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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Paul Shread who wrote (7426)	2/8/2002 12:01:06 PM
From: isopatch	Read Replies (1) \| Respond to of 36161

PM sector comments from Briefing.com (on NASDAQ.com web site) <Sector Rating Commentary Precious Metals Reviewed Feb 7 Slightly Outperform In little less than two weeks, the Gold & Silver index, or XAU, has rallied an eye-opening 21%. With the spot metal breaking above $300 an ounce for the first time in two years, gold bugs have come out of the woodwork and are predicting spot prices of $355 to as much as $1000 an ounce (in the years to come). Are they to be believed? Is this the beginning of the long-awaited bull run in gold? Or is it just another news-related bubble that gets pricked quickly by central bank selling and a strong dollar? In order to answer these questions a little history is in order. Current hype aside, the reality is that gold has risen in only four of the past ten years, and is still about 20% below where it began trading a decade ago. Though last year was one of the good years, it's important to remember that a) the metal was bouncing off a near 20-year low b) the global economy was in recession c) worldwide equity markets were in full retreat and d) the terrorist attacks on the US created a climate of political and economic instability. Considering that most of these concerns continue to hang over the financial markets (to some degree), it's not surprising that gold remains well bid. What has been surprising is the pace of the advance. But that can be attributed in large part to the Enron scandal, and the doubts it has raised about the credibility of corporate finances and of Wall Street. Other factors contributing to the metal's recent rise include: Argentina's financial woes, central bank buying (largely China), a spike in Japanese buying ahead of a change in government guarantees on bank deposits, and a trend toward less producer hedging. With regard to the last issue, two of the largest gold producers -- AngloGold and Newmont Mining (which recently merged with Canada's Franco-Nevada Mining and is about to complete merger with Australia's Normandy Mining) confirmed that they would be sharply reducing or eliminating hedging altogether. Clearly, there's an impressive array of forces underpinning the current advance in gold prices. Though Briefing.com expects the domestic economy to gain momentum as the year unfolds, there's enough uncertainty regarding the strength of any such recovery to suggest that gold will remain in favor as a hedge against prolonged sluggishness. Meanwhile, the other main forces which had been weighing on gold over the past few years -- central bank selling and the strong dollar -- appear less relevant. The market has adjusted to the more predictable selling by central banks and though the dollar remains strong against most global currencies, virtually all major currencies have lost value relative to gold -- a signal that many investors are losing confidence in the monetary policies of the developed nations. Given how quickly gold spiked, don't be surprised to see the metal lose some of its glitter over the very short-term... However, as long as support in the $278 area holds on any correction, Briefing.com expects gold to make another run at the 310 area, with penetration setting up an intermediate-term test of the $335-$350 area. And with spot prices on the rise, gold stocks should continue to shine - though historically rich valuations levels will limit scope of additional upticks. We are reiterating our 4-star rating. Stocks: Agnico-Eagle Mines (AEM), AngloGold (AU), Barrick Gold (ABX), Gold Corp. (GG), Gold Fields (GOLD), Hecla Mining Co. (HL), Newmont Mining (NEM), Pan-American silver (PAAS), Placer Dome (PDG).> nasdaq.com