Friday, March 16, 2007

Cara Gold-Seer

Following the termination of the present bullish phase in Precious Metals within 1-4 months (Apr-Jul 2007), there ought to be a severe shake-out. The senior and intermediate producers are going to be priced very high. The place to have capital invested is in the small (and riskier) ventures that have well-funded exploration and resource development programs.

Buying precious metals today is the biggest no-brainer trade for the next two years. Every time there is a dip, buy it. And when the daily RSI-7 gets over 70-75, sell some (say half), and after the next Fed intervention, buy even more.

Buy the shares of the small miners and development companies that are expected to commission new mines within 3 years. Western Goldfields is my value choice. For the senior miners, on the basis of resource expansion in 2007 and 2008, Kinross. Silver Wheaton (SLW) is the best pure silver play.

Guyana Goldfields (GUY.TO) is developing a world-class ore-body in Guyana. Sprott has a C$16 12-month Price Target. Buy the dips.

Plan the trade and trade the plan. Think in If-Then terms (add to a position, take profits, cut loss). Define your investment time frame and accept the gyrations within the price/time range.

It is in our DNA to associate gold and silver with stores of value. Fund managers are human beings too with the same DNA, so we can expect their speculative spirits to work into gold in a huge scale that will drive gold into 4-digits since the gold market is so small.

We are in a Secular Bull market for commodities, including metals and precious metals. The spike top in gold within 1-4 months (Apr-Jul 2007) is more than an intermediate-term cycle. After the break, it will take another 2-3 years to recover to this cycle's highs. In the interim (after the break), the better place for capital would be in the technology and telecom companies, and in the rapid growth small and mid-caps.

So, if gold does attract a world of interest as it reaches $700-750 and possibly $800, traders ought to take profits and seek long-term opportunities in small and mid-cap tech companies.

If gold ran higher than $800-$900 in 2007, there would be an avalanche of recovered supply and new small mines coming on-stream, and the major miners would be selling forward again. All that opposition would be sufficient to terminate the gold Bull.


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