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Omaha World-Herald raises the gold issue and cites GATA
By Peter Brimelow
CBSMarketWatch.com
Thursday, August 12, 2004
http://cbs.marketwatch.com/news/story.asp?guid=%7BD32A1740%2D03F3%
2D4202%2D8182%2DB739DF1C9CAA%7D&siteid=mktw
NEW YORK -- Gold stabs to the much-watched $400
mark, then subsides. And the gold geezers continue
patient.
Patience, in fact, has marked the veterans' approach
to gold since this bull market began more than two
years ago.
They are even calm in the face of the fact that gold
arguably appears poised to recreate the halcyon
days of their middle age -- when the stagflation
confounded conventional economists and gold's
$800-plus blowoff in 1980 vindicated the
long-derided gold bugs.
Dow Theory Letters Richard Russell wrote this
week:
"Nothing much to say about gold or gold stocks
except more consolidation, and they seem more
difficult to 'knock down' now. I believe that gold
and gold shares continue under quiet
accumulation."
Russell has consistently argued that gold is in
a primary bull market -- but that it will take time.
Gold is like insurance, he says; you buy it and
forget it.
This is temperamentally alien to his old friend
Harry Schultz, who like Russell also been
publishing his service, the International Harry
Shultz Letter, since the 1960s.
Both editors have similar backgrounds, ages, and
outlooks (dire). Both believe that stocks are in a
primary bear market, with deceptive rallies.
But in Schultz's latest issue, which just snailed
by in its erratic way, he puts a very different twist
on patience.
He writes: "I've been a lonely gold advocate in NOT
forecasting '$500 any day now' for the last two
years and that's been validated!"
Shultz argues that gold has been in a $370 to $430
trading range for more than a year. And it's probably
going to stay there, he says. His long-run chart work
"predicts that gold will reach a minimum $580 target
WHEN it eventually (probably not in 2004) breaks its
reverse head-and-shoulders neckline -- at $428, which
I've mentioned before as top of the action zone."
(I'm translating this out of his patented Schultzspeak
and tech-talk).
But don't worry, Schultz continues: "Fortunately, you
DON'T NEED $500 gold to make money; in fact,
vertical markets are higher risk, as corrections come
out of the blue, and sharply. It's far safer and easier
to make money in trading ranges in ANY stock,
metal, fund or commodity. ... The top part of the
trading range is where you sell and the bottom part
is where you buy."
Schultz actually advocates gold stocks for the
same reason that Russell dislikes them: their
leverage.
But Shultz warns that all gold stocks have their
own individual patterns (which he tracks in a
separate service). And, overall, he says he's
reducing his recommended overall portfolio
exposure to gold from 25-35 percent to 20-25
percent.
His reasoning: "Gold isn't running away and you
can make all the money you want by TRADING
THE TRADING RANGE. Later, when gold breaks
out...I'll increase [exposure]."
(Schultz is also increasing his recommended
exposure to bear funds to 5 percent).
Another gold-negative point: Like other
technicians, Schultz is worried about what he
sees as a reverse head-and-shoulders pattern
in the U.S. dollar, suggesting it might rally,
despite the trade deficit.
Overall, Shultz remains his same old reassuringly
apocalyptical self. He predicts "deep stagflation in,
say, two years" and even claims to have inside
knowledge of plans to restore the draft.
Gold stocks that Shultz has dabbled in recently
(omitting his detailed trading instructions): Northern
Gold, Kirkland Lake Gold, Durban Roodeport Deep,
and Gold Fields of South Africa.
Bear funds he's mentioned: Prudent Bear, Rydex
Ursa, and UltraBear Profund.
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