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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (21278)	8/16/2007 9:26:58 AM
From: KyrosL	Respond to of 217560

Gold is just a commodity with a past.

To: elmatador who wrote (21278)	8/16/2007 1:39:11 PM
From: TobagoJack	Respond to of 217560

give it time ... besides, gold is going 'up' relative to some other stuff and further, my lovely yen will soon yen for gold ... watch and learn, the revelation will soon enough be but, never mind, message from heinz on round robin e-mail regarding gold stocks, the fundamental backdrop for them is improving fast - a steepening yield curve, rising credit spreads and a rising real price of gold will enhance gold mining margins (by letting the real price of gold rise, the market provides an incentive for the production of real money, thus gold's real price tends to increase during busts). however, the sector is obviously caught up in the same general liquidation maelstrom that has gripped the rest of the market. yesterday the HUI index closed well below 320, and is now in one of two last ditch support zones (310-320 is one, 270-280 the other), with this first zone of support looking likely to break. so from my PoV there are only two possible positions in the sector right now: stopped out , and/ or fully hedged. actually, the stop point for me personally was roughly HUI 335, which i thought shouldn't be violated on a closing basis (since that would bring on the test of 320). in view of the improving fundamental backdrop, one must be alert for the eventual reversal. if the stock market sell-off intensifies in waterfall fashion, i have little doubt that HUI 270-280 will be tested next however. still, this is the time to be on the look-out for emerging opportunities in the sector. for in case that the 310-320 zone holds, one should consider buy stops if currently stopped out or eager to establish a position. gold the metal is obviously a different kettle of fish. it is steady in dollar terms recently (in a relatively tight trading range), which means it is firm against other currencies. the reason why it has managed to ignore dollar strength is imo the anticipation of rate cuts, due to the steepening yield curve. so a long position in e.g. GLD looks fine to me with a stop at 64 to 64,50 (equivalent to the $640-645 support zone in spot gold). Homestake Mining 1929-1935 may be a good example for what to expect if the bust becomes severe. what did the stock do? it got a huge haircut in the actual 1929 crash along with the rest of the market (it fell from $80 to $55 or so, roughly a 30% whack), but then proceeded to rise nearly 10-fold over the next 6 years. during that time it paid out more in dividends that the stock would have cost at the '29 low. in fact, the 1935 dividend alone was $56/share (with the stock trading at about $500). HM's EPS growth from '29-'35 was 41% compounded annually. note that this was achieved with a fixed gold price (which was raised once, in '34 from the previous $20.67 to $35 oz.) - the reason is that although fixed, the gold price rose sharply in real terms. falling input costs did the trick.