January 27, 2004

- unedited version -

U.S. Dollar hit fresh, 3-year lows against the Yen Tuesday erasing all of yesterday’s Dollar Index gains.  For the day, the U.S. Dollar fell over 1% giving gold a bullish jump higher. In today’s gold trade action, we had expiration of option contracts trading with a large number of strike prices located around the $400 - $410 level. Capping gold from rallying higher was noted selling of funds liquidating February future positions and not rolling them over into April contracts. Silver, on the other hand, had a spectacular session jumping nearly a quarter of a dollar to over the $6.50 area. Some fund buying was noted. Silver remains poised to move sharply higher, quickly as it has done a good amount of consolidation around $6.25 support. Once silver gains momentum, it is capable of fast, sharp rallies. Although silver and gold have similar trading relationships, it appears silver is on its own for the most part.

Looking ahead in the next several days, volatility is expected to continue for both metals. All eyes are on the US Dollar movements. It is quite amazing from my perspective to see the world’s paper reserve currency in such disarray. Any “dead cat bounces” or recovery rallies are unable to last any sustained period. It is to be expected the Dollar is headed much lower in the “easy money” environment, but think of the amount of foreign currencies, such as the Yen, which are sold by the BOJ, to buy US paper assets. Despite this futile effort, the ability to even control this plunge has been minimal. You can throw billions and billions at this monster, but the dollar bubble is being burst and serious consequences are to be expected. Do not forget the U.S. economy is structured on a strong dollar policy. As the Dollar looses its prestige, products are sure to undergo inflationary pressures. We can see this in the prices of commodities. Look at oil, look at copper, look at gold! So, I reiterate a common question poised in this report, when does gold lose its exclusive dollar/gold price movement link and when does it begin to move in all foreign paper currencies? This is the $1,000 golden question and when it finally occurs, gold will move higher at a faster rate!

It was blast-off for oversold, cheap gold and silver shares. BUT wait! Is this a rally within our downtrend to possibly 200-205? Or was yesterday’s 212 low a possible turning point? It is too hard to say as a bottom is only known after the fact. I believe today’s action was bullish. Yet, we are not out of the woods. The close today showed weakness possibly due to day traders exiting profitable trades and those on “edge” without a clearer short-term trend in gold established. Also, the Dollar, despite today’s drop, could rally higher for a short-term bounce. When and by how much – time will tell. For now, the currency markets are very volatile, unstable and sure to bring surprises in the weeks to come.

What we do know is any pullbacks should be met with buying as “buying the dips” mantra from the CNBC days is quite applicable to this golden bull. Those who are brave are well rewarded on these pullbacks as past data over the prior years have shown us that repeatedly. Selecting an entry point is not easy but all prior entry points below the rally highs have all been exceeded and well rewarded. So use the data we present and choose wisely.

There was a lot of news out in the gold/silver sector including Harmony’s earnings (affected by gold output and rand strength), Harmony’s announcement in increasing funding for exploration, Barrick Gold’s establishment of an exploration office (they are watching with more interest smaller exploration companies as larger, senior gold companies are expected create a busy year ahead in the acquisition arena), Newmonts new $1 billion equity offering (raising cash for a takeover?), Apex Silver’s 6.8 million share offering and much more. So here we go…

- Company News - 

S&P rates Newmont Mining universal shelf "On Jan. 27 Standard & Poor's Ratings Services said today that it assigned its preliminary 'BBB' senior unsecured and 'BBB-' subordinated debt ratings to Newmont Mining Corporation's $1 billion universal shelf. The company may also issue preferred stock under the shelf. At the same time, Standard & Poor's affirmed all its ratings on Newmont. The outlook is positive. Total debt was $1.3 billion for the September 2003 quarter."
Reuters   Tuesday, January 27

Golden Star Announces Changes to Its Board: Ian MacGregor Becomes Chairman, Lars-Eric Johansson Appointed a Director
BW   Tuesday, January 27

Barrick Gold's New Office Tracks Junior Exploration Cos. "Barrick Gold Corp. (NYSE:ABX) has opened a Vancouver office to monitor junior exploration projects, executive vice-president Alex Davidson said at an exploration conference. Davidson said two or three employees in the office are tracking junior projects, and visiting managers of companies and their exploration sites. The local office also handles Barrick's exploration efforts around Eskay Creek, its 100%-owned gold mine in northern B.C."
DJ   Tuesday, January 27

Harmony Gold to boost exploration spending "South Africa's Harmony Gold (HARJ.J) plans to double exploration spending this year to 100 million rand ($14 million) in order to compete better with rivals, Chief Executive Bernard Swanepoel said on Tuesday. Harmony, the world's fifth biggest gold producer, eventually wants to match its main competitors and boost exploration funding to around $50 million a year, Swanepoel told reporters following a results news conference."
Reuters   Tuesday, January 27

Anglo American Sells 3.35% FirstRand Stake For ZAR1.5 Billion
DJ   Tuesday, January 27

Apex Silver mines offers 6.8 million shares "Apex Silver Mines Ltd. (AMEX:SIL) on Tuesday said it was offering 6.8 million shares at $20.79 per share and will use the proceeds to develop the San Cristobal silver-zinc project in Bolivia."
Reuters   Tuesday, January 27

U.S. Gold Corporation Subsidiary in Mexico Continues Exploration of High-Grade Gold System "U.S. Gold Corporation (OTCBB:USGL; Berlin Exchange:US8) reported today an exploration program update by its 40% owned subsidiary, Gold Resource Corporation, on the El Aguila property in Oaxaca, Mexico."
BW   Tuesday, January 27

Apex Silver Mines Announces Equity Offering to Raise $141 Million "Apex Silver Mines Limited (Amex: SIL) today reported that it is offering 6.8 million ordinary shares at a price of $20.79 per share, the closing price per share on January 26, 2004, for aggregate gross proceeds of approximately $141 million. Apex Silver reserves the right to increase the size of the offering. Apex Silver has engaged Sunrise Securities Corp. to act as placement agent in connection with the offering. The closing is expected to take place on or before January 30, 2004. The net proceeds will be used to finance a portion of the construction and development of the San Cristobal project, advance evaluation of exploration properties, and for other general corporate purposes."
PRN   Tuesday, January 27

Eldorado Gold Corporation: Year End Update "2003 was a year in which Eldorado continued to strengthen its balance sheet, substantially advanced the Kisladag Project in Turkey, increased the Company's reserves and resources and created a new initiative in China."
BW   Tuesday, January 27

Harmony Gold Q2 loss deepens on weak output, rand "The world's fifth-biggest gold producer Harmony (HARJ.J) said on Tuesday its second-quarter earnings had been knocked by soft gold output and a buoyant rand but a currency turnaround had improved its prospects."
Reuters   Tuesday, January 27