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Minyan Mailbag - Gold '05

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

I was chatting earlier today with the very knowledgeable Mattison Reinecke, fellow Minyan in Torino, Italy about gold and stuff and he put some thoughts on paper that I'd like to share. Thanks Matt, enjoy the kids, they get big too quickly!.



Laurie,

"I think that the gold bull market is over!!!

Just kidding...

It seems like we are just consolidating our gains. Sentiment got way out of line with the fundamentals in my opinion. The strong mining currencies and higher commodity costs gave us no leverage. As the profits of Newmont Mining (NEM) (for example) haven't kept up with the gold price NEM the stock rightly suffered in my opinion.

I think we are going to see a change this year, but I want to see gold do well in euros (and other currencies) to confirm my opinion. We gold bulls all believe that gold is the currency of choice for the next ten years, so it better start acting like it. Nobody now remembers that gold bottomed in euros and yen in the late 90's and then in dollars after the turn of the century. The gold bull market is not just a weak dollar play. The whole world is now focused on the dollar euro relationship, so is it time for that relationship to break or to change?

Sentiment has now reached an interesting point. Have you ever looked at the marketwatch.com sentiment work of Hulbert? It has worked well with gold stocks in the past. Gold market timers (newsletters) are now short the market, which is as negative as they have been for years. (contrarians take note-LM)

I have been slowly diversifying out of my euros into other currencies. My biggest move has been to uncover my dollars (invested primarily in gold stocks and high dividend non financial stocks) in early December (I wish late December) and to buy some undervalued currencies, such as the Singapore dollar. I find it interesting that smarter people than me, such as Marc Faber, are now talking about a dollar rally to 1,10-1,15. I think I will play it until 1,20 if it happens. But maybe NEM will test its long term trend line in the mid 30's??? It will definitely be interesting to watch the reaction of gold stocks to strength in the dollar. I find it somewhat relieving that NEM held above its Jan 7 low, while the euro continued to weaken under 1,30.

We shall see...

I will reconsider my long term thesis if NEM breaks down from its long term trendline. (I hate saying that, but as Todd says discipline trumps conviction.) Until then lower prices are better entry points, no???


Ciao,
Minyan Matt


Now there's one smart Minyan! - Loz.

position in gold, nem

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