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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: larscot who wrote (96732)	12/14/2003 2:32:40 AM
From: paul ross	Respond to of 116837

Larry- Over a short period of time its hard to determine just what the dynamic is between gold and the stocks. Over the longer term here is a comparison of the XAU(stocks) vs POG from Goldsheet: goldsheetlinks.com

To: larscot who wrote (96732)	12/14/2003 4:49:08 AM
From: IngotWeTrust	Read Replies (1) \| Respond to of 116837

Larry, bite or no bite, what I said is the truth. What you observed this week in particular is the result of anti-gold Barrons taking another one of their patented swipes at the gold equities market with their negatory piece proclaiming loudly to anyone who listens that...BASED ON A CASH FLOW METRIC specious argument, that all gold equities were overpriced and therefore, deserving of being sold. IT is a bogus argument, and one that only helped trapped equity bears in rising equities climes. Three (3) MORE things to remember about gold equities: 1) GOLD MINING COMPANIES are based on ASSET VALUATION not on "cash flow metric." That would be like claiming that because the restaurant sector had poor "book to bill ratio" no one should own restaurant stock. Everyone knows that the book to bill ratio is a metric for valuation of semi-conductor genre equities. Another example of a specious metric valuation argument would be to apply the Chicago Purchasing Managers data which tracks inventory flow and build up of the manufacturing industry to value the airline sector for building up an inventory of unsold seats, and those unsold seats needing to be "worked off." Apples and oranges metrics in all 3 instances. Several of the gold mining companies are only selling enough gold to pay the bills, and holding the physical for either better future prices b/c they all see what we pedantrian plebes see, OR they plan to use the stockpiled bullion to pay a special dividend as one large gold miner did this week...after the Barron's hatchet job. <font color=blue>(BTW...the last hatchet job on gold done by Barron's was in February when they took aim to Royal Gold's Royalty model and used the wrong yardstick to measure IT as well.)</font> 2) Mutual funds by virtue of size and competition for sector dollar deposits, all play the same VERY SMALL POOL of large names, by and large. This is simply due to their need for liquidity so that they can get in and get out of the gold equities' market without either raising or lowering the market in that small sector by the very size they themselves generate in that sector when they lumber around in their executions doing their thang... It stands to reason that when Barrons conducts an illogical stampede, ALL blackbox players--mutual funds, hedge funds, daytraders--(makes no nevermind) herd surge out of the largest equities' names plus several small names as well--and drag down gold equities, which are then reflected in your NAV 3) As you have accurately observed, there is a lag period between gold equities appreciation and gold bullion appreciation in your 50/50 allocation model. Why? One has to understand the pokey analyst world who works by what I call a mixture of "committee thinking" and "rookie rabbit ears." The committee thinking process is a group think dynamic shared by all the "gold fund managers." It is WORK, and I do mean work, to re-examine their spreadsheet data (for lack of a better nomer) in light of rapidly moving underlying physical commodity price appreciation. They don't just go to the column market gold prices and plug in $410, and voila, a new "equity valuation immediately blinks to the bottom line of their spreadsheet. These fund managers have to re-evaluate weighted assay averages on known mine data, guess what management is thinking in light of higher pries, conduct surveys of management to determine THEIR group think re: expanding reserves potential and corporate planning and budgeting for expansion, etc., etc., etc. All the time, they are looking askance at the flow of geological data, price data, supply data, demand data, seasonal data, economic data, trying to put their finger on what is conservatively predictable in all those metrics prior to making their buy/sells. THEY HATE to move suddenly such as when they are driven by huge outflows from disgruntled pension funds for example, scared by recent Spitzer-like revelations. So, while physical gold is free to respond immediately to supply demand based buying/selling in an open outcry auction system, at least here in NY, and free to respond immediately to ESF and Locals running prices daily up and down the flagpole to see who salutes, mutual funds are by and large the slow-deliberate elephant in the space, as opposed to the more nimble physical gold valuation player. Chew on this, and you'll begin to understand why I said what I said in the first response to your query. Thanks for the get back. The short answer is NO, you're not seeing an overbought condition in the equities correcting themselves. It is my thinking they haven't even begun to catch up with this latest bullion move that is still very fluid and very strong and very much nascent in terms of duration. Look at it this way: Physical gold is up OVER $400 --a psychological benchmark I'll grant you--only some 13 out of 23 banking days, and only higher closes above $400, 2 out of 2 Fridays in a row. There's no way in hell, equities analysts have had time to reconstruct or re-evalutate gold equities, etc. It simply isn't in their nature to do this ASSET BASED METRIC recalc, which is the proper metric, in a newer/higher plateau that has only been in place 13 out of the last 23 banking days. The very management personnel they have to survey in order to re-jigger their spreadsheets don't even agree on what they are going to do or if this above $400 is "for real" They probably won't believe above $400 is for real for another 2 years, frankly...the last 22 have been so very very brutal. Just some addition fodder upon which for you to chew. Regards

