Gold's Sky-Trip Leaves Me Speechless

Thursday, November 17, 2005

Looking at gold, which skyrocketed some 5% in the last 2 days, leaves me simply speechless. Not that I would dread the move of the universally accepted money of the last 6000 years at all, but either we are moving towards worse times faster than even I anticipate or there is too much heat in this market. I suspect the latter and would not be surprised when this move will run into heavy selling, maybe as soon as tomorrow.
While the fundamentals will still favor gold even at levels above $500 an ounce the latest price explosion is begging for a consolidation. Gold will have to work the $475 to $485 range a bit more before the upturn can resume on a sound footing.
Silver has much more room too. I would not be surprise to see the $10 level before summer 2006. It is favored by the still too high gold-silver ratio which now stands at 1:60 and has always been around 1:15 in the last 2000 years. But don't expect the best conductor to close in soon. Patience and wide stops will be everything to see a golden future with a silver lining.
To repeat it: There is much more room on the upside but watch out for heavy corrections. Gold's support is at $456, the former resistance at the former year's high.
Unhedged gold miners look attractive even at current levels, but the next correction in line with the gold price will offer better entry levels for those who are not long already. But watch out not to pick leveraged companies. Those with the least debt will do best in the long-term. And make a distinction between explorers and producers. Only the latter will benefit immediately from higher gold prices.
UPDATE: This bull market is for real. Bloomberg TV just reported that sales of bullion bars and coins rose 56% in the third quarter. As one hardly buys physical gold for short-term speculative reasons I detect a healthy trend behind the recent surge.


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