Lots of good reading tonight -- and a happy ending to Friday''s rout of gold

8:23p ET Monday, October 6, 2003

Dear Friend of GATA and Gold:

This article from Canada's Financial Post is interesting
for acknowledging, in passing, that gold has quot;powerful
enemies.quot; The author doesn't go into details, but he may
have figured that this was the most he could get published
at the moment without risking transfer to the sewer
commission beat and that you could figure it out.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Gold's glitter a gamble; new funds, tactics let you ride the bandwagon

By Jonathan Chevreau
Financial Post (National Post), Canada
Saturday, October 4, 2003
a href=http://www.nationalpost.ca/financialpost/story.html?id=D926CED2-A7A7-htt...
4CF3-8AA0-2ED

The US$14 plunge in the price of gold yesterday was a
vivid warning for investors tempted to jump whole hog on
the precious-metals bandwagon.

Gold fell to US$374 an ounce, the lowest level in two
weeks, as the greenback rose against the euro and the
yen.

Of course, those gripped by gold fever -- many speculators
and hedge funds are long on gold -- may view the sell-off as
the proverbial buying opportunity.

Latecomers who joined the party only after gold mutual
funds rose 16% in August (and 30% over the past 12 months)
may be feeling buyer's remorse today.

Such outperformance should have served as a flashing yellow
warning signal. Mutual fund investors are notorious for jumping
on a trend only after it's been established. Chasing recent
performance is what got investors into trouble in 1999, when
they piled into the Nasdaq and technology funds.

But what if gold bugs are ultimately right and we are still in
the early stages of a gold bull market? If that's the case, the
recent dip creates an ideal moment to leap aboard the
bandwagon.

The latest issue of The FundLetter urges investors to waste
no time in joining the gold rush. Fully five of the newsletter's
eight pages are devoted to precious-metals funds and the
other three cover resource funds that own gold stocks.

As a moderate quot;bugquot; holding 10% of my portfolio in gold, the
newsletter got my attention. While discussing this with an
editor, a colleague confessed he holds fully a third of his
portfolio in gold. That got me thinking that if gold aficionados
are infiltrating the financial media, the general public can't be
far behind.

My friend's 33% position exceeds the more prudent 5% or
10% financial advisors recommend as a quot;hedgequot; against
economic calamity. But it's in line with a call by Dow Theory
Letters editor Richard Russell, who recently bumped his
suggested gold allocation from 10% to 33%. However, mere
hours before yesterday's sell-off, Russell warned that quot;gold
and gold stocks are tired, and might even be ready to correct.quot;

Gold has powerful enemies in government and the banking
sector, groups that favour quot;fiatquot; currencies no longer backed
by gold. Accordingly, those contemplating jumping into gold
should first assess the pros and cons of holding the actual
metal -- quot;real money,quot; the bugs call it -- versus the stocks of
companies that explore and mine it.

Bullion reached the lofty height of US$393 last week, but
gold stocks rose even more. Portfolio manager John Embry
says the stocks were factoring in a bullion price well into the
US$400s. In his Sprott Gold and Precious Metals Fund, he's
been selling some stocks to buy more bullion. However, he
still believes bullion will easily pass the US$500 level, due in
part to heavy buying by China.

Embry's fund, recommended by The FundLetter, is now open
to small investors following the lowering of the minimum
investment amount from $25,000 to $5,000.

It used to be hard to find mainstream advisors who believed
in gold. Today, RBC Investments' Nathan Mechanic, for one,
suggests those who don't have at least a market weight in
gold stocks run the risk of lagging indexes such as the TSX.

Mechanic warns, however, that gold is not a buy-and-hold
investment but a quot;tradequot; -- exposure and risk must be
carefully managed. Anyone tempted to go overboard should
check the charts of gold funds over the last 10 years. They'll
see many lost money for four years straight. These volatile
funds often move from first quartile to fourth quartile and back
again relative to their peers.

Mechanic says there are four phases of gold fever: the first
sees the stocks of major gold producers such as Barrick and
Newmont rise; the second spreads the fever to smaller majors;
the third to the juniors; and finally the speculative exploration
stocks you'll find in Embry's fund.

Most gold stock funds rise with the price of gold, although The
FundLetter singles out Dynamic Global Precious Metals as a
buy. Those who find its 4.68% management expense ratio
(MER) too hefty can take an indexing approach through an
exchange-traded fund (ETF). Barclays iGold provides a
basket of 12 Canadian gold stocks at an MER of just 0.55%.

These days, what has gold fans really excited is a global
ETF that will hold gold bullion rather than stocks. Sponsored
by the U.K.-based World Gold Council, the ETF launches
next year. The bulls believe pension funds and mutual fund
managers will jump on it, adding to the momentum.

Canadian fund investors likely have more exposure to gold
stocks than bullion, but they don't have to wait for the bullion
ETF. Three bullion funds already exist. These let you avoid
the hazards of storing bullion or coins directly (which you
can buy from places such as the Bank of Nova Scotia in
downtown Toronto).

Millennium Bullion Fund and Central Fund hold bullion on
your behalf in bank vaults, and are eligible for RRSPs. The
former holds equal parts gold, silver and platinum, but has
a high MER of 3.5%. The older Central Fund has an MER
of just 0.6%, but sells at a slight premium (9%) to its asset
value. It holds gold and silver, while the new Central
Gold-Trust holds only gold.

Investors should understand that gold's action is part of a
broader bull market in commodities and hard assets. This
is occurring as stock markets flat-line and the U.S. dollar
falls, all while China's economy heats up.

Writer Jim Puplava says it well in Financialsense.com: quot;In
flooding the markets with money and credit, the [U.S.] Fed
has been setting the foundation for the next bull market in
commodities, especially precious metals.quot;

Those wishing to play these trends can do so through a new
hedge fund available later this month: the Van Eck Hard
Assets Performance Trust. In addition to gold, those hard
assets include energy, forest products, and real estate.

In true hedge-fund fashion, it shorts overvalued gold stocks
and goes long on under-valued ones. It has a minimum
investment of just $1,000, but note that it's considered
foreign content for Canadian registered plans.

----------------------------------------------------

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a href=http://www.silver-investor.comhttp://www.silver-investor.com/a

a href=http://www.thebulliondesk.com/http://www.thebulliondesk.com//a

a href=http://www.sharelynx.nethttp://www.sharelynx.net/a

a href=http://www.mininglife.com/http://www.mininglife.com//a

a href=http://www.financialsense.comhttp://www.financialsense.com/a

a href=http://www.goldensextant.comhttp://www.goldensextant.com/a

a href=http://www.goldismoney.info/index.htmlhttp://www.goldismoney.info/index....

a href=http://www.howestreet.comhttp://www.howestreet.com/a

a href=http://www.depression2.tvhttp://www.depression2.tv/a

a href=http://www.moneyfiles.org/http://www.moneyfiles.org//a

a href=http://www.howestreet.comhttp://www.howestreet.com/a

a href=http://www.minersmanual.com/minernews.htmlhttp://www.minersmanual.com/mi...

a href=http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.htmlhttp://ww...

a href=http://www.goldcolony.comhttp://www.goldcolony.com/a

a href=http://www.mineralstox.comhttp://www.mineralstox.com/a

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a href=http://www.hsletter.comhttp://www.hsletter.com/a

Eagle Ranch discussion site:

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----------------------------------------------------

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----------------------------------------------------

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