Peter Grandich On Gold
I received far more emails and calls today regarding gold than I ever have since returning to the metals arena last spring. This, in itself, suggests to me many people were caught too long and/or have not developed the stomach for the ups and downs. In either case, it could suggest that after a bounce, we could look for a period of base building, as these nervous folks think strength is now a selling opportunity.
Readers of The Grandich Letter should not be totally surprised. I spoke in my January 8th edition that one should not be surprised that a swing in the currency play (in this case, the Euro versus the U.S. dollar) would be an excuse for a correction. On January 15th, I said I welcomed the correction that began and believed it to go to $400 without causing any long-term changes in the major trends.
It seems like many were searching today for some handholding. Even veteran resource company management people reached out to me for an opinion. I fully appreciated their concerns. After all, how many times has the up-trending gold price been pulled out from under their legs over the last two decades? With the psychological $400 level being slightly broken, they too have joined the retail investor in thinking has the end come to yet another apparent short-lived gold bull market?
Marked today down (January 29th ). I think 6 months or even 6 weeks from now, we'll look back and see it just as another pause that refreshes. In fact, if you look at the rally from the lows of two years ago, you will see that certain areas became levels where sharp sell-offs occurred. The good news is those sell-offs didn't last long. In fact, as gold moved to higher trading levels, the sell-offs became shorter in duration. So can be the case if my tealeaves are correct.
The key to this gold bull market remains physical buying. I read that the COMEX had an unbelievable amount of contracts traded today. This suggests to me that we had too many weak longs but there were buyers looking to take their paper on the cheap. That paper could get even cheaper after an expected bounce tomorrow, but not one major fundamental or technical event has taken place that has changed yours truly belief that the secular bull market for gold is still intact for the long term. But then again
I've been a New York Jets fan for 35 years so buyers beware!
February 2, 2004
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