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-- Posted Wednesday, 8 February 2006 | Digg This Article
 My gold correction forecast proved one thing – I can still compete with the track record of a broken clock (it’s right twice a day). But before you or I start to think it was much more than a good guess, I only have to remind myself how many years I had a tax-loss “carry-forward” to prevent any head swelling.
After 20+ years in the trenches, I’ve concluded one of the best ways to look forward is to first look back. Since returning back to the bullish camp in the spring of 2003, I’ve maintained we were in a secular gold bull market that should have three stages to it. The first was the rally on the back of the falling U.S. dollar. The second was a rally in most major currencies (we’re still in that phase, albeit now correcting a very overbought condition). The third would be a frenzy-type rise on the heels of economic upheaval in the U.S., serious geopolitical problems worldwide and a very strong supply vs. demand picture (all three moving in the right direction). While I’ve maintained the jewelry factor is a critical fundamental factor often ignored by the gold bugs, I want to be perfectly clear on an equally important factor that until recently was dismissed or laughed by most, but in my mind, had as much of a leg to stand on as any other factor: the assertion that the gold market has been manipulated. GATA www.gata.org and its overall argument continue to carry large weight in my book. Although I differ to the extent of the manipulation and how often it’s actually influencing the market, I do believe Bill Murphy, Chris Powell and GATA have seen it overall for what it is. Furthermore, I find Bill’s daily commentary extremely useful in my own work and investments. Let’s realize that if I actually knew for sure, I would be penning this commentary from the ninth hole of my own tropical island, not Central New Jersey! For much of 2003, 2004 and 2005, the true gold bull’s party boat had plenty of room on it. Bill Murphy, I and a small minority of others who didn’t hedge their views, had plenty of elbow room. However, once $500 was taken out to the upside, a near mad rush took place to get a spot on what looked like a boat that had nothing but clear sailing ahead. That in itself began to concern me. At $550, we began to see numerous “mainstream” analysts and the like start to greatly upgrade their view on gold. (These are the same folks who at $350 or even $450 couldn’t muster much encouragement for higher gold prices.) Another bearish factor for me was the recently concluded Vancouver gold show, which was the most crowded gold show in over a decade. Finally, Market Vane’s bullish consequence of 90% for the metals and a very overbought technical condition, led to me conclude a correction was at hand. 
I think at this point, at least one test of the $537-$542 area in gold is a logical assumption. While the $20 whack in a day was a stunner to many, the fact is most people assume it’s just a blip on the RADAR and have not lowered their bullishness or even increased it (if that’s possible). When you have several days of 90% bullish readings according to Market Vane, history suggests the correction is not over in a day or two. In fact, there have been only two similar cases for gold where 90%-plus reading for about a week occurred—mid-December 2005 and January 2003. In both cases a fairly extensive correction took place. We will need to monitor how bullish and bearish sentiment reacts over the coming days to know if this is just a short but harsh correction, or if a break below the $540 area to as low as $510-$525 is going to be needed to empty out the party boat again. Silver – Should mirror gold but I’m mildly disappointed that the proposed ETF is running into another stumbling block. If and when it gets the true green light, I believe it can be as bullish for silver as the ETFs have proven to be for gold. Platinum and Palladium – I’ve been suggesting the spread between platinum and palladium would narrow in favor of palladium and I continue to believe this can be the case. Base Metals – Because I believe a serious economic slowdown here is underway and should eventually affect even China, I’m no longer a roaring bull on most base metals. I would sooner be over-weighted in precious metals and uranium. 
Oil – I’ve stated that the highs during Hurricane Katrina should prove to be the cycle highs for the next couple of years. The fact that the Iranian, Nigeria and other geopolitical factors worldwide couldn’t give oil a push to new highs, and the fact that the winter has failed to live up to the bad predictions made last fall, suggests to me we now may have witnessed a massive double top in oil and $50 oil is more likely than $75 from here. Grandich Publications, LLC. P.O. Box 243 • Perrineville, NJ 08535 www.Grandich.com phone • 732-642-3992 email • Peter@Grandich.com Grandich Publications, Inc. provides research, analysis, and investor relation services for certain of the companies featured in the articles appearing in its publications (each a “Featured Company”). Featured Companies may pay fees to Grandich Publications, Inc. that may include securities-based compensation that would appreciate if the company’s stock price rises. Accordingly, there is an inherent conflict of interest involved that may influence our perspective and provide an incentive for publishing favorable information with regard to a Featured Company. Grandich Publications has been given the right to exercise stock options. A complete list of options and share price (in Canadian dollars) is listed on the company website. Furthermore, most companies have entered into agreements to pay Grandich Publications a monthly fee. Fees are also listed on the website. The material herein is for informational purposes only and is not intended to, and does not constitute the rendering of investment advice or the solicitation or an offer to buy securities. The foregoing discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). In particular, when used in the preceding discussion, the words “plan,” “confident that,” “believe,” “scheduled,” “expect,” or “intend to,” and similar conditional expressions are intended to identify forward-looking statements subject to the safe harbor created by the Act. Such statements are subject to certain risks and uncertainties and actual results could differ materially from those expressed in any of the forward-looking statements. Such risks and uncertainties include, but are not limited to, future events and the financial performance of the Company which are inherently uncertain and actual events and/or results may differ materially. This report may refer to “measured, indicated and/or inferred mineral resources”, which do not have demonstrated economic viability. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever achieve the status of “ore reserves”. A Preliminary Assessment is based on inferred resources that are geologically speculative, and as a result, there is no certainty that the economic considerations or results will be realized. Third party statements contained herein and information contained in any source cited herein are not endorsed by or adopted by Grandich Publications, LLC, nor has their accuracy been verified by Grandich Publications, LLC.
-- Posted Wednesday, 8 February 2006 | Digg This Article
Peter Grandich is the Managing Member of Grandich Publications, LLC (www.grandich.com).
The company publishes The Grandich Letter (first published in 1984) which covers the metals and mining industry, follows world markets and economies, and covers the Canadian markets from an American prospective.
Grandich also provides a variety of corporate finance and development services to publicly-held companies.
Peter Grandich is also the Managing Member of Trinity Financial, Sports & Entertainment Management Company, LLC (www.trinityfsem.com), a Registered Investment Advisor in the State of New Jersey. Trinity provides investment advisory services to individuals, small to mid-size businesses, professional athletes and entertainers.
Peter is a long-standing member of The New York Society of Security Analysts and The Society of Quantitative Analysts.
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