Gold's day in the sun: Doug Casey forecasts few showers, massive profits

WorldNetDaily.com ^ | Saturday, June 29, 2002 | Doug Casey

[JohnHuang2]

I'm a total believer in this saying. I ought to be, since (I believe) I'm the one who actually coined it: "Things that you expect to happen usually take longer than you expect; but, once they get under way, they unfold much more quickly."

That's exactly what's happened with the gold market. And it was completely predictable (reminding me of another saying, which is equally true: "Just because something is inevitable, doesn't mean it's imminent"). In any event, most gold stocks have recently doubled. Many, like Harmony, have tripled. Some, like Nevsun and El Dorado, have been ten-baggers.

Presumably, many of you did as I urged and "backed up the truck" any number of times over the past two years. Of course, many did not; or, at least, not to the degree they wished they had. And everybody, I'm sure, is asking themselves what to do now. Take profits, because it may be another of gold's numerous false starts? Or buy more, because it may be the start of a real bull market?

Let me be as clear as possible about this. Any of the false starts in gold over the past two years could have led to the start of a real bull market; I treated them as such and bought more. But things actually are off and running now. This bull market has just begun, after a bear market that's run over 22 years since the previous peak in January 1980, when gold hit $850, and silver hit $50. I expect it will continue for several years, and by the time it's over gold will not just have gone through the roof, but to the moon.

To pull a number out of a hat, $1,000 seems reasonable, $3,000 easily possible. And, actually, those aren't completely arbitrary numbers. They're just a matter of arithmetic, taking various measures of the number of dollars outstanding and dividing by the amount of gold in the U.S. Treasury. The arithmetic is important if you believe that gold will again be used as money to back the currency, as I do. But that's the big picture.

There are other things, however, that are more to the point for a speculator:

• The annual deficit of newly mined gold over industrial consumption (1,500 tonnes, or 53 million oz.).

• The apparently huge short position in the metal established by bullion banks and mining companies.

• The fact that gold production will actually be dropping for years to come.

• The fact that far more gold is being produced out of reserves than is being added to reserves.

• The fact that many of the world's governments have already sold a great deal, or all, of their gold.

• The fact that the world's monetary/financial/economic position is almost a carbon copy – but much, much amplified – of what it was in 1971, when the great bull market that took the metal from $35 to $850 started.

• The fact that a whole generation has grown up knowing absolutely nothing about the metal or the companies that mine it. And there's a lot more.

My opinion is that these stocks are going to go completely insane on the upside. They're going to be wilder than the Internet stocks. By the time it's over, every cat or dog that has "mining" or "resources" or "gold" in its name will be selling for $5 or $10 or $50 a share – much the way anything with a "dot-com" or "-net" in its name recently did. The public, innocent of any fundamental knowledge, will buy them the way they bought the Internet stocks.

You'll find a complete list of my current recommendations in my monthly newsletter, International Speculator.

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[JohnHuang2]

Saturday, June 29