gold shares set for take off..

No matter how much fear is out there in the market a rising gold price MUST be reflected in rising share prices for solid producers.

This will then spill over to juniors proving up resources and then to specs. This has always been the way of the market and this time will be no different.

At present with so much nervousness around juniors have been way, way oversold.

The irony of course is that the sub prime crisis as it is called, (it in reality is much more than that) is one of the important reasons why gold will soar in price as monetary authorities like the Fed are now in virtual panic mode reducing interest rates and inflating the money supply.

There is currently pretty much a buyers' strike with the gold juniors and specs. The majority of investors are frozen with fear, don't understand gold and gold shares and fail to understand imo that gold shares can and will perform in a long term gold bull even with a falling Dow.

What we are seeing imo are nervous sellers/weak hands dribbling out small volumes of juniors and specs at lower prices. But this is likely to end soon imo.

Because compared to a gold price well over US$900 with fear around causing plenty of selling (How will they get any money to explore for gold? It's too risky. No one will give them any money. They are using up all their money and don't have an income. They'll have to issue more shares. That means another dilution.)many heavily discounted juniors have become screaming buys imo.

Eventually all a company will have to do is announce it has obtained some gold leases and will start looking for gold and its share price will run.

If you are looking for great economic conditions and bullish stockmarkets in order to invest in gold shares then why bother?

Better returns will usually be obtained elsewhere imo.

Now here are some good points made by Brian Lundin:

"... The power crisis in South Africa is dramatically reducing gold production, and there is no quick solution in sight.....

Central banks are running low on ammunition with which to attack the gold market. It was 10 years ago that we published The Gold Book, a stunning compendium of research and analysis by Frank Veneroso that revealed how years of gold sales and loans by central banks, spurred by a gold carry trade, had led to a huge accumulated “short position” in gold that could never be repaid.

In addition, Frank concluded that this continued trend of gold loans would, in about 10 years time, reduce central bank gold holdings to the point where they would no longer be able to provide enough metal to the market to restrain the gold price.

The result, he said, would be an explosion in the gold price to a level that would far overshoot the equilibrium price.

It’s been 10 years, and judging from the reduced level of official gold sales under the Central Bank Gold Agreement in recent months, we may have reached the turning point Frank predicted.

Importantly, as I alluded to in my “rising tide” analogy, these factors are all coming into play just as the global money supply is rapidly enlarging.

... And this is why we need to ignore the waves that drive gold up and down so violently these days, and concentrate on the tide that is continually rising underneath."

Full article at http://www.kitco.com/ind/Lundin/lundin_feb112008.html