Impressions and Notes NYC Institutional Gold Conference
September 8-9, 2003
Analysts and Newsletter Writers
Thom Calandra
Thom spent a few minutes discussing the launch of his newsletter, which has just gone from $200 to $249 for a subscription. He dangled the tantalizing prospect of some upcoming blockbusters to those who have not yet tithed to him. Thom pointed out the unbelievable performance of the base metals and claims that you will see the best performance from poly-metallic stocks (copper/gold, for example). In this regard, Thom mentioned a couple of juniors like Northgate and Bolivar Gold.
Thom mentioned that he believes that Ivanhoe Energy could go to $6-$8. He also holds the Australian dollar.
Thom discussed Nevsun as a potential blockbuster and says that we should get some news in 6-8 weeks. He was asked about a company on his watch list, Bitterrroot Resources, but it is a microscopic market cap company that is only suited for high spec investors.
Calandra referred to Dines' view that gold is clearly in a bull market and that will eventually become a raging bull market. Thom
reviewed some charts of senior and mid-tier golds.
Ian McAvity
In one generation, we have consumed the savings of our forebearers and also those of the generation to come. The massive debt will be retired one way or the other. Debt is the single most important factor. The second factor is the stock market valuation level. If history is a guide, the market's too high for a bear market bottom, by P/E, dividend yield or any other measure you choose. Another point that Ian made was to indicate that he shares the beliefs on China that are espoused by Robert Friedland.
Look for gold above 355 euro and 45,000 yen. He believes that targets for gold are $400 and $500. The gold market will change character after it surpasses 355 euro/oz.
Mary Anne Aden/Pamela Aden
Mary Anne Aden began by reviewing long term (30 year?) chart of gold. She uses a 40-month moving average to identify very large trends. Long term charts of the S&P500 and USD confirm that the super major trends are up for gold and down for stocks and the USD.
Near-term targets on gold are 415 and if that is surpassed, 500. Longer term, the target following $500 is $850/oz. During the conference, gold broke above 380 which Ms. Aden interprets as a signal that 415 may be very close. There is a possibility that we could see a short term high for gold in the Sept-Oct, but the uptrend is intact as long as gold remains above $337.
The HUI chart is even better than gold.
The XAU chart features a breakout from a massive, multi-year, Head & Shoulders formation, with a target of 160 (using the distance from
the neckline to the top of the head as an upside target from the neckline). Huge bottoms are followed by huge moves.
A study of the performance of gold during previous inflationary periods shows that gold and gold stocks perform very well in periods of inflation. This also holds true for deflationary periods. The Fed's actions are very bullish for gold.
The USD is 25% overvalued based on the trade deficit alone.
During the conference, silver rose to $5.20/oz which was interpreted to be very bullish and confirming the move in gold. The targets for
silver are $6.50 and $7.00. Above that, silver will be breaking a huge pattern for future moves (up, presumably).
Charts of commodities (copper, oil, zinc) were reviewed next. The breakouts on these charts confirm commodity price inflation which is
supportive of higher gold prices. Zinc was shown to be just now breaking out.
Rick Rule
An article covering some of the comments by Rick Rule and Ian McAvity appeared after the show and is included below. From my own
notes:
The set of conditions for rising gold are now with us, not in front of us. That's the good news. The bad news is that means bad things
are coming. Gold is insurance but be careful what you wish for.
Don't confuse patience with complacency. Allow time to make you right, but purge yourself of complacence. Rick reminded the audience that the 1996 show marked a peak in goldbug exuberance, but was in fact a period of maximum risk. The 2000 show was a period of maximum gloom and low attendance at the conference, but that was the time of lowest risk to enter gold stocks.
Beware the silly season with regard to gold stock prices. Rick is concerned about the very large number of financings done recently in the sector (i.e. a few months down the road we could see a sell-off as the restrictions fall away). By his measure, gold stocks are only worth 1/3 of the value at which they are currently selling. It's cheaper to buy gold and gold futures than stocks at this point.
Rick encouraged investors to look at enterprise value, market cap + debt - (free cash and redundant assets). Examine price vs. value.
Look at balance sheets, to learn about company debt and cash.
NY Gold Conference: Gold Bulls Must Take Profits, Be Patient
-- Secular Bull Market In Place, But Prices Won't Rise In Straight
Line
By Gavin Maguire
New York, Sept. 9 (OsterDowJones) - While gold may indeed be in a secular bull market and destined for higher prices, bullion holders and investors must demonstrate patience and a preparedness to take profits along the way in order to avoid disappointment, according to two noted speakers at the 16th annual New York Institutional Gold Conference.
