Sharon:
On March 20, I ran my computer model for select funds that most likely to double. The computer output gave 5 funds, two of which were FSAGX and FSESX. Well, I knew something about FSAGX and FSESX that the computer didn't. Then I put FSAGX and FSESX on the top of the list of 5 funds.
On FSAGX, computer did not know the following:
* There are two types of gold, gold bullion and gold mine stocks. FSAGX, XAU are based on gold mine stocks. $286 per oz is price of gold bullion (POG).
* On March 20th POG was near 20 years low.
* There is a GMI/GB (Gold Mine Index/Gold Bullion) ratio. If the ratio is in 1.20-1.45, gold mine is undervalued. In the following 6-12 months the gold mine stocks should move up significantly. If the ratio is in 1.90-2.15, gold mine is overvalued.
* On March 20, GMI/GB was 1.11. Gold mine stocks were very undervalued
in relation to POG, but POG itself was near 20 years low!
* The GMI/GB ration can be calculated using data from Barron's Market Lab. This ratio is also posted by Larry S. in SI, on Sat or Sun. We may simply bookmark Larry S. to read the ratio.
* The Asian countries (India, Japan, Taiwan, China, etc) are big gold buyers. India is number one gold consumer in the world. The Asians usually buy gold at $295 or lower. They step up buying at $285 or lower.
* In early April when the POG was $295, then IMF announced a plan to sell gold. The leak of this news caused front running that knocked the POG to $285 and lower. Bill Murphy of GATA was very upset! So were many other good people, including me.
* But Chinese central bank wants to buy gold. I guess IMF could make a deal with Chinese central bank, to sell gold directly to them. Such sale will not disturb the gold market. Why not?
* In a war more people are inclined to buy gold. The Balkan war helps to sell gold.
Yesterday the Swiss voted to change the law that will allow the central bank to sell gold. Normally that should be considered as a bad news for gold, but today the POG moved up!
Julius
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