Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

*** Heinz Blasnik's comments on Gold ***

Hi Zeev,

Did you know that Heinz has a discussion forum at SI?

Among it's credentials are 302 bookmarks in a collective total of 390 'group' posts.

It's called "Heinz Blasnik- Views You Can Use"
and, fwiw, is moderated by William Godot.

As one of your many long time adherents, and knowing well your dislike for most forms of censorship, I hope you find this 'heads up' to be in good taste and useful to you.

That being said, I thought you might be interested in seeing Heinz' views on my favorite weakness. <gg>
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From: heinz blasnik
Wednesday, Apr 16, 2003 1:43 PM
Respond to 125 of 391

the 200-dma's have been broken, true. but not the major up trend line as such (in the PoG we could easily stomach further falls without endangering it - look at both PoG and HUI weekly charts and put a ruler to their lows). the 200-dma as a strict demarcation for bear or bull mode is a bit simplistic - practically every bull market in history has suffered corrections along the way that resulted in some trading taking place below the 200 dma. however, it is usually regained fairly quickly. in this context it will be important to see how the attempt to regain it shapes up.
nothing is ever certain, but a brief summary of the gold situation such as it now is still favors the bulls imo:
1. the fundamentals have gotten even better for gold...CBs across the world are printing money furiously. supply (mine supply, that is) has just suffered its first (albeit small) annual decline in ages...and seems set to decline further, barring a big price rise. investment demand is slowly but surely recovering...in a tentative manner , as is customary after a long lasting bear market. it's the key to higher prices. did the gold mutual funds receive big inflows denoting a top? nope...the opposite happened. many long termers breathed a sigh of relief and bailed last May (so says John Embry, who managed the RBC's gold fund at the time).
interest rates remain low (set to continue for some time imo) , which ensures forward selling will remain out of favor... it also means the opportunity cost of holding gold remains negligible. and the US budget deficit, which has always been one of the main drivers of gold bull markets in the past, looks set to continue to increase by leaps and bounds.
lastly, the dollar sure looks sick...and with the current account deficit slumping ever deeper into the red, its only redeeming feature is imo that the confetti produced by other CBs isn't much better in principle.

2. the technical damage, while severe, looks to me to be nothing extraordinary based on the idea that it may be a still young bull market. see the beginning stages of historical major bull markets for reference - they usually stall right after the initial thrust and suffer big corrections followed by long, tiresome consolidation periods (that's what we seem to have now).
the COMEX CoTs are meanwhile much improved...only the hard core residual speculator long positions remain. e.g. the ratio of small spec longs to shorts is the best since January of 2002. this does not mean further falls can be ruled out - but the potential selling pressure is much diminished. it seems more likely to me that long positions will be built up again.

3. in summary, there seems to be more opportunity than risk at these levels. if the PoG merely stays where it is right now, many gold stocks should be interesting from a value investor's standpoint, especially the ones with growing production and reserve profiles.
we have a bullish balance of probabilities, but it might of course not work out. e.g. Prechter remains steadfast that the secular gold bear isn't over yet and i wouldn't dismiss his ideas out of hand. the solution to this problem is to be long and employ stops to minimize the risk. most gold stocks have a clearly defined trend, in spite of their volatility. use the trend lines for your mental stop points.

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=18848250

And to a question in which he was asked if he still favored the South African Gold stocks, he replied:

From: heinz blasnik Wednesday, Apr 16, 2003 2:50 PM
Respond to 125 of 391

well, they've obviously suffered from the strong Rand...but the Rand looks quite overbought to me, and they have largely discounted its effects by now imo. the one fact that still argues in their favor is that the have the largest gold reserves and the most capable mine management by a mile (with the possible exception of Droopy's management of course...-g-).
the most recent quarter will look bad, but perhaps not as bad as feared. lower Rand gold price coupled with lower grades (lower grades tend to be mined when the Rand PoG is high) should make for quite a retrenchment in earnings, not as bad in dollar terms naturally.
it made sense for the Rand to retrace its previous collapse, but it doesn't make much sense for it to stay there or get even stronger imo. and any Rand weakness from here on out will likely be greeted with a buying binge on the JSE's gold board.

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=18848756

Regards,
Dan