Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: que seria who wrote (4958)	9/15/2002 10:20:57 PM
From: ms.smartest.person	Respond to of 39344

Actual Crisis Needed For Gold To Break Higher Based upon supply/demand fundamentals, which vary from information source to information source (i.e. World Gold Council, Gold Fields, and others), gold is a screaming buy. After all, since 1987, or when Gold Fields estimated that supply and demand were at equilibrium, annual demand has been above demand every year. That said, the gold market is not entirely driven by the demand versus production supply stats alone. Rather, central banks sales and producer hedging are equally important factors to consider. With this in mind, 3 factors that have been working in gold’s favor since late 2001 are as follows: 1) The continued reduction of producer hedge books (“The global gold producer hedge book contracted by a net 147 tonnes during 2001, the second consecutive annual decline in outstanding positions and a far greater fall than the 15 tonnes recorded in 2000.” Goldfields) 2) The first decline since 1993 in Central Banks lending (for 2001). 3) The return of gold’s ‘safe haven’ status -- ‘investor demand’ was up 36% in 1Q02 (125.6 tonnes). WGC. Some would also point out that the gold rally has been facilitated by the inability of central banks to manipulate the POG. However, this topic has been discussed before, and need not be rehashed at this time. With improving fundaments the long-term outlook for gold continues to brighten. However, what should also be considered is the fact that higher prices ‘could’ bring about an increase in production. And although this theory is untested since gold has been in the doldrums for 20-years, two counter points to the points above would read as follows: 1) Gold is rallying while production costs are scratching 15-year lows (average cash cost of $176/oz in 2001, down $11 from 2000). These two factors could help more production come online. 2) Companies that previous made great efforts to generate profits from their hedge book may not have been inclined to dig up every ounce of gold possible and/or vigorously tried to expand reserves (profits were generated in the hedges – in some cases as bets against a rising price of gold). With the reduction of hedging activities more production could come online. In sum, while the reduction in hedge books and central bank sales are reason for investor enthusiasm, they do not guarantee a continued rally in the POG. Rather, the reduction in the immediate supply of gold, which has helped send prices higher, has also served to curb demand in key regions (India), and spawn longer term production questions. Concerns over central bank sales/manipulation remain as well. Near Term Outlook & Conclusions A new trading top (#3) was recently formed at $324.90 an ounce (September 9, 02 ~ October contract). As suggested back in May, ‘gold could retest $300 an ounce or head above $350 an ounce by September’. Given that gold retested $300 an ounce and quickly rebounded (August 1) this is bullish indicator. However, that gold has failed to recapture its previous highs and/or attract much U.S. investor attention could hinder further immediate gains from developing. On the topic of ‘demand’, what should be remembered is that strong demand for gold in Japan did not arrive overnight. Rather, Japanese demand has recently increased following more than a decade of sinking real estate prices and an 18-year decline on the Nikkei. Quite frankly, Japanese buyers, worried about an economic crisis following the adoption of new banking laws (March 31, 02), finally said enough is enough - they moved into gold (similar fears may not arise in the U.S. for some time and/or until Treasury yields/U.S. dollar drop(s) significantly further) The difference between yesterday’s gold rallies and tomorrows may well be that gold reacts to a crisis rather than preemptively rallies expecting a crisis to develop. In such a reactionary rally (say following a stock market crash) investors would flee stocks, scoff at poorly yielding/risky bonds and head directly into gold. It is this type of rally that is needed for gold to propel to new bull market heights. That the July crash in U.S. equities did not send the POG higher confirms one thing: investors didn’t decide that enough was enough. Just as it took Japanese investors a decade to figure out that gold is a store of value (versus Yen), it may take American investors longer than a couple of years (or the length of the current bear market) to arrive at similar conclusions. That said, U.S. demand is still second only India and there have been some signals (increased excitement in gold stocks) that investors are learning of gold’s unique investment traits. Moreover, if an actual crisis does arrive (i.e. terrorism, Brazil, stock market crash, etc) this learning curve would surely be shortened. In sum, and to reconfirm by bias that the investor should own some gold (silver), I would rather buy gold at $300 an ounce rather than short gold at $330 ounce. Such is what the current trading range may represent -- a staging area for future gains. BWillett@fallstreet.com fallstreet.com

To: que seria who wrote (4958)	9/15/2002 11:33:18 PM
From: ms.smartest.person	Respond to of 39344

GOLD & SILVER POTPOURRI We have the unfortunate task of reporting that Stillwater Mining's lower production levels will hurt its earnings and may lead to a failure to comply with loan covenants. It has cut 2002 production targets to 640,000 ounces of palladium and platinum down from an estimated 680,000 ounces. Yet production is up 22% from last year. They have $43 million in cash for operations and $198 million outstanding of a $250 million line of credit facility. Once the news was released the stock dropped to $6.70 a share. This stock sold at $36.50 a year and a half ago. The stock price does not justify the value of the company and if political problems continue in South Africa and there is any mine disruption in South African platinum and palladium properties, this stock will soar. On a long-term basis this stock is a steal. Over the past two years the refrain has become a familiar one. The outlook for the equity and mutual fund investor remains grim as you remember we have been short the market and long golds and the Prudent Bear Fund for 29 months. July saw the biggest outflow of money from mutual funds, $52.6 billion, ever. As we predicted there is no end in sight. Gold funds over the last 12 months are up 51.8%. The second best markets were Hong Kong and Taiwan, which were up 24.2%. Real estate was up 9% and bonds 8%. This year gold funds are up 42.7% with real estate up 6.9%. Since March of 2000 gold funds are up 68.3%, real estate 45.4% although relatively illiquid and small cap value special situations 19.9%. The bail-out has begun. Anglo-American is selling 15% of its existing South African mining assets to black businesses to meet the country's aim of boasting black influence in the industry. We can promise you the move was done with a gun muzzle firmly pressed against someone's temple. Anglo also said they were willing to sell 25% or more of the equity in new mining projects to black interests. All of you with South African mining shares should be paying attention because it is obvious Anglo American is selling out. We believe the phase out will take five years. Black investors don't have the capital to buyout or take 51% ownership positions in mining companies it can only come from the government probably in the form of bond issues. You do not want to own these stocks when there are very viable alternatives such as Agnico-Eagle (AEM-NYSE) and Goldcorp (GG-NYSE), both unhedged gold and silver producers. For rest of article, click on link gold-eagle.com