The Really Useful Gold Thread

CS,
I hope you are having a good family holiday. If you are around in London, give me a bell. Meantime, On the gold market...

There may be something in what you say:
The market is less liquid between holidays, and is therefore easier to manipulate. But I think the Tsunami DOES have something to do with Gold's drop since alot of the countries hit by the disaster keep their savings in Gold. Surely, some of those savings are being tapped now.

But let's look at Gold versus Gold shares.

1/
Gold in Euros has fallen to the Eur.320 support, if broken, there is support nearby at Eur.312:
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For the past 4-6 weeks, Gold has been one of the weakest "currencies", and so if the markets reverse in the new year (as I expect) then it may outperform a stronger dollar.

2/
Gold shares had a great 2003, but 2004 was a year of relative weakness, as Claude Cormier says:
"So far in this secular bull market, gold has been up 78%. Since they bottomed four years ago, gold stocks have again shown their traditional leverage and have gained approximately 200% on average. During that time, our top 10 performers increased in price by 750% confirming that leverage is at its best with small companies that have the ability to discover precious metals and expand their resources and reserves. No doubt that we want that kind of performance for the next 4 years. But...

Something undesirable happened in late 2004 - the metal has outperformed most gold stocks. Although gold went up 6%, stocks went down 10%. Our own selection of 46 juniors and mid-tiers gold stocks which has been up as much as 260% since the bull market started, managed to lose 8% in the last 12 months. On the other hand, our top 10 junior picks were up 48% during the period. So what really happened?

You certainly have read many times about the fact that gold stocks supposedly always lead the metal. Does this means that we are entering a new bear market? I do not think so. The 2004 divergence between gold stocks and gold was simply due to a very specific set of circumstances including - a near perfect negative correlation between the US dollar and gold without similar action in other fiat currencies like the Canadian dollar - and unexpected very high costs on all goods that are needed to run or develop mines."
@:

3/
The problem of rising costs in a non-dollar currency, has been particularly severe for the South African producers. Now that currency, and the companies listed there look set to experience a turn for the better, as the charts on the ZAR thread will show:

4/
In recent days, the gold stocks have not fallen to the extend that they normally would with such a sharp drop in gold:

Note that, MACD (for the HUI/Gold ratio) has already turned up. For me, this a sign that the gold shares are already deeply oversold, and are set for a good bounce in the new year.

5/
In the past week, I have been buying "with both hands" the bombed out Juniors listed on my GAIN thread. In past years, the average GAIN stock has shown a rise over over 50% within 6-8 weeks after the new year starts. It would not surprise me if we saw at least that this year. So, with luck, $200K invested now would go to $300K or higher.

Have a Happy New Year!