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-- Posted Tuesday, 6 November 2007 | Digg This Article | Source: GoldSeek.com
Tuesday, November 6, 2007 10:00 a.m. EST Editor’s Note – Because I’m traveling for the better part of the next two weeks, I thought I ‘d write a short update on the markets.
Gold – I love it when a plan comes together! In a business where you either learn to say “I was wrong” a lot, or you in vain try to fool the investing public into believing that you somehow weren’t, it’s especially gratifying when a major outlook of yours – one on which you feel you were particularly outspoken – plays out as you foresaw. The gold market continues to unfold pretty much as I have laid out since returning back to the bullish camp in the spring of 2003. I have stuck to my guns on wanting to be over-weighted towards gold versus financial assets and as of today, I think the results have proven that to be the best course of action. I even felt precious metals over base metals were the best bet for the last year or so, and this has also proven to be the better choice. But, in a business where you’re only good as your last call and soon investors will ask, “What have you done for me lately?”, I won’t rest on my laurels and instead continue to stick my neck out until the inevitable wrong assumption and the cries become “off with Grandich’s head!” We began 2007 with gold near $600. I stated in my New Year’s edition (http://www.grandich.com/docs/GL_01-14-07.pdf pages 7-13) the three key factors that I anticipated would drive gold higher with a move to a new, all-time nominal high on gold this year. Much of that belief has come to fruition and should continue to play out into 2008. People are calling and emailing (especially after my Barron’s quote where the reporter failed to use my entire commentary and made what he did use appear to be something different than I implied) and asking if it is time to sell or is it too late to buy gold? The bad news is that gold is no longer “cheap.” It’s also likely to have a fairly good correction and consolidation (eventually), an event that has taken place often since the great Bull Run began around $250. These “two steps up and one step back” moves have kept the majority of people out of gold (along with many closet bears who dress up as gold authorities/media persons but are really anti-gold). The best anyone can do is make a good guess. With that in mind, here’s my best guess as we speak: · I believe we’re either in or close to having a Commercial Hedger failure on the Comex. Thanks in part to Bill Murphy’s newsletter http://www.lemetropolecafe.com/ and http://www.gata.org, this factor has been eye-popping, to say the least. But it comes as no surprise that the vast majority of professionals, investors and financial media have missed it because they have erroneously dismissed Bill’s and GATA’s work, something I feel has been a very important tool for me and has helped to keep me on the right side of gold. (Just ask the many who sold the last $200 rise and now wish they understood the dramatic rise in open interest, option positioning, etc., which Bill has so often pointed out in his superb publication.) The next couple of days should go a long way in telling us exactly how much this has/will impact the gold price. · When asked if there is one factor above all others that influenced me on being bullish on gold, my answer has been the same for a few years now – the inverse relationship of gold to the U.S. Dollar. How many times did I say (or was quoted as saying) that the “only party that doesn’t know the U.S. Dollar is dead is the U.S. Dollar?” Heck, even super models are now saying it! http://www.bloomberg.com/apps/news?pid=20601087&sid=aCs.keWwNdiY&refer=home The fact that the U.S. Dollar keeps making new, all-time lows while gold is within reach of a new, all-time high, comes as no surprise. · Geopolitical – The Pakistan news (a factor I discussed in my October 14th edition), is just one of many geopolitical events I expect to continue will provide underlying support for gold for the foreseeable future. Bottomline – Again, I want to remind you if I knew for certain (or near certain) what the future holds, I would be sitting on my own island with a golf course and a daily Texas Hold’em tournament, and a church (please, God, not in that order-LOL). My best guess scenario from now to years-end is: · We make a new, all-time high on gold (or come very close), while oil breaks $100 and the Euro is either side of 1.50 versus the U.S. Dollar. · Most likely during the U.S. Thanksgiving holiday and years-end, and especially if 1.50 on the Euro is hit or exceeded, we can see Central Banks intervening in the currency markets. The Europeans simply can’t deal with (they may have no choice over time) a 1.50+ Euro. This holiday period atmosphere would be a smart time for them. Market conditions are thin, short dollar players have gigantic paper gains and would want to lock in profits for the year, and in their mind it could set the tone for 2008. Such intervention could also assist in causing the inevitable price correction/consolidation for gold, but keep in mind we not only have seen this time and time again, but it’s healthy and part of the bull market. Final Note – It’s critical to appreciate the message I tried to give in my October 14th edition. http://www.grandich.com/docs/alert_10-14-07.pdf My concerns expressed in that edition are for the next several years, so day to day and week to week moves in the markets mean little to me as I fully anticipate my long-term picture to play out over time. If it doesn’t, you will certainly know how wrong I was as an appearance on Divorce Court would be likely. As the Holidays Approach - As we approach the holidays, many of us are facing different challenges. For those of us who believe in God, we could ask, “Are you even there?” Dolly Parton has recorded a wonderful song that makes so much sense to me and I hope it hits home to someone out there as well. http://gospelman.info/christian/HelloGOD.html
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-- Posted Tuesday, 6 November 2007 | Digg This Article | Source: GoldSeek.com
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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