Patience is required BT. As pointed out in the article below. ....

Patience is required BT. As pointed out in the article below. . Don't worry gold stocks will catch up...



Mighty gold battle begins

By Peter Brimelow, CBS.MarketWatch.com
Last Update: 12:38 AM ET Dec. 16, 2002







NEW YORK (CBS.MW) -- The goldbugs are gathering again, suspiciously as usual. But this time some technicians (and economists) are gathering too.





HULBERT FINANCIAL DIGEST
To order an Individual Newsletter Profile on any of the newsletters tracked by the HFD, click here.

To order the HFD Monthly Newsletter, click here.

To view the Investment Newsletter Directory, click here.




Martin Pring of the Intermarket Review, author of Technical Analysis Explained, the bible of this generation of technicians, says flatly: "the most important technical development in the last week has been the solid breakout in the gold (and silver) price." (Gold's $332.20 Friday close was its highest since 1996.)

Pring had been worried that gold shares hadn't been leading the metal price up as they usually do. But now he thinks the shares have begun to confirm. In his characteristically industrious way, Pring also charts a ratio between inflation- and deflation-sensitive equities. He reports that too has achieved a technical breakout.

Bill Buckler of the Australian service The Privateer, a rising force in the gold world, reproduces a spectacular multi-decade monthly semi-log gold bar chart. He comments emphatically:

"Look at the major trendline, connecting gold's 1980 all time high with gold's most recent 1996 high. This line has been challenged ever since gold first broke above it back in May. Now, with this rise to $US 333 on December 13, gold has broken ABOVE that eight-month 'consolidation' phase. In the process, it has left behind the LAST downtrend on the chart....The final 'proof' that $US gold IS in a bull market is now in hand. With that, the potential for a much faster price rise in $US terms for gold increases MASSIVELY."

And there's a more conventional reason for gold's glitter: an emerging consensus among economists that the U.S. dollar, is finally (finally!) breaking.

The respected institutional service Bridgewater Associates said this in a recent daily bulletin:

"We are still very early in a major dollar sell-off. The US needs to attract 80 percent of the world's available capital just to keep the dollar stable. The relative attractiveness of US capital has deteriorated to the point where it is extremely unlikely the US will be able to maintain the market share of world capital it needs to break even. In fact, foreign demand for the dollar has already begun to significantly decline, and it is only a surge in foreign government demand that is keeping the dollar from collapsing further. This demand will falter as the pressure on the dollar intensifies."

Argh!

Mark Hulbert, of the Hulbert Financial Digest, tells me that his gold sentiment index -- measuring the exposure of investment letter gold timers -- to gold, rose to 53.85 percent on Friday's close. That's higher than for much of the past six months, but still a lot lower than the 89.58 percent level hit in February when gold first made its first attempt of the year to break through $300.

Translation: bullish, but not bullish enough to provoke contrary-opinion twitches.

Four timers followed by the Hulbert Financial Digest have beaten a gold buy-and-hold on a risk-adjusted basis over trailing 10 years. (Pring and Privateer are not currently followed by Hulbert).

Two -- Professional Timing Service and MutualFundStrategist.com -- are bullish.

Two -- Mutual Fund Timer [no Web site] and FundAdvice.com -- are bearish. So the market-beating "Best" are about the same as the market-trailing "Rest" -- this indicator gives no clear signal.

The goldbugs are suspicious, of course, because they suspect their market is managed. (See my Nov. 11 column).

One investment letter titan who recently announced his conversion to this view, Dow Theory Letter's Richard Russell, said this over the weekend:

"...A huge battle is going on behind the scenes in the gold area. The latest [CFTC] figures show that... the Commercials are flooding the gold market with additional supply (shorts) while at the same time the big speculators have increased their long positions hugely.

"So watch for gold to get erratic and volatile. There's a mighty battle going on. Gold bulls should take their positions and not be leveraged... Even in a bull market, when you're on margin the odds are that the 'smart boys' will get you, and you'll be sent home crying."

For more information or to subscribe to the Hulbert Financial Digest, click here