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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (3267)	7/25/2002 4:56:28 PM
From: Jim Willie CB	Read Replies (2) \| Respond to of 89467

an opinion from a gold expert on recent turbulent days / jim The over-riding theme of the last two days in the financial markets has been that of a complete and wholesale liquidation of all speculative positions held by large commodity trading funds and individual investors. Whether such actions were taken to raise cash for margin calls in the stock markets or to mitigate risk is unknown, but I would guess the latter. The financial markets are in complete disarray, displaying volatilities that I have very rarely seen in my 25+ years. Just yesterday, the US stock markets saw price ranges of between 9 and 10% OF THEIR ENTIRE VALUE in just one trading session. Another example would be the value of the British Pound, which collapsed by over 2 US cents on Tuesday, only to regain virtually all of that value just the next day. Complete and sheer insanity. As global financial markets careen wildly, with no apparent fundamental reasons, from apex to nadir, it is only sensible that ever-increasing amounts of fear infects traders. Immediately, they begin to moderate risk by selling positions in the markets. In the last two days, it did not seem to matter what the fundamentals or technical considerations of any individual market was, the position got sold, across the board. And those markets with the greatest level of speculative interest got sold the hardest. Gold was perhaps the best example of such blind selling. Contrarily, platinum, which has little investor interest, was only slightly affected by such profligate selling. In such a market condition, nothing makes sense. Traditional correlations and relationships get thrown out with the trash in the wake of speculative selling to moderate risk profiles in investment portfolios as volatilities increase. The good news is that such actions must be considered aberrations against the general and long-term trends of the markets are always very transitory in nature, lasting at most a few days. With the USD now continuing its downdraft, gold and silver look plenty cheap at these prices. Speculative selling has driven these market prices to rather low levels in a cyclically weak period of physical demand. But, risks are significant and volatilities enormous. Overall, I would recommend trading maintaining our long positions in these markets and trading a whole lot less than normal. We will soon see a reversion to the trend and a retracement to thoughtful and meaningful markets rather than the complete insanity and volatility experienced this week. There are times to get aggressive and times to just sit back and wait. Patience, usually an unheard of virtue among most traders, now has a greater benefit. A report by CIBC, released yesterday, indicates that they are expecting a substantive rally in gold later in the year, forced by the trend toward a lower USD in global markets. As gold is priced in USD worldwide, the longer-term negative correlation between the USD price and the gold price is well documented. These two markets have a negative correlation of about 92%, a very high and most reliable statistic. CIBC expects gold prices to peak between $340 and $360 by the end of the year. I tend to believe that even those prices might, perhaps, be a bit too low. As the USD continues to fall, as the equity markets continue their bewildering and completely insane machinations, investors may be drawn into considering investments in an arena that is a bit more rational. Another external influence that is needed is the resurgence of physical demand, which usually begins in earnest in the Fall. All in all, these markets are most difficult. Leonard Kaplan