Richard Russell On Gold
The P&F chart below presents and even more important picture. Here we see HUI with a triple-top structure at the 198 level. To turn bullish, we would have to see HUI close at the 200 box. If that happens, my thinking is that it would only be a matter of time before HUI and the mass of gold shares attack their recent highs.
Hey, as I'm writing at 12:35 PM HUI is trading at 200.10. Let's see if it closes here. Hmm, HUI after filling the 200 box traded down a bit to close at 197.87. So HUI did break out, but it didn't hold. Nevertheless, the chart now suggests that HUI is in a bullish mode. HUI would now have to hit the 186 box to turn bearish on the chart.
I'm repeatedly asked whether gold is preferable to gold shares or gold shares are preferable to gold. Here's my thinking. For the faint of heart, gold coins "feel" safer than gold stocks. Gold in your hand is the product that gold mining companies are working for. Gold in your hand means that you've already got the product. There's nothing safer than that. I still have coins that I bought for $65 back in the early '70s. I never had the urge to sell them, and I never worried about them.
Gold coins are true, intrinsic wealth, and you can leave 'em to your great grand children knowing they are wealth. You can't do that with any gold shares.
But gold shares are where the leverage is. If a gold mining company's costs to produce an ounce of gold is 195, and gold goes to 500, the mining company's costs are going to stay relatively the same while the selling price of its product surges. That's where the real leverage is, and you don't get that when you hold the metal.
Of course, if the price of gold rises, holders of both the coins and the gold shares do well. It's a matter of your tolerance for risk, your stomach, and your philosophy of investing. I would never tell a subscriber what ratio of gold to gold shares they should own, or even how much gold or how many gold shares to own. It's a personal decision.
Yesterday's Gold Action -
Dec. gold was down 1.80 to 376.00, and I thought the action was strange and manipulated, but so what. In the end, gold will do what it has to do. Dec. silver was down a penny to 4.87. Jan. platinum was up 8.70 to a new high of 726.10. Dec. palladium was up 9.45 to 215.00. Platinum and palladium surging while gold is off a buck? Yeah, I thought it was strange.
Gold/Dollar Index ratio was down 1.30 to 408.50.
One share of the Dow buys 25.61 ounces of gold.
Gold advance-decline line was up 8 to 1300, which matches the previous high of 1300 recorded on Sept. 24.
XAU was up .68 to 91.38. HUI was up 1.14 to 197.87.
ABX up .08, AEM down .01, ASA up .77, AU up .45, DROOY down .07, GLG up .20, GSS up .02, NEM up .41, PDG up .28, RGLD down .09.
Gold acting OK as are the stocks, but more "work" may be needed. It seems obvious to me that "someone" doesn't want gold at new highs. So what!
Richard Russell
Editor-in-chief - DOW THEORY LETTERS
www.dowtheoryletters.com/dtlol.nsf
October 9, 2003
The inimitable and venerable Mr. Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.
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