To: larscot who wrote (96732)	12/15/2003 2:35:41 PM
From: barrcuda	Respond to of 116837

Larry, I too own a chunck of FSAGX and they had a dividend distrubution on Friday. If you look at your shares you will see an increase of about 3%. So, it is not as bad as it looks.

To: larscot who wrote (96732)	12/16/2003 9:27:12 AM
From: IngotWeTrust	Read Replies (1) \| Respond to of 116837

Larry, re: my response @ 2 years: <font color=green>"The very management personnel they (mutual fund managers) have to survey in order to re-jigger their spreadsheets don't even agree on what they are going to do or if this above $400 is "for real" They probably won't believe above $400 is for real for another 2 years, frankly...the last 22 have been so very very brutal." </font> Acc'd to Price Waterhouse survey results released this morning, I may have been "too quick" in my 2 year statement...especially if the only 10% incremental increase per year is the "modeling standard" adhered to in future years. feast your peepers here. OPEN QUOTE under Fair Use Doctrine for educational purposese only: <font color=slateblue> Gold miners cautious in gold price estimate Consensus US$337 an ounce: Price is used to calculate reserve estimates Drew Hasselback Financial Post Tuesday, December 16, 2003 Gold miners are taking a cautious approach to the gold price in their 2003 yearend reserve calculations, a survey reveals. PricewaterhouseCoopers contacted 46 gold miners around the world and asked what price they will use to calculate their reserve estimates in upcoming 2003 annual reports. The results, released yesterday, show the average price will be US$337 an ounce. That is about 10% higher than the average of US$305 that was used in respondents' 2002 annual reports. At US$337 an ounce, the 2003 estimate is rather conservative given current gold prices of more than US$400 an ounce. "The industry probably feels comfortable that there's a certain amount of conservatism in its numbers," said Paul Murphy, leader of the Canadian mining practice at PricewaterhouseCoopers. Answers from specific respondents were kept confidential, since final reports will not be published until early next year. Respondents included all 10 of the world's largest gold producers, including Denver-based Newmont Mining Corp., Toronto-based Barrick Gold Corp. and Kinross Gold Corp., and Vancouver-based Placer Dome Inc. A reserve is an estimate of how much gold remains in the ground. The price is the key to the calculation. A gold deposit is worthless if its location or its geological conditions render it too expensive to mine at a profit. But if a company assumes a higher gold price, it can justify boosting its stated gold reserves. The richer metal prices will cover the costs of mining more expensive deposits. So even though the gold price has already risen more than 21% during 2003, miners have raised the average reserve calculation price by only 10%. "I think the companies are being somewhat cautious," Mr. Murphy said. PricewaterhouseCoopers included mining firms from Canada, South Africa and Australia in the global survey. Part of the conservatism may reflect the higher costs those companies face due to the rise of their local currencies relative to the U.S. dollar. Gold is traded in U.S. dollars, so a rise in the greenback squeezes profit margins at mines based outside the U.S. "While the weakened U.S. dollar may be one of the prime reasons gold has risen so dramatically, it has also had a very negative impact on those producers operating outside the U.S. who are incurring expenses in much stronger currencies," the survey states. PricewaterhouseCoopers also collected data on the average price used to calculate carrying value. This year that number will average US$347 an ounce, up from an average of US$307 in 2002. Mr. Murphy said the survey is aimed at helping mining company boards of directors and their audit committees. That data provides them with some guidance as to how their peers are reacting to the changing price climate. This has been particularly helpful in the past, when gold prices were dropping and miners had to take writedowns, Mr. Murphy said. "You need to be able to defend the price that you use. An auditor, or even worse a regulator, might choose to challenge a company on the position that it took." © National Post 2003 </font> Nothing like getting the scoop via SI before it becomes "mainstream news, eh?"<vbg> No wonder equity investors are frustrated in not seeing more "action" in their rav fav stock pick, or their NAV participation. BTW...just to refresh my memory, Fidelity Select Gold formerly only held primarily US Bullion coins if memory serves (about 10 years ago?)...what is their portfolio mix acc'd to your latest statement? g_t