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Pastimes : All Clowns Must Be Destroyed -- Ignore unavailable to you. Want to Upgrade?

To: double-plus-good who wrote (33730)	5/18/2000 5:56:00 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 42523

well, simply put, he could be right. i really don't know. i don't think he is though. imo every time the XAU goes below 60, it is a buy, but i won't lose any sleep over a final wash-out should it occur. regarding his anecdotal e-mail evidence, well, you can read the exact opposite stuff from other analysts (e.g. Kaplan) about 'despondency' and 'long term gold stock holders selling out' and so on. the fact is that PEI is perma bearish on gold and the last PEI prediction i can remember dating from February was that the S&P would be at 1800 by April. Market Vane's bullish consensus on gold has recently fallen to 20%...that's extremely low historically, and commercials are net long by a wide margin ever since it dipped below 280. so there's evidence contradicting his e-mail anecdotes. admittedly it's been trying our patience here...but i'm not a gold bug, and have most certainly NOT been long gold stocks for 20 years. i only got interested in the sector while i was in SA, and i have ridden several smaller gold rushes there with phenomenal results. one could ask, if it is not time to buy stocks when they are cheap, when IS the time? it is simply a contrarian strategy to buy what's totally shunned by other investors...it's no sin to be early, as no-one knows for sure when the down-trend will be decisively broken (least of all PEI). but you can currently buy Goldfields' reserves at $20 per ounce with the stock slightly over 3 bucks...that's like buying one dollar bills for 20 cents. to varying degrees the same holds true for other gold issues...they have rarely been as undervalued relative to their reserves as they are now. since it costs $350/oz. to replace currently mined gold on average, output from higher cost producers continues to shrink. the same can not be said of demand. CB supply has become a known quantity since the Washington agreement, and producer hedging will be severely curtailed. in the meantime the dollar is wildly overbought and inflation and commodity prices in general are on the rise. gold is heavily shorted at the same time, as everybody who could has hopped on the aging trend. btw, what's more, not even ONE WS analyst is rating gold stocks a buy... so they're a classical contrarian investment. admittedly that has been true for quite some time, but even the periodic bear market spikes were highly profitable to trade on, see last September.