Welcome to GCRU #106 on Mar 24, 2004. Unusually, gold rose every day since & including last Wednesday, rising $16. J. Gold shares put in a mixed performance. The usual rise “shares-lead-bullion” style didn’t work. On Monday, gold made its biggest 1-day rise: $4.90, +1.18%. But our Schultz Gold Shares Advance/Decline Index fell 4.0 pts. XAU fell .73%. HUI fell .81%. Only SGI (the prime gold share index) rose: +.57%. WHY did gold shares fall when bullion shot up 1.18%?? The answer came over my dinner last night at the Café de la Paix, in Paris, with Hugh Hendry, co-mgr of Odey Asset Management, UK, whom many of you have seen on CNBC as a super-star guest with sharp wit, humor & brain. He is a fellow gold advocate & chart-orientated, with brilliant track record. We concluded over a fish dinner that golds are lagging now because all the stock mkts are falling – just as they did in 1987 when the US stk mkt crashed big time & gold went with them, contrary to expectations. When people lose big money & get margin calls, they sell whatever they need to (shares before bullion). So don’t expect contra-stk mkt action for gold now that the primary bear mkt has resumed in equities. Hugh & I agree the 2ndary rally is over. He is short. •••I ended last GCRU with a PS that gave correct guidelines for what subsequently occurred. We got the 2dc over 406 neckline with its target of 420, which we hit precisely. Now 420 is the new barrier to be overcome. ••Meantime the US$ fell thru the 88.50 interim support, but held (barely) at the far more critical 88.00 level. As long as 88.00 holds, gold is going nowhere important. •••I covered most of my gold futures shorts, but not all. Interestingly the loss on the futures was not far more compensated (as it should have been) by a greater rise in gold shares. I was “saved” by a rise in bullion. Shows the value of holding both bullion & shares, & using futures to hedge. ••Gold’s big Monday jump was probably triggered by geopolitical events: Hamas chief killed, global nervousness spreading from Madrid, Taiwan leader shot, Iraq violence increasing, Kosovo killings. •Despite all that, gold shares could not, in the main, hold their Monday gains. Eg, Bema shot up but closed at its low. Ditto Wheaton & GSC & BVN, all good chart stks, but couldn’t hold gains. Best actors were Gammon & IMZ who held their gains. ••Bigger Picture: bullion is probably in a base building action, perhaps a reverse H&S with 419-422 as its neckline. Look for more consolidation for the “average” share & the gold indices. Once 420 area blows its top (needs 3 day close over 419) we’ll probably see a move to 450 +/-. So plan accordingly. Buying weakness is ok in the few stronger stocks – only. Buying on the breakout is for the rest. •••Note to HSL readers who are interested in the 2% sales tax article: The e-mail address given has been changed. Now: firstname.lastname@example.org ••Bullish consensus: gold 81% & overbought. $: 29%. ••Thnx for your letters. One sample: “How do U folks do it? U bring clarity to upheaval. Your PS guidelines last time were beyond good. Congratulations & thank U. Enclosed renewal for 1 year”. ANN. •••Patience now, dear reader-family. With some discipline now, we can prepare to pounce like a leopard. Watch for the moment. Bye from your alchemist guru, Uncle Harry
PS: The stock mkt was a bit oversold on Monday. Tues modest recovery was matched, ironically, by a modest rise in gold shares. NYSE advances exceeded declines & Russell Index & DJT rose. Equities will resume their decline soon. Will gold shares correct a bit also? Probably. Unless we get the 3-day 419 breakout first.
Schultz Gold Index (SGI) – daily chart (L/O/C): Bull cues: on strength only at mkt &/or on 1-day close over 14.00. Bear cue: lighten up on 1-dc below 13.00; final exit: 1-dc below 12.00. Comment: close over 14.00 needed to validate 4-mos H&S base; 16.00 theoretical upside target. Spinner lines positioned to confirm new bull/buy cycle. Bullish action in SGI & Spinner action justifies preemptive positioning in strongest stocks.
Schultz Gold Share Advance/Decline Line (SGS-A/D) daily chart (L/O/C) Bull cues: given on 1-dc over Jan 5 downtrend; again over 5165. Next major bull cue: 1-dc over 5240. Bear cue: 2-dc below 5075 (exit at mkt if sharp break below 5075 develops). Comment: continued closing strength over (5180) right shoulder high needed to definitely void threat of H&S top (powerful counter-trend rise poss above 5180). Spinner bullish.