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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: JDinBaltimore who wrote (28258)	10/3/1999 1:53:00 PM
From: michael r potter	Respond to of 99985

Some time around 1982, I read an article that stated that the price of gold was most influenced by the rate of increase or decrease in inflation. That is not the rate itself, but the rate of increase or decrease. There does seem to be a correlation, certainly much more than previous beliefs that it responded to various political or military crisis scenarios. If there is a correlation, it is generally believed that the rate of increase in inflation is now occuring. It would also follow that gold should rally and will not go back to where it was, as inflation is accelerating, if not yet in the official #s, certainly in the various inputs that will influence the CPI down the line. From a sentiment standpoint, it is quite positive that after the explosive move Mon. and Tue, gold has held the majority of its gains, while interest and comment quickly fell to near pre-rally levels. It was also bullish, that Tue., as gold was on its way to a further $24 rally, the "the crowd" sold into it [the gold stocks XAU]. The thinking was, "you are not going to get me again, I have learned my lesson that every rally in the XAU should be sold, as every rally has failed". This thinking is positive from a contrarian perspective. Finally, to say gold stocks are under-owned by institutions and the public is a gross understatement. If a small portion of the available hundreds of $Billion decides to edge in, it is moving into an area with a market cap in total worldwide, probably equivalent to around 1/4 of Microsoft. A very small door to squeeze through. Mike