Investment advisers Ian McAvity and Rick Rule both cautioned attendees of the dangers of having too high expectations for the gold price now that it is gaining increased attention from the investor and fund community and prices linger at six- to seven-year highs in the $375- to $380-per-ounce region.
McAvity, editor of technical newsletter Deliberations on World Markets, presented charts of previous gold bull runs and pointed out the
turbulent and volatile nature of prices within an overall up channel. "No market goes up in a straight line, and even in a bull
channel you have to expect some setbacks in the price," he said.
"That is why it is important to be patient with this market and take profits when prices are looking overcooked and re-enter again on
price dips." Rule, senior analyst for Global Resource Investments Ltd., echoed the need among gold bulls to not expect too much too soon.
"There's a big difference between inevitable and imminent that we need to remember," he told delegates Tuesday morning.
"While all the stars are aligned for an inevitable bull run in the gold price - due to rising U.S. trade and budget deficits and government spending, slow mine supply growth, U.S. dollar weakness and so on - that does not mean that a pronounced rally in the gold price is inevitable," Rule said.
"In fact, could a real break higher in the price be three, four, five years in coming? Yes indeed it could," he warned. "So don't expect
incredible gains in the price over the near term, and be prepared to limit your losses and take profits along the way.
"But also be prepared for prices to head higher over the longer run because we are indeed in a secular bull market for gold."
John Doody
John Doody described the four goals of his newsletter as follows:
- provide macroeconomic analysis for an overall market view
- Find gold stocks that are over/undervalued
- Study the undervalued stocks
- Maintain a list of Top 10 Gold Stock Analyst picks
John has a first target for gold of $450/oz. He is not looking at mid-tiers right now, he believes they are fairly valued.
Some of the stocks that have huge (10-bagger) potential, in his opinion, are:
- Freeport McMoRan
- Krystallex
- Arizona Star
Jim Dines
Jim Dines is a very entertaining speaker and knows how to whip up a crowd. He began his keynote presentation by leading the crowd in singing "Happy Days Are Here Again". Twice.
Jim answered the question of "when to sell" by saying that it is WAY too soon. The bull market is just beginning to get moving on the
junior miners. This gold bull market will DWARF the Internet boom and it is just getting started. Trendlines are the first line of
defense and they are telling us that all systems are go. We have had confirmatory upside breakouts in gold, silver and the juniors.
Dines showed a chart of his silver index, which to his knowledge, is the only one in existence. To him, this is confirmation that silver
continues to be totally ignored.
Long-term charts of gold and silver show a downtrend, a multi-year base formation and now a beginning bull market. Dines is also bullish on base metals, including copper, lead and zinc.
Dines made a prediction that gold is going to $1000/oz and will see spikes up to $3000-$5000/oz. Silver will go to $100/oz.
Dines went through a blizzard of charts whipping up one after another on the overhead projector, practically yelling "Uptrend! Next!" (he had someone else running the overhead). It was quite exhilarating.
Richard Sacks
Richard's presentation was amusingly titled "Why Most Investors Will Do The Wrong Thing in the Gold Bull Market". Richard argued that to
be successful investing in this sector, you must have conviction. And the only way to gain that conviction is to understand the fundamentals that are driving gold, like debt and the USD. You must look at the charts to see and understand the indications that the bull market is here.
He commented that Goldman and Merrill Lynch are now recommending a shift in asset allocation to include some gold.
The bullish case for gold includes:
- Low interest rate structure
- Stable to rising demand for gold
- Declining mining production
- Shift in producer mentality away from hedging
- Shift in attitude towards the commodity
- USD
- US current account deficit at an unsustainable 5% of GDP
Most gold investors operate on a time horizon that is too short, you must have the right horizon to gain the most benefit from this market.
It is crucial for investors to get into Canadian-listed gold stocks and not wait for, or limit themselves to those that get a listing on a US exchange. By the time these juniors get on a US exchange, you will have missed a substantial part of the move up.
He recommends a focused portfolio that should be held over a multi-year period.
Richard recommended the following approach to the market:
If you have less than $100K to commit, just buy a fund, like Toqueville Gold. If you have more than $100K to commit, get an advisor who knows what they are doing. He is one himself. He recommends a 10% allocation but acknowledged that he is way more invested than that himself.
Richard mentioned the following as stocks that he likes:
- Newmont
- Krystallex
- Nevsun
- Manhattan Minerals
- Sunridge Gold
Taken from BTS email...
AI
