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Strategies & Market Trends : The Art of Investing -- Ignore unavailable to you. Want to Upgrade?

To: cool who wrote (148)	10/5/1998 2:21:00 AM
From: Sun Tzu	Respond to of 10676

I don't see gold rallying much from here for a number of reasons. To begin with the financial assets have done so well even in the face of crisis that most sophisticated investors (read very rich) would gravitate towards T-bills, DM Bundes, or even managed futures rather than gold. Second, gold's main buyers in the world (aside from industrial use) are nations like India, Pakistan, the Middle East,... Their ability to buy any substantial amount of gold has been impared by their currencies' devaluation. Third, the major world gold producers, Russia and S. Africa, are having major econimic problems and gold is one of few valuables they can sell to gain hard currencies. This will put pressure on them to produce as much as they can which will pressure the prices. Fourth, there is still the threat of central banks selling (esp. in lieu of Euro). So all in all I am not bullish on gold. I know that gold stocks have rallied lately, but this has been mostly on the back of the small rally in gold and the hope of further increase in gold prices which due to above reasons I do not expect. However, given that at the current levels, some gold mines are being shut down, and if gold falls below $265 (fairly possible IMO) a lot more of the less efficient mines will close, the gold mines will be ripe for consolidation sometime between now and the next 3 years. The survivors will rip great rewards. So when the time comes, I'd be investing in the gold produces who are firstly the most efficient, and secondly are financially strong. Sun Tzu