But bull doesn't die that easily. The intellectually lazy, if not blatantly idiotic financial media, afraid to do much more than scrape the surface of the story or to simply steal tired old clichés from one another in a never ending circle of trite nonsense and uninspired drivel, continue to shovel on the bull in still higher piles.

Not only is gold dead, they inform us, but the recent spike higher was simply another hoax played upon the gold community, just a short-term aberration based on fleeting war concerns. "Remember the Gulf War?," they query. "Gold tanked soon after the first bombs were dropped. It'll happen this time too."

Never mind that gold has been rising since April of 2001, long before the bubble-headed over-coiffed ninnies at CNBC took notice of the exceedingly obvious. But now the folks who failed to forecast, who failed even to NOTICE the rise in gold, presume themselves so gifted with prophecy that they're in position to pronounce the death of the uptrend. Listen to them if you must, but you'll have more success betting on a one-armed cowboy at a vegetarian clapping convention.

Let's take a look at some of the finer examples of their bull in greater detail and dismantle their inane arguments one by one:

1) "Gold rose in anticipation of war and will come crashing down as soon as the conflict shows signs of some kind of resolution. In fact, it's already doing so simply because it looks like the war will be postponed."

Bull ! In the past fifteen months or so, Comex gold rose more than 40%, with the bottom in gold prices having been put in considerably earlier. Gold began to creep higher long before Iraq became an issue. A weakening dollar and a troubled monetary system have underpinned the bull market in gold. Iraq didn't trigger the bull market nor will it ring the death knell for gold.

A 40% rise in gold and the financial media dismisses it as some sort of aberration, a mere emotional reaction to war concerns. We're talking about one of only very few profitable investment sectors since the bear market in stocks began. Gold mutual funds and stocks have topped the lists of best performers for years. Yet the entire rally has, for the most part, been at best ignored and at worst, scoffed at.

When the stock market rises a paltry TEN percent, the financial spin doctors don their party hats, dance jigs up and down Wall Street, and hold virtual parades in their tiny, greedy little minds, drooling over the commissions that stand to be snatched from naïve investors as the next huge bull market unfolds. But gold rises FORTY percent and it's just a fluke, to be dismissed by the smarty-pants Wall Street establishment that has been pleading with us to buy more stocks even while 50% of the S&P 500's value has disappeared in less than three years.

Does this make any sense? No. It's just plain bull ! If the Dow rose 40% it would be trading at only a few percentage points from a new all-time high and you can bet your bum that Wall Street wouldn't dismiss it as an aberration.

So why doesn't gold get the same respect? Why doesn't it "count" when gold stocks are up 200-400% in the past few years? Because the Wall Street establishment and the sycophantic financial media that feeds off it are piled high and deep with conmen and salespersons who are in the business of fleecing customers via market transactions, collecting the "vig" on every one of their trades, (profitable or not), and not in the business of providing anyone with profitable information.

Now, if a simple-minded twit like myself could identify the early stages of an unfolding bear market and the bottom in gold stocks two years ago, then why couldn't the vast Wall Street army, armed with millions of dollars in technology, staffed by the "best and brightest" that our Ivy League schools can offer? And more importantly, if they failed to spot the emerging gold bull market, should we really give a flying flip about what they have to say about its demise? The answer is obvious.

2) "Gold's monetary role is dead. It's just another commodity. The rally was a response to short-term considerations that have no long-term significance. Once the excitement is over, gold will fade right back into its two-decade slumber."

Bull ! Anybody with even the vaguest conception of how the world monetary system functions (that is, almost no one on Wall Street and ABSOLUTELY NO ONE on CNBC) knows this to be patently untrue. Gold has fulfilled its monetary function flawlessly for as long as most of today's investors have been around, and for a few thousand years prior to that as well.

Gold appeared to have "died" in the 90s as equities and other forms of paper took the spotlight. But in fact, gold behaved precisely the way it should have. The dollar was strong and therefore gold was weak. More recently, gold surged higher as the dollar plummeted. One need only compare charts of the dollar and gold to note this very obvious correlation.

Gold is the ultimate barometer of the world-wide fiat currency system and as always, it responds inversely to the fluctuations of those little pieces of paper that we mistakenly refer to as dollars, actually called "Federal Reserve Notes", interesting pieces of art that are now barely a vague reminder of the real money they used to represent. That's why gold is up 1000% in the past seventy years while the dollar can scarcely purchase 5% of what it did earlier in the last century.

(Enrapture us naive simpletons with some more with your delightful musings of low inflation, oh dear Maestro Greenspan. And please, if you have a moment, we're in the market for a large steel suspension bridge too.)

To suggest that gold no longer plays a significant monetary role, that it is a "barbarous relic", is naïve, ill-informed and dare I say it, just plain ignorant. Those who consider gold a relic should ponder why it is that U.S. central bankers, overseers of the richest economy on the planet, have not dumped U.S. gold holdings on the market as some other nations have.

Somewhere, deep in the bowels of the Treasury are stored significant reserves of actual, physical gold. And these holdings are maintained because the "wizards" who run our financial system have refrained from tooting off their crack pipes for just long enough to recognize the value and importance of gold in the monetary system. That's why we keep gold in 'them thar' vaults, rather than chickens, jelly beans and Gucci handbags.

3) "Gold surged from $330 to $390 and yet gold stocks just sat there. Obviously, even the gold mining stocks know that the rally is over."

