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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (26363)	12/19/2002 9:18:25 PM
From: elmatador	Respond to of 74559

Gold Published: Dec 19 2002 20:38 \| Last Updated: Dec 19 2002 20:38 Gold has slipped the bonds of its recent trading range as war fever grows. It soared to a 5½-year high of $353.75 an ounce on Thursday, well above its recent range of $310-$330. Some observers are forecasting it could go above $400. Yet, with the exception of possible war in Iraq, it is difficult to find any change in the fundamentals that have underpinned its rise over the past three years. The latest spurt does not appear to reflect any underlying shift. Production has failed to match demand for much of the past decade. That was largely due to the unattractiveness of investing in new capacity when prices were low. But the recent consolidation among the miners should result in greater producer control over supplies coming on to the market. Much of gold's recent strength has been driven by an unwinding of positions by traditional hedgers such as Barrick and AngloGold, though the opportunities for de-hedging are reducing. Support for gold has also come from the weakness of both equities and the dollar, which faces further pressure from the growth in the US current account deficit. The Washington accord, which led to a cap being set on annual central bank gold sales, has nearly two years to run. It has proved so successful in stabilising the metal's price that, in the view of analysts, it is likely to be extended, though possibly with a higher annual limit of around 450 tonnes. One of the few blemishes is the weakness of consumer demand, though the recovery of the rupee should stimulate Indian interest. Overall, the decline in demand is starting to slow. None of these factors is new, which leaves the highly rated gold miners looking vulnerable. The gold price has risen 27 per cent in two years against an 87 per cent rise in the FT Gold Mines index. A non-hedger such as Newmont Mining, which is best placed to benefit from a rising gold price, is on a 2003 price/earnings multiple of 40. Even a hedger such as Barrick is on a prospective p/e of 35-plus. A gold stock bull might argue that the $29.50 of "gold value" in a Newmont share, net of production costs and debt, represents a 2.5 per cent premium to the share price. But on these price/earnings numbers there looks to be more value in less precious metals.

To: TobagoJack who wrote (26363)	12/19/2002 9:56:15 PM
From: Jorj X Mckie	Read Replies (1) \| Respond to of 74559

Jay, thank you very much for that comprehensive answer. When last in HK and Beijing around the Chinese New Year earlier this year, I brought 1/10th oz coins as gifts for the office staff. The staff in Beijing was especially appreciative and they were the ones that told me that they could not buy them. They certainly didn't see it coming nine months ago. It seems odd that the POG would rocket up so much on that news if it was already known...perhaps just an overreaction....