Dr. Clive Roffey
The US elections are beginning to dominate world news. American voters are being browbeaten to select the next White House resident. What da ya want, a Kerry hot dog without relish or a Bush hamburger with cartoonist's ears? The fast food facial caricatures of the contestants say it all. That's the way I see it from 6000 miles away.
We all know that nothing can travel faster than the speed of light and many are familiar with Einstein's more complex concepts on space time relationships. The breaking of the sound barrier has for some time been accepted as a norm from Concorde travel to mach 8 military aircraft and the amazing achievement of penetrating the sound barrier by a jet propelled land craft. But we now have to come to terms with a new type of speed characteristic.
The shock wave after a thermo nuclear explosion rips through the atmosphere as an expanding circle, but eventually dissipates. Compare this to the instantaneous cloud burst of news events that descend from satellites and are immediately seen by all corners of the globe. It would be interesting for some avid researcher to calculate the speed of news dissemination.
I discuss this topic as I believe that it is very relevant to current events. The world watched aghast as the terror and tragedies of the 9 / 11 events were instantaneously viewed in the sanctity and comfort zones of living rooms from Russia to Australia or from South Africa to the US. Terror had suddenly transcended all physical, distance and comfort barriers. Global viewers recoiled together as they lived the minute by minute experiences through the eyes of the news commentators and the devastating pictures of screaming New Yorkers fleeing from the tsunami of dust as the twin towers collapsed.
For the first time in modern America's history had invaders made a material attack on mainland America. Put this into perspective. Europe has had numerous conflicts on its soil during the past 1000 years. Europeans have a psyche that adjusts to such events. The Middle East has been a hot bed of occupation for 5000 years. But for Americans this was a new experience. When attacked mankind's attitude changes from the turn the other cheek religious philosophy back to its roots of the eye for an eye Mosaic law.
Under such circumstances someone had to pay. This was the dilemma dumped on a newly elected President. He made crucial decisions that have affected the world. He acted, fast. Whether the intelligence information upon which the Iraq invasion was based was correct or not, there was action. Correct or not I wonder whether the ex military man turned pacifist challenger to Bush would have done any different?
A final comment. The terror protagonists are specifically identified as Moslem religious extremists. Unfortunately public tolerance of such a minority will not last for ever and eventually an emotional back lash against this group will broaden to include the whole religion, even the moderates who decry the actions of the fanatics. Beheading hostages does not help the cause and I believe that any long lasting solution must come, not from aggressive retaliation, but from within the Moslem community controlling the radical elements within its house. Failure to do this will certainly result in broader retaliations that could well affect the lives of many innocent believers.
The relative strength picture of the $gold price compared to the Dow remains one of the most important charts in my analysis. The top frame shows that the relative strength line has effectively moved sideways for the past two years. This details that the gold price has kept pace with the moves on the Dow. But this rectangular pattern will not last forever and the line will break up or down. My analysis indicates a charge to the upside for gold to outperform US equities.
The relative strength of Silver against the Dows is even more positive. The relative strength line in the top frame pulled back to test the main support level and has since bounced off it. This not only implies that silver will outperform US equities but also gold.
The expectation that silver will outperform gold is confirmed in their direct relative strength chart. The ratio in the top frame again pulled back to test the major support level and has since bounced off. I must continue to look for the silver price and related stocks to out perform the gold price and its related stocks.
Silver underperformed platinum for so long. But it had a rally in early 2004 and was then dropped back to test the base formation. This chart has power!! I expect silver to completely outperform platinum going forward.
From this analysis I would have 60% of my portfolio in silver stocks and 40% in gold with nothing in platinums.
Dr. Clive Roffey
7 August 2004
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Gold Action is a fortnightly commentary on global gold markets produced
by Dr. Clive Roffey who has been a leading independent commentator on
gold markets since 1969.
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