Bull ! Yes, it's true that gold mining stocks failed to follow gold on its meteoric rise from $330 to $390. But it's the function of the stock market to anticipate future developments, not to react haphazardly to the news du jour. Stocks generally move well before fundamental events unfold to confirm those moves. That having been said, let's get a bit of a grip on the reality surrounding gold stocks, shall we?

Today the XAU is up nearly 80% since the bull market in gold stocks began. The performance of quite a few individual mining stocks is much better, with some up as much as 200-300%. That's the reality.

OK, so gold stocks didn't break out to new highs along with gold over the past couple of months. But have they underperformed? Only if you maintain a very short-term perspective and ignore the big picture. Reality again: the XAU is still up 80% from its low and many individual mining stocks have posted triple-digit gains over the past couple of years while gold at its peak was up only around 40% from its low. I call that exceptional performance on the part of gold stocks, not underperformance.

Perhaps, dear investor, we can excuse gold stocks for not having risen 500% when they, having correctly anticipated the breakout in gold well in advance, are still up handsomely from their late-2000 lows? Can we in the gold community refrain from whining about "underperformance" given that gold stocks have whipped the pants off every other sector in the stock market for two years running?

That's my response to the bull, as I see it. But we don't have to take my word for it. We'll let gold do the talking. Call the rally a short-term aberration if you must, but before you be so quick to judge, consider the following powerful fundamental bases for further gains:

1) From a technical perspective, gold is in the most sustained and solid uptrend that has been witnessed since its last mega-bull market in the 1970s. Certainly gold has had some significant upswings over the past two decades, some even bigger than the latest, but no advance has been as orderly, steady and fundamentally sound as this latest one.

In addition, with the advance above $330, gold has broken out of a long-standing basing area, just the sort of performance we'd expect to see in the wake of a completed bear market and a newly emerging bull market. Not only did gold break out, but it followed through exceptionally, posting an 18% advance above the breakout level. That's what we call "follow-through" and it serves as clear evidence of the validity of the breakout, as well as the potential for further gains.

With gold having retreated to $340, we are witnessing a "return-move to the breakout level", a very common occurrence in all markets. If anything, the sharp retreat to $340 should serve as evidence of a healthy, newly emerging bull market, rather than proof of its demise. Put more simply, gold is behaving precisely the way we might expect it to were it in a bull market. If it walks like a bull, talks like a bull, and has "I'm a bull!" tattooed to its rump, chances are fairly good that it's not a duck-billed platypus.

2) The dollar is in an extended bear market, having plummeted sharply from its 2001 high. As any currency trader will tell you, currencies tend to trend remarkably well. And trends in the dollar tend to average seven years in duration. With the dollar falling for only the past year and a half, is it likely that it has seen its ultimate low? Not very. And as you know, when the dollar falls, gold rises. Unless this dollar-bear has been exceptionally short and wildly atypical, the odds favor further gains in gold over the long-term.

3) Take a gander at commodities. The CRB Index is as good a place to look as any. Talk about a spectacular uptrend! The move to "stuff" is on in full force. The smart money has long ago lost its fascination with paper markets. After almost twenty years of stellar gains, paper has topped out. Stocks are very unlikely to return to their "glory year" for at least a decade, if the historical record is any indication.

Commodities, tangible "stuff" is now rapidly coming into vogue. Markets tend to be cyclical, with various forms of investment going in and out of fashion. Tangible stuff has been out of fashion for nearly twenty years, but as the uptrend in commodities (including gold and oil) will attest to, it is rapidly coming back into style. And let's face it folks, all that money sloshing around all over the world has to go somewhere. If it isn't going into stocks, it may very well continue flowing into gold.

4) The Fed has pretty much come right out and announced that gold is going to the moon. Undoubtedly you've heard plenty about Fed Governor Bernanke's December speech in which he discussed running the "printing press" as a tactic in the potential battle against deflation. In other words, the Fed has proclaimed that decimating more than 95% of the dollar's value (since the Fed's inception in 1913) simply won't satisfy these clowns. There's still a smidgeon of perceived value left in the dollar and by golly the Central Bank won't rest until it's done what all central banks must do: devalue and debase a nation's currency until it is absolutely worthless.

If and when such "printing press" tactics are employed (and the explosion in money supply suggests that they've been employed for some time) you can rest assured that gold will continue to be the benefactor. I can't imagine the Fed being any more accommodating toward gold. Bless them and their wee cotton socks.

So there you have it: the gold bull unraveled and the gold bull market in full force. But don't dismiss the Wall Street establishment and the financial media entirely. Keep a watchful eye on these buffoons for it will be to them that we'll be selling when gold and gold stocks finally top out. How will we know when to sell? When they begin to list all the reasons why gold will rise forever and why a bear market in gold stocks is simply unthinkable.

Mark M. Rostenko
Editor
The Sovereign Strategist

24 February 2003

Mark M. Rostenko, a veteran of Chicago's commodity exchanges and editor of The Sovereign Strategist, spends far too much of his time enthralled by the never-ending procession of inane prattle emanating from Wall Street. Nonetheless, it hasn't stood in the way of accurately forecasting the dollar's top, the beginning of the gold bull market, and nearly every significant turning point in the stock market since the bear market began. Please visit www.sovereignstrategist.com for a free sample issue and more commentary. And while you're there, feel free to join our international family of well-informed and successful investors.