Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

*** Gold related post ***

Hi lawreal,
I wasn't able to read the Bugos' article in your earlier post as I didn't want to register with Zacks, but
have you seen today's column by Bugos? Good read. Do check out the original as it contains a couple of informative tables and additional text.

(EXCERPTED)

USD Teeters, New Lows Imminent - a currency & gold market analysis

By: Ed Bugos, GoldenBar.com

Today's Highlights:
Bearish breadth expands against greenback
Gold bears fail to focus on USD as driver
The outlook for the dollar is related to real return expectations
What else haven't the markets considered
Gold equities factor $310, could be a buy now
Barrick dances around market's demand
 
Gold prices could be set to turn up again.

You couldn't tell by Monday morning's selloff on the TOCOM (Tokyo Commodities Exchange) overnight, and the action in gold shares recently. But after watching the major US stock averages stumble early in the session, witnessing a firming of silver and base metals prices, and observing fresh slippage in the US dollar, against currencies broadly, we're set to get right bullish on the metal in the short term (we've been less bullish in the short term since the day gold prices reached our $390 target).

After consolidating for the past month, the Swiss Franc surged to new highs Monday, followed by the Euro - though the new high is more marginal there. The US dollar index has been consolidating its sharp 2002 losses over the past 30 days, also, but currencies such as the South African Rand and Australian dollar continued to soar throughout. Both made new highs against the greenback again Monday - the Rand gained nearly 2% to new 2 year highs, while the Aussie rose 1% to new 3 year highs.

Gold Bears Fail to Keep Focused on the US Dollar
Last week, stock bulls were excited about a strong durable goods number and upward revision in fourth quarter GDP that implied a rebound in manufacturing. However, Monday's release of the ISM index (used to be the NAPM - National Association of Purchasing Managers) for February dampened that enthusiasm, because it contracted to 50.5 from 53.9 in January, well below forecasts exceeding 52.In terms of measuring economic activity in the first quarter, this is an early indicator, though stuff like this never moves markets all by itself. What may be more important for investors is Friday's February employment report. Weekly jobless claims figures have looked dismal all month long, though who knows what the magicians will do to the monthly number.At any rate, the chalk marks (chart activity) remain bearish for most equities around the world - except parts of Asia perhaps. The bears look set to take back all that the bulls have gained since 1996/1997, in both the Dow and the US dollar. The US averages look very shaky, and a look at the components only makes us more bearish. The Dow looks ready to take out October's low at 7200, which would be a new almost six year low. The significance of it is whatever you might attribute to leaving behind the 1998 low.In this teetering backdrop, gold prices should reach our $425 - $450 medium term target easily by the first half of 2003. We could be right on the edge of just such a move. But much depends on just how much of the decline in the dollar index has been factored by the move in gold to $390 during February.Our target for the Dow is 6000 on a break through October's low, plus or minus. Our target for the dollar "index" is about 91. Gold should break through its 1996 high of $425 on such moves, which incidentally, would almost complete the medium term objective of gold's December break out from what many believe to be a five year double bottom - if it were a true double bottom, the implied objective is actually closer to $450.That may sound conservative to some gold bulls. It is in our view too. It's certainly not as aggressive as our long term (approx.. 5 year) target - $2000.

Gold Stocks Factor $310/oz.
Gold shares continued their slide Monday. The AMEX Gold Bugs index finally nailed our first short term downside target (the 200-day moving average), and appear likely to head lower for another day or so. However, they could be nearing the end of their countertrend move, particularly if our gold price outlook is correct.Moreover, our gold share index suggests investors are factoring just a $310 average gold price for 2003, approx.., as of Monday's stock market closings.That was about the average gold price most gold producers realized in 2002. Meanwhile, the average gold stock is down 20% since February's peaks. Our index is down 10% from its peak.At its peak values in early February, for instance, Goldcorp's shares implied an average $415 gold price this year (range was $380 to $450). Today their market is saying gold is worth only $335 this year ($310 to $360, see table).We might take it as a bearish indication for gold prices if the technicals confirmed it with intermediate bear signals in either the leading gold shares or gold itself.Instead, we are taking it as a sign of too much bearish sentiment during a correction.Since our outlook for the dollar remains bearish; because the main trends in the gold sector remain bullish; and because bearish sentiment is both relatively extreme and typical, our bet is gold stocks are about to put in a bottom. That's a change in our short term outlook. On February 7th we issued an alert warning for a dip to around the current level in gold shares - a little lower actually.By typical I mean in that confidence at the early stages of any bull market is typically fickle, and so is the allure of seemingly logical sounding countertrend arguments in the midst of any correction also typical.

Much more, including charts and tables at:

http://news.goldseek.com/GoldenBar/1046825992.php

Regards,
Dan