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Minyan Mailbag: Gold Rush!


Yellow metal hit $1000. What's next?

Professor Lewis,

Do you think that Gold Shares will continue to run--now that Gold is dancing around $1,000--or are we in for a violent pull-back?

I read and bookmark your articles daily. I own most of the mining stocks that you like. I thank you for my gains.

Minyan Kathy


Thanks for the kind words. I'm glad I could help. Feel free to check out my daily letter; you might like it too.

$1,000 is just a number. It's meaningless, just as Dow 1,000 was in 1982.

The Gold mining shares aren't even close to pricing in $1000 gold. The XAU/gold ratio is a depressed 0.205, which still hovers near the low end of this ratio's 25-year history. The juniors are even more depressed and trading like gold is still $600. Stock guys still don't believe gold's rally is for real. They expect gold's rally to fall apart at any moment because brief bear market rallies followed by a collapse is what they've grown used to seeing during gold's 20-year bear market that began in 1980. That secular bear market ended in 2000, however.

This is now a secular bull market in gold. Today, gold is at all-time highs after having broken out of a 30-year trading range. The rules are different. Rather than a "top" at $1000, I suspect gold crossing over $1000 may actually be a psychological catalyst to send the gold shares significantly higher as investors finally begin "believe" that gold's rally is for real and begin to price it in to the gold equities.

Don't forget that there are a lot of deflationists too that are short the gold shares. They will be squeezed at some point too. Today's new all-time high in the GDX gold mining ETF may even be the beginning of that squeeze.

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Position in GLD, Gold Shares

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