gold~some sage advice

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    Folks. I'm a great believer in the secular bull run for gold. Over the next couple of years gold will continue to rise in my view. That said, one needs to be careful about this current huge rise in the POG. The quick rise possibly brought on by war fears as per the article below will certainly trigger short covering. This is a kind of positive feedback which will raise gold prices further. Such a rise can only be temporary until short covering is completed, after which, the POG is likley to drop off.

    By all means take a position in gold or gold shares but be careful that you're not paying top dollar which may take a little while to get back to if you happen to buy at the peak of a spike.

    Chuck

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    December 18, 2002


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    Gold Shines Through War Clouds




    Dec. 18
    — By James Regan

    SYDNEY (Reuters) - Nervous investors piled into gold in Australia on Thursday, extending an overnight price rally in the United States as fear of war in the Middle East mounted and oil prices soared.

    Gold bullion still trades hundreds of dollars below the $800 an ounce it fetched in 1980, though a frenzy of post-New York trading polished the metal to a fresh 5-1/2-year peak of $347 an ounce in active Asian trade.

    "The war factor is driving up gold, there's no doubt," said Commonwealth Bank of Australia commodities strategist David Thurtell.

    Many New York bullion dealers would have left their desks for the night with gold fetching $342.00 an ounce, itself a sharp $4 rise on the benchmark $338 an ounce fixing price set earlier in the day by the London Bullion Market Association.

    But bullion banks in Australia early on were buzzing with a second gold rush as investors simply crossed time zones to the start of a new day in the southern hemisphere.

    By the time bullion dealers in Hong Kong opened shop, gold continued its shining streak.

    "We're seeing a fair bit of buying activity post-New York," a bullion dealer in Sydney said.

    Another dealer would not rule out a test soon of the May 18, 1997 high of $350.90 given the volume of trading in the precious metal.

    PRIZED FINANCIAL ASSET

    Spurred by fears of a war against Iraq, a weak dollar and strong oil prices, gold has surged nearly 25 percent this year, making it one of the best performing financial assets.

    The White House said on Wednesday that President Bush is concerned by omissions and problems in Iraq's arms declaration.

    U.S. officials said any declaration would not be an immediate trigger for war, but speculators and investors continue to build a "war premium" into the price of gold, historically seen as a sanctuary from financial market turbulence.

    U.S. officials later said the military has been told to notify up to 50,000 troops they might be sent to the Gulf early next year.

    "We're seeing gold react to world events and that has also caused a large amount of short-covering of positions, which is helping push of the price," Eagle Mining Research gold analyst Keith Goode said.

    Speculators have been driving prices higher, based on gold's reputation as a safe haven, as the dollar fell to three-year lows, financial markets fretted about Iraq and crude oil prices surged back above $30 a barrel.

    Rising oil prices are an early indication of looming inflation, making gold even more attractive as an alternative to stocks and cash.

    BUYERS BEWARE

    Large and small investors caught gold fever last week when bullion futures topped $330, which capped gold's previous rally in June.

    But, caution professional dealers, the market is now extremely top-heavy, with funds adding to their net long position since it was tallied last Tuesday at 51,359 contracts, the largest bull bet on the COMEX since 1996.

    War has often led to sharp price spikes in gold, such as in August 1990 when the metal gained over $60 an ounce to breach $400 when Iraq invaded Kuwait.

    But within 24 hours of the start of the Gulf War in January 1991, it plummeted from above $400 to $374.

 
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