This year''s gold producer de-hedging is forecast to be greater than last''s

Gold bugs or gold bulls?

By Peter Brimelow
CBSMarketWatch.com
Monday, March 22, 2004

a href=http://cbs.marketwatch.com/news/story.asp?guid=%7B0B4DF8BA%2D51C7%http:/...
2D4974%2DAE42%2D72C67F4B59FD%7Damp;siteid=mktw

NEW YORK -- quot;The REAL Gold Bull Market?quot; cheerfully proposed
gold friend Bill Buckner of The Privateer in his Saturday comment,
no doubt facilitated by the time zone advantage offered by his
remote lair, way up the coast from Brisbane, Australia.

quot;Over the past week, spot future Comex Gold has had its best
weekly rise for five months, rising from $US 395.60 to $412.70.
That's a rise of $US 17.10 or 4.32 percent.quot;

Buckner's site, with its powerful charting capabilities, is among
the most dramatic examples of a newsletter adapting to the
Internet. He went on to penetratingly remark:

quot;But that's not all. Here is the movement of the gold price in
10 selected currencies this week, arranged in order of the
magnitude of the upmovequot; -- and followed with a table showing
that gold moved significantly last week against all the major
currencies except the yen (He didn't bother with the Chinese
yuan).

From his own, rather different, geographical viewpoint,
underneath a snowdrift in the hills of New Hampshire,
Freemarket Gold amp; Money Report editor James Turk saw
related reasons to be upbeat:

quot;Gold's long-term uptrend remains firmly in place. ... Gold
appears to be breaking out of the flag pattern that has
formed over the last two months. ...'Flags' are a common
consolidation pattern. ...It is logical to expect that this
current flag will end with an upside breakout, which in fact
now seems to be in progress.quot;

All of this was little comfort to the owners of gold shares.
A sluggish week saw both the XAU and HUI indexes close
slightly lower.

This is not entirely surprising. Several influential
commentators -- for instance, James Dines and Harry
Schultz -- have been worried about gold equities.

The former, in the latest Dines Letter, observed of the
golds: quot;Nonetheless, some suspiciously top-like
formations are evolving, and we will 'tighten our stops' on
them, just in case.quot;

While the latter, in his latest HSL said, quot;What action to
take? If U are a bit overweight in gold shares amp;/or if U
own some clearly underperforming stocks (like the list
above), I would sell them. (I have.) I would not sell bullion
or coins, but weeding out weak golds is no different from
weeding out hi-techs, drug stocks, or any other group.
Keep the strong.quot;

(In fairness, it should be noted these comments do not
cover the events of the past few days.)

Possibly the negativism of these and other pessimistic
commentators have influenced the behavior of the quite
in-grown gold share community.

There is a specter haunting gold and gold shares. (You
have to be a product of the '60s to get the allusion.) Do
gold and gold shares predict? Don Hays, the Wall Street
triumphalist whose technical work always merits serious
attention, was provoked into an unusually prolonged
discussion of the metal on Friday:

quot;It is my thesis, strictly by observing the long-term price
action of gold when history tells us the Fed has either
been too tight or too loose, that the price of gold in the
range of $370-$400 is about right.quot;

Why?

This, of course, is the manipulation-inviting type of reasoning
that drives Bill Murphy's LeMetropoleCafe.com readership into
rage.

Martin Pring provides, perhaps, a more immediately useful
investment perspective: quot;the Gold Bug Gold Share Index
(HUI) ... with a decisive daily close above 231, would be an
excellent pointer that the gold price is about to make a new
bull market high.quot;

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

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