HUI - Too Young To Die! Update
Eric Hommelberg
December 4, 2007
Excerpt Gold Drivers Report December 03, 2007
Gold: $789 - HUI: 406
This piece is a small update on 'HUI - Too Young To Die' published on November 18, 2007
In my piece 'HUI - Too Young To Die' (November 18) I made a case for a continued gold rally despite the bearsish sentiment caused by the $60 plunge in gold. Gold hit its projected support at $773 briefly indeed and started rallying again towards a high of $835+. So far so good one would say but gold started plunging again and fear was surely kicking in after Goldman Sachs issued a report last week in which it recommended to 'short gold' in 2008 and projected gold prices below $650 nexy year. Now here we are again at 50 dma support levels many are wondering hwat the nearby future will bring. Will Goldman be right indeed or will they be proven wrong again as in December 2005.
Now let's first review the chart presented two weeks ago which highlighted the similarities between the correction of December 2005 and the present one.
Now please take a peek again at the December 2005 peak in gold. Indeed very similar to the one we just witnessed in November 2007 right? Guess what gold prices Goldman Sachs were predicting in December 2005 for the following 12 months?
Well, their forecast concerned gold prices by end of 2006 in the $470 - $510 range. Needless to say they were wrong and my guess is they will be wrong this time again. It goes far the scope of this update in order to discuss Goldman's hidden agenda for predicting lower gold prices but the bottom line is that predicting lower gold prices is predicting an appreciating dollar. An appreciating dollar however could be regarded as science fiction during times of severe financial stress in the US banking sector, current account deficits exceeding $800 billion per year, exploding costs of middle east war (multiple trillion) and foreign countries looking for options to diversify out of the dollar.
Now let's calm down and zoom in to the last few months of the chart above and see what it tells us:
This chart tells us:
- Uptrend which started in August (A-line) is still in tact
- 50 dma is only tested for the second time now since last bull run began.
- If current AB Flag formation could be resolved to the upside then $900 in Q1 2008 is a real possibility.
- Current support at 50 dma $778, the at 38% FIB retracement level at $773
Conclusion:
There's no reason for panic since no uptrend has been broken yet!
(see also original report 'HUI - Too Young To Die' of November 18, 2007)
Now where to go from here?
If you are a believer in gold's future then these are the time to increase your gold share positions since the gold shares are still selling at fire sale prices. In other words, downside risk is low. Higher gold prices the years ahead will lift the entire gold share sector but the most exciting rewards will come from junior mining companies making new discoveries.
Here at golddrivers.com we track promising junior companies which we believe could be huge winners before this decade is out. If you would like to participate you could opt for a free trial subscription
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Junior Picking Contest 2008 - Win a 10 oz gold bar!
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Please don't hesitate to fire your questions/remarks to: ehommelberg@golddrivers.com
Best regards,
Eric Hommelberg
The Gold Discovery Letter/
The Gold Drivers Report
www.golddrivers.com
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