"Talking about sheep, I think that's all we have here with the gold shares. One of them got up and headed off down the hill and they all followed. Soon he might amble right back up again and they'll all follow. That's it really."

Our correspondent has a point. But suppose bullion were to continue to muddle along for, oh, the next eight to ten months, or - perish the thought - even longer? Would even the hardest-core gold bugs, still parched and dizzy after wandering for more than twenty in the wilderness, finally start to crack? And what about the rest of us - johnnie-come-latelies who yearn merely to quadruple our net worth as the U.S. and global economies sink into a hell-hole that would scare even Nostradamus?

All such questions aside, gold quotes have indeed been stuck in a range, as Jacques has observed, and mining shares once again look like they're about to fall. A difficult environment for gold bugs, to be sure - but certainly no worse than the reality faced by investors whose retirement dreams rest on Glassman's prediction of Dow 36000.

As for me, I'd intended from the first, when I reluctantly ceded Black Box Forecasts to my former employer and launched Rick's Picks, to emphasize technical coverage of mining stocks that were beneath the radar of most analysts and chartists. I did so believing that a long and powerful bull market was just beginning. Nothing since has changed my mind, but what's a guru to do when a preponderance of the stocks he tracks go comatose for stretches of weeks, months or even years?

The question is not rhetorical, since neither you nor I can afford to sit on the sidelines dithering over missed opportunities, or still worse, to squander our capital on bad opportunities. But even at our most desperate, neither should we force ourselves to see the bright side of the gold "story" when the technical evidence does not warrant it. Like now. Many of you have written to ask which PM stocks can be bought now for the long term. My answer, as you may have inferred from yesterday's comments, is none of them. Although we can look forward to bottom-fishing certain optionable stocks if the mining sector retreats 10-15% as I've predicted, we'll do so with stop-losses this time -- and with fear of an uncertain future whose shape may lie not only beyond reason, as it nearly always does, but beyond imagination.

Recall that when mining shares began to plunge in April and hidden-pivot supports were getting trashed with impressive regularity, I expressed a queasy feeling here that things might get ugly. But with minuscule long positions in more than two dozen stocks, I hesitated - admittedly for too long - to shout the one simple piece of advice that would have worked best: "SELL EVERYTHING!!!!" In the belated aftermath, we did wind up selling off most of the little bits and pieces, and then regrouping cautiously with positions in more-liquid, optionable stocks well suited to hedging risk, and taking profits, in all types of markets.

So where do I stand now? I remain, as always, a raving, lunatic-fringe bull on gold long-term. But I also have serious concerns about the next twelve to eighteen months. The deflation that I am convinced will take hold during that time will not likely allow a buy-and-hold strategy for any class of assets, and as a result, even financial whizzes are apt to be challenged as they try to hang onto a mere fraction of what they currently possess as investment assets.

Perhaps the best evidence we have of how difficult the quest for yield has become is the presumably humbling experience of Warren Buffett. Regardless of whether Buffett took a big hit in silver as was rumored, in recent months he has very publicly expressed his distaste for dollar assets. He may prove prescient in having shifted into euros, yen, gold, or whatever, assuming that's what he did; but because the deflationary argument for a strong dollar is at least plausible, it can be argued that, risk-wise, Buffett is farther out on a limb than he has ever been before.

If Buffett has been betting against the dollar, it would be hard to fault his logic, since America's massive trade and budget deficits - and now a weakening economy - would seem to all but ensure dark days ahead for the greenback. But my worst fear is of a preposterously strong dollar - a condition that would likely put gold -- and debtors - under increasing pressure for the foreseeable future. And although I've long doubted that the POG could sink as low as Bob Prechter's predicted $200, we are obliged to acknowledge, for reasons that I've explained here earlier, that a very strong dollar is at least possible, as is a corresponding drop in the dollar POG.

Meanwhile, if gold shares are not yet what retail-speak would term a strong buy-and-hold (even if, in my opinion, physical metal is, for reasons other than portfolio growth), the best we can do is trade 'em up and make profitable use of price swings. For this task I feel well equipped, and I remain confident in the consistent accuracy of my price targets as well as in the usefulness of these targets to both traders and investors. Whether we are waxing bullish or bearish on gold at a given time, though, our stance must be rooted in technical reasoning, and not based on what we have come to hope, or to believe.

Rick Ackerman

July 28, 2004

Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers' initials will be used unless express written permission has been granted to the contrary. All Contents © 2004, Rick Ackerman. All Rights Reserved. www.rickackerman.com