Here is an except from today's gold world. I removed a couple of...

Here is an except from today's gold world. I removed a couple of pages of the economic misery stuff, and just left the opening paragraph and the conclusion. If anyone wants to read the whole thing - gold-world is free.


The Calm Before the Tsunami
By Greg McCoach | Monday, August 25th, 2008


Using the analogy of what happens just before a tsunami hits shore, the recent action in the financial and precious metal markets is indicating to me that the water at the beach has begun to recede. Some are fleeing to higher ground; while others who have not yet learned what these ominous signs mean, are walking on the beach observing the unusual spectacle with great curiosity.

(a few pages of economic type analysis that backgrounded and justified the following conclusion:)

Dreadful Times = Opportunity in Gold Mining Shares

I have mentioned several times this year that before we get to the parabolic moves that many are expecting in the metals and mining shares, we may have to witness a downside that could be absolutely dreadful. Well, unfortunately, dreadful is where we are right now.

On top of the carnage in mining shares, gold and silver prices have been hammered to the downside taking the metals to unexpected levels causing investors even more concern and worry. Gold has now sold off almost 25% from its last new high made in March of this year at US$1,031. Typically we have seen gold and silver sell off 10% to 15% after making a new high so this new development is making some headlines. It has been as difficult a time as I can remember in this market, especially since the fundamentals are so strong for much higher prices.

The sell-off in gold and silver this past week, which was unexpected by most including myself, is a short-term phenomenon. It will not last long. We can best endure it by understanding what is happening and knowing that this volatility is a clear indicator that something is really wrong, prompting in my opinion near-term explosive moves in the metals.

The Fed, knowing a financial hell-storm is about to hit, is trying to prepare as best they can by propping up the dollar. In my opinion the Fed has informed the central banks around the world of what they are dealing with and have asked for help in supporting the dollar. A massive collapse of the dollar would be bad for all involved. So in collusion with other central banks around the world, the Fed has propped up the dollar temporarily knowing what is coming is going to be very negative for the greenback. Their hope would be that as the financial tsunami hits, they can keep the dollar from going below the 70 level on the US Dollar Index. Just prior to this up-move for the dollar of almost 5%, the US Dollar Index was teetering around the 71 to 72 level. We'll just have to wait and see what happens.

Two pieces of information I look which have been reliable in the past are the Gold/XAU and Gold/HUI ratios for determining where the bottom may be for gold and silver prices. Based on these ratios, I see that the price of gold and silver may have bottomed last Friday. For me this was a totally unexpected buying opportunity last week and a gift for those who were looking to add precious metals to their portfolio. Bullion dealers everywhere however have been reporting that they have little or no inventory of items to sell. On top of that the U.S. Treasury announced they have suspended the minting of gold and silver eagles for the time being. All of this is very unsettling but very positive for much higher gold and silver prices.

An Upturn in Mining Shares

Our mining stocks are acting even more problematic, but I sense this market will soon bottom out as well over the next several weeks. Hedge Funds, which are blowing everything out the door in order to raise cash, have been the biggest culprits affecting our mining shares. With so few buyers at the moment in the precious metal markets, we are seeing the best purchase opportunity I have seen in the junior mining shares in the past five years. There are some exceptional values out there at the moment. Several of our stocks will be moved back into the buy category in the August Mining Speculator which will be out later this week. In this edition I will have a full update on our mining stocks and which companies would be the best places to put new money right now. I sense the turn to the upside could be very close as we head into the fall.

For now, all we can do is exercise patience and prepare as best as we can for the major changes that are coming. Please do not panic and sell your mining shares at these ridiculous levels. A better time is right around the corner.