Chuck checked in LATE:
Bill:
Sorry for the tardiness of this note but I was waiting for the close to write it.
On the surface today might appear to be a boring, as usual day in the gold fields. But, under the surface I strongly suspect something different has finally begun, very possibly the move most of us have been expecting and hoping for. This is a strange statement when one considers that the stock market market ended up near its top up nearly 50 points and the HUI barely moved, just 3 points.
However, remember that at the opening the price of gold had again plunged, and the HUI sank another 9 points. I have always felt that the shares are the best barometer of the direction of gold and of the strength and weakness of gold. So even though gold closed down a few dollars, the senior shares did okay, but some of the smaller ones really came to life. Most of the ones that I follow were up and several up more than 10% on very good volume for a change. If this is the historic market that most of us believe, then the junior shares should be the leaders of the future.
What does this mean? Remember, the price of gold is only one part of the junior equation. The other are its costs. As the ratio of gold to commodities goes up, it is a very positive signal (this is not my thought, but Bob Hoye’s whose work I greatly admire and follow.) We have had a very sharp drop in some of the base metals over the past couple of weeks, and I think that the junior shares are possibly reflecting the increase in this ratio.
If this is the case, we should see some very strong pops momentarily in many of the junior exploration companies, and that should include even the beleaguered readers of this column . It has been a very frustrating couple of years, but I believe that the light, and not the oncoming train is at the end of our tunnel.
The other important point is that the strength is very likely signaling profound weakness coming in the stock market, and in particular, the financial shares. This is what happened in late 2001 and early 2002, and as Bob Hoye points out this week in November 1973 when the stock market dropped 20% and the gold shares took off. If so, we should know about this very soon, and it will not be done in a corner but before the entire financial community. Chuck
ikiecohen@msn.com