Watch List last week.
Wolfden is exploring for gold in the rich Red Lake mining district of Canada,
stomping grounds of New York Stock Exchange-traded miner Goldcorp (GG).
The day's biggest gainer in early going Monday was an even smaller company, SKN
Resources (SRL). The Vancouver, Canada, company is active in the same China
region as Southwestern Resources (SWG), whose shares have skyrocketed following
promising reports of test results coming in from Yunnan Province.
SKN Resources was profiled in this space Friday, when the shares were selling
for $1.60 Canadian. SKN on Monday morning was trading for $2.50 Canadian,
giving the company a market capitalization of -- get this -- just $8 million
Canadian. See the SKN report in Thom Calandra's StockWatch.
In the larger arena, Kaplan at True Contrarian says Meridian Gold is his top
choice. "It has dropped over 50 percent from its September 2002 peak, mostly
because of worries that its Esquel mine in Argentina will experience delays in
opening due to a local judge's decision to require additional environmental
permits," the gold writer tells me. "The unemployment rate in Argentina is
quite high, due to their severe recession, and it is certain that the
government there will welcome any newindustrial project that it can get. The
overreaction to this headline news is itself a compelling reason to buy."
Gold gathering ahead
The year's next big gold conference comes to Las Vegas in late April. will
present more than 25 speakers and 100 companies from the mining industry. See:
Now available: The Calandra Report
Out this week: the third issue of The Calandra Report, a new subscription
service. This week's report, with Watch List, includes the service's first
recommendations, and interviews with two executives who may make themselves,
and their shareholders, very wealthy. Here's how to order.
Thom Calandra's StockWatch is CBS MarketWatch's flagship column. The regular
report is headed into its eighth year at CBS.MarketWatch.com. |
