« Return of the gold bull, Mon., Dec. 19, 2005, 10:23 AM | Main | Web results for 2005, Mon., Dec. 19, 2005, 4:15 PM »

December 19, 2005

A (somewhat) stronger metals group, Mon., Dec. 19, 2005, 1:59 PM

Although softening a bit in the past three hours, I think the metals are likely to continue to rally. But like the rest of the broad equity markets in the world, I think the rally is getting a little long in the tooth, and will likely start to pull back in January.

So, I am going to suggest that this recovering gold rally will fall short of the last one ($541 on Feb-06 gold). We may get to see maybe $530, possibly, but I foresee another test of $500.

Not to worry for the long-term. I truly believe that, based on economic fundamentals that exist today (the U.S. credit bubble, in particular) along with monetary policies in place to stave a crisis, the gold and silver price is going much higher, eventually.

I have set a long-term (i.e., greater than one-year time horizon) target of higher than $600.

From my ADVFN Gold Page (Metal Guru) column today:
Outlook for gold bullion:
Long term " very bullish (US$600 and higher)
Intermediate term " bullish (550)
Short term " bullish (530 and then another test of 500)
Spot price: 506.80 (11:00 AM ET Dec-19-05)
Price at last column: 535.80 (4:19 AM ET Dec-12-05)

Since then, gold bullion has settled back a couple dollars, and the goldminer stocks that had been hot, have considerably cooled.

Judging from the mail I am getting regarding the penny miners, I'd have to say the promoters' stories are making the rounds. Which is good if you happen to be long.

This morning I received a letter from a reader ("T") who reminded me that he had written me recently about ZZZZZ, and that, while I had not written up that particular metals "opportunity" the stock was nonetheless up a further "+67 pct from $2.84 to $4.84 (and still climbing!), in less than six weeks!"

So I wrote back:

"T, I know enough about the stock promotion business as well as the needs of most of the followers of this blog for me to avoid commenting on small caps like ZZZZZ. To play that game is to go against every principle I stand for. That game requires investors to buy into stories pushed out to them by promoters. To win at that game requires a different type of trader, a different type of approach to trading.

Having been in the business for 40 years (on the inside), I know that at least 80 pct of those traders lose. I don't want to leave that as my legacy.

And if the 20 pct of traders who are successful at playing the micro cap stocks want to tell me I'm missing the boat, then I'm all ears (and nothing between them). The talk goes in one and out the other.

So I hope (for your sake) ZZZZZ goes to 20-30 or 40. It doesn't matter to me, just like it wouldn't if ZZZZZ goes to 3-2-1-50 cents. And if I wanted to revert to being the "Dream Merchant" I was for many years, then I'd have no difficulty (other than a conscience) in ripping off the Little People.

Having said that, if enough of my readers want to start a penny stock club that I could look in on periodically, I may do that. But I have a lot of work re-organizing the data I have already published, and setting up with a better service.

I have to do that first because that will give the greatest value to the vast majority of my readers.

Cordially,

/Bill"

Let me tell you, if you don't already know this, that bear markets fall faster than bull markets rise.

Being dead certain I can take advantage of a sustainable rise in equity markets, all I have to do is protect myself from the inevitable stumbles. One or two steps back is to be expected at times, but crashing down a whole flight of stairs is something I try to avoid.

Btw, on this day that started out with so much promise, including a major speech by the President at 10:30am, the broad markets in the U.S. are now down across the board. The Naz is particularly weak (down over -15).

Posted by Posted by Bill Cara on December 19, 2005 01:59:58 PM | Category: Gold

Discourse

Bill you see another test of $500? That is only $8 away. I wouldn't mind seeing that support kick in! Just this morning I was ticked that gold was up yet again. I want more dips!

Can you even try to explain what happened here, the housing/home stats come out and the market goes cold taking oil and gold with it.

I was also wondering why Japan would do a retake on their double down margin stance.

I think these rate hikes have roiled Mexico & Brazil. Even the banks are out to lunch there.

Bloomberg article this morning reports (I hope I remember the stats right but they seem reasonable)

8% - dow return next year
27% - emerging market(india, brazil, mexico)
13-18% - international developed

Can this be another spark to fuel the goldbuggy!

Posted by: dinov [TypeKey Profile Page] at December 19, 2005 2:17 PM [link]

Bill,
I know you have frequently commented on the accumulation of gold reserves by Asian central banks. These comments by Chinese banking official Yu Yongding may strike a chord:
http://www.thestalwart.com/the_stalwart/2005/12/fed_watching_ch.html
If China's greatest fear is a rush to the door by major holders of dollar reserves, it is likely they are trying to convert as much as possible as quietly as possible into hard assets like gold. China's strategic oil reserves may also serve this purpose.

Posted by: josh [TypeKey Profile Page] at December 19, 2005 4:00 PM [link]

A lengthy and at times fascinating discussion of Yu's comments appeared recently here: http://www.rgemonitor.com/blog/setser/111525

-- Whatever his influence (or lack thereof) there comes a point when global markets give up (or threaten to give up) on the $. At some point, volatility will HAVE to rise....

Posted by: rhetguy [TypeKey Profile Page] at December 19, 2005 4:52 PM [link]