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After the Gold Rush


Equities haven't cornered the market on bulls!


I was lying in a burned out basement
With the full moon in my eyes.
I was hoping for replacement
When the sun burst thru the sky.

(Neil Young)


Conventional wisdom said that gold was going to $440 after it technically broke at $460.

Conventional wisdom said that gold would go down if the dollar rallied.

Conventional wisdom said that gold would go down due to the large short position held by COT.

Why should conventional wisdom be correct in opining that gold will fail at $500?

Even though I think it will pause, I don't think the pullback will be that severe. Plus, when it hits $500/oz, the media coverage will trigger a whole new slew of investors to chase the gold stocks. Just my two ounces on the subject.

Minyan Neal


While I got your note late last week, I felt that it would be apropos to post it this morning. After all, gold traded north of $500/oz last night and, as you suggested, the media coverage has been pretty loud. It's been 18 years since we last saw a five handle and the finski lasted all of one day. True to form, after poking through this psychological barrier last night, the yellow metal is back below the threatening threshold, pretty as ever in pink.

The after-the-fact reasons for the rally are plentiful, as after-the-fact reasoning tends to be. Indian demand, ETF accumulation, Russian Central Bank buying, fiat currency alternative-there are always two sides to any trade, we know, and the '05 gold rush has been no exception. Whether we're talking metals, bonds, equities or schnitzel, price is the ultimate arbiter of any great debate. I remind myself of that daily when I flip my switch and gander at this year-end goose.

I can't tell you whether I was lucky or smart when I opined in Ojai that energy would toss the leadership baton to the precious few. Prolly both, as my supposition was a long-term predication with a short-term turnaround. Still, with the XAU up almost 30% since our mountain festivus, I made some partial peels (read: sales) last week as a function of discipline. There is no "set rule" on how to trade-the markets are dynamic and we must be as well-so I opted to take a bit off the table (as opposed to setting downside stops) before I sat down for the holiday feast.

The more important question is whether this is it for the metal trade. My humble opinion is a resounding "no" although, as with any bull market, pullbacks are inevitable and when they arrive, it will feel like the game is over. The genesis of my desire to own the metals, quite honestly, was to diversify away from the greenback. With the dollar up 7% since the summer, it's clear that this hasn't been the causation of the metal ramp. Perhaps that relative strength is a precursor of further gains in the months and years ahead.

Nobody is smarter than the market and I don't profess to have the answers. But for my money, I wanna keep some exposure in this complex and loosen my grips on the handlebars. While my background is trading-sixteen years worth of stress and sleepless nights-I adapted my style to the market a few years ago and operate in two buckets-longer-term investing and short-term trading. This falls squarely in the former and, as such, my tactical approach is a bit different than it ordinarily might be.

Hope this helps, Neal-happy hunting!

position in metal equities

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

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