Market Strategy – 19 February 2003

“………And geopolitical worries continue to dominate the market” (Source: the Every Media )

Silver- hair traders grin and think differently. It’s the state of the global economy as well as the geopolitical risks. They look at the forced margin selling on gold which generated a widespread, beautifully orchestrated, temporary scurry to safety. Why “beautifully orchestrated?”

Well all those dealers and bankers and indeed the Fed, who need a strong US$ and a weaker Gold price, must be pretty relieved that the 50 % margin hike arranged by their buddies worked — this time, for a while. Just the way silver was knocked down in the early 1970s, by doubling of margins. Yet margins alone don’t change underlying supply and demand.

Notice that although the Gold price has come down on big volumes from the 8 area, now trading at 3, the oil price and US$ Index, which are usually correlating indicators, have hardly budged. There is plenty of support for spot Gold at 7 and higher – see our graph of April Gold Comex at

Also, the share prices of better quality gold mining producers are still pirouetting above their long-term moving averages and above long term supports. For instance, Goldcorp [GG] listed on the NYSE, closes today at .68 , well above pattern and key count level support at . 12. Down moves since 4th February have been on declining daily volumes — something traders know is important, because declining volumes suggest that only the unconvinced holders are selling and that maybe it is clever money that is buying. The behavioural count profile on daily and weekly and monthly counts – all have an upward bias while above .12. Or to put it differently — none of the counts are showing reversal signals to down.

Yes, plenty of those enthusiastic gold shares of just two weeks ago, have had some damage to their super trend profile — yet the silver- hair traders also grin at this — because they know that although they may have to be patient for a few weeks, the dips are welcome buying opportunities, in an infant or adolescent bull. Goldcorp was trading at .58 as recently as 6th January 2003 — so anything under .00 looks cheap, assuming that $Gold is headed for 0 and above, in less than 15 months as my relativity analysis and some cycle pointers suggest.

Mr. Bush and Mr. Blair aren’t fools, nor are all their advisers fools, nor are they war mongers. No matter how loud those still in denial, mostly uninformed, hopeful, well meaning, wide-eyed war protesters — shout that they do not want war. No decent person does.

What the silver-hair traders also know is that Mr. Bush and Mr. Blair must believe that the alternative of delaying on Iraq, may well be general mayhem in the Middle East and in the rest of the world. Terrorists and tin-pot rulers of the poverty-stricken, probably have some unfriendly devices and the means and willingness to deliver them. To show the evidence would compromise the sources and reduce already shaky economic confidence further. The awful fallout alternatives are unpleasant to contemplate — so of course — few do.

I’ve also noticed that the economically unsuccessful nations all try to characterise the US and the UK as merely wanting to grab Iraq’s oil. Maybe they do want the oil, maybe they don’t. The flaw in that argument is that an invasion and occupation of Iraq won’t give a sustained source of oil. Unwelcome occupiers tend not to occupy and pillage for long. It can cost more than the oil.

Our friends the silver- head traders, don’t easily say it at dinner parties nor even to each other — but if the choices are between attacks from megalomaniac dictators or attacks from difficult- to-find terrorists — the choice is clear. First eliminate the megalomaniac dictators who obviously fund and arm the terrorists and who have the means through oil and half- built nukes to further destabilise the global economy. Not to overlook all the pain that a destabilised global economy would bring as well.

After the unfriendly Megalomaniac fellows are gone, the Free World fellows will have a bit more time to apply antivirus to those difficult to find terrorists. Excuse the analogy in these sensitive times, when there is risk of biochemical and nuclear attack.

No, I’m not a capitalist pig just wanting more oil. Just trying to think like one of them silver- hair traders and like Mr. Bush and Mr. Blair – with plenty of compassion for the innocent on all sides.

Whatever solutions are attempted in coming months and years — unfortunately the US$ is going to be a casualty for a long time and Gold will have renewed energy as a symbol of exchange.