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

To: Kaena™ who wrote (13354)	7/5/2003 3:20:26 PM
From: Kaena™	Respond to of 39344

I believe we're very close to a break out for gold and the gold stocks - possibly within a few weeks. The gold sentiment index / gold ratio spread has broken out of its descending triangle a few weeks ago. This ratio tends to lead gold. (See chart at the bottom of the page). cairns.net.au Japan Government Bonds which have been leading US Treasuries may have put in a top portending rising long term rates increasing the yield spread which triggers gold to rise. Rising rates will further weaken the dollar possibly curtailing its bear market rally. If the dollar breaks .94 to the downside, gold and gold stocks will probably begin its next ascent. Concerning gold stocks, as mentioned before, I believe that the South African stocks are among the most highly leveraged to a gold price rise especially given the negative political publicity (over-exagerated IMO), labor disputes and strong Rand – DROOY and HMY in particular. As before, labor and management will most likely find an equitable agreement reassuring investors. The Rand is once again in the process of weakening after recently peaking in late April. After several rate increases, RSA now with a slowing annual M3 growth rate (10% to 7% in May) needs to lower rates with the consequence of weakening the Rand. The next Reserve Bank meeting will be held in August. The main attraction of the Rand (as well as the other commodity currencies) has been the higher bond yields in an appreciating currency. The RSA bond yield was relatively high last year but has been coming down now providing less incentive with added risk. For example, the 10-year South African bond has dropped to 9% from more than 11% last year, and inflation in that country is reported to be in the double digits meaning that the real return is now negative. With a slowing money supply, a historically volatile currency and expectations of rate cuts, the Rand will continue to weaken as nervous investors exit their holdings. I see a very possible repeat of 2001/2002 with a weakening rand, rising gold price and South African stocks outperforming North American producers. Investors are also searching for yield and stocks like GFI, AU, HMY, etc. will be attractive for this reason as well. Investors who buy a stock for yield are considered strong hands, long-term investors. I was fortunate to buy DROOY at .58 at the height of the last labor dispute scare. Although much more expensive now, I find it undervalued relative to other producers especially given the environment described above and its superior performance in 2001/2002.