look at it this way

I just thought I'd put a few of my thoughts on gold down as some long suffering gold investors on the gold thread seem to be losing faith. Hang in there guys. Think Pantene shampoo adds - It won happen over night, but it WILL happen.

News out of the US gets worse and worse by the day. Just today Bloomberg reported a more than doubling in repossessions and a 48% rise in foreclosures since the same month last year. 1 in 348 home owners was served with a default, eviction or similar notice. MBIA and AMBAC (very quietly mind you) have had their ratings downgraded. This has really big ramifications.

It seems to me that the intervention in the gold market has been far more noticeable over the last three months than in any other period in this bull run. Maybe this means nothing, but maybe it means the cartel is finding its getting harder and harder to managed the price or its taking more and more effort (read gold) to manage it.

The investment banks themselves are starting to struggle, so I wonder if this will affect their abilities to carry out their interventions on the same scale, the further along that we get.

There is good argument that India will provide solid buying around the $850 level. Their imports were down significantly in the first quarter (around 60-65% or so), so one might think they will need to do some restocking and see $850ish as a pretty good price after the run up of the last three to six months.

The oil gold ratio is at an absolute extreme and equal to its lowest point EVER at 6.3ish. A move back up towards a more normal reading would allow for a decline in the price of oil without a corresponding decline in the gold price, one thing many people feel could bring gold down further, or of course a rise in gold while oil stayed elevated.

Many gold shares have suffered 50%+ falls (much of which has been due to highly volatile market conditions and movements rather than fundamental shifts in these company's outlooks). In fact for many the outlook has improved in that time (LGL, RSG, AND, AVO, DOM, DIO and I'm sure there are others). Increasing earnings could also start to flow through if cost increases can be contained below the increase in prices many of the unhedged producers have recieved over the past 6 months.

Massive expansion in inflation (the money supply) over the past 5 years by most western countries is finally beginning to show up and cause real problems. Take a look at all the riots around the world over food and petrol price rises in the last 3 months. These aren't just isolated events. They are literally happening all around the golbe. The situation is affecting inflation expectations the world over and logic should tell us that this is when things start to happen. There is also (in my humble opinion) very little geopolitical risk priced into gold at the moment (bar the amount thats been priced in over Iraq etc for ages).

There is obviously very poor sentiment towards gold and the shares at the moment so we could even speculate that as a contrarian approach, buying up of gold and gold shares might occur over the traditionally quiet summer and autumn period ahead of the well known higher demand season at the end of the year. Because everyone expects the usual poor performance over the summer, I wouldn't be all that suprised to see a different outcome take place.

Mentally after large falls in stocks it seems as though they are more likely to continue to fall, but in reality having fallen so much, they are more often than not, at or near the end of their move down and are in the process of forming a base.

Throw in a quake in the worlds largest gold producing country and power shortages in the 2nd and 3rd largest producer countries Oz & SA (Newcrest alone losing 30,000 ounces and I'm sure there are others affected) and I just can't see gold going far below the MAJOR technical support at $845-$855. Remember that in nominal terms the support at this level goes back 26 years or so. Everyone knows it was the previous high way back when, even mum and dad sitting in front of channel 9 news every night.

I'm sure many objective analysts could well come to the conclusion that this price (of gold and the shares) provides an excellent risk reward opportunity especially if looking out over the next 3-5 years, with a buy around $850-$870 and a stop something around $800-$820.

One thing that many are citing at the moment or maybe the thing that is leading to the recent bearish sentiment is the threat of real action on the US dollar. Again this is just my take on it, but they seem to be getting a bit more desperate having to drag Hanky Panky Paulson, Benny Boy and Dubya out in support of it in the last week. As someone mentioned on another Gold thread, this may be timed to coincide with the G8 meeting so the yanks don't get quite as big a tongue lashing as they should.

Rest assured the fed (who if you didn't know are 53.8% owed by Citibank and JP Morgan - now you know why JP got Bear) can't and wont raise rates, bar maybe a token 25 or so basis points to give the impression they're really serious about supporting the dollar (so serious they run a negative real rates policy!). The investment banks (who own the Fed) need interest rates low to keep them solvent. They will look after themselves long before they give a shit about inflation running ramplant on the average joe. Inflation doesn't affect the rich anything like it does the average person. Recession does. No one borrows money and the banks can't earn their beloved fees and interest.

It's just my prediction or speculation but I think we are close to (if not at the point) where Gold may begin to move in less and less correlation with the dollar and more and more in response to the visible and growing inflation problems, which is golds real environment in which to flourish, or at least has been historically.

All in all I think history and hindsight will show us that buyers and holders at current prices will be better rewarded than sellers at current prices.

I'm hanging onto mine. A lot could happen between now and this time next year that would be positive for gold and the gold shares.

I'd wish you all the best of luck but as you can see from my signature there's no such thing.

Good trading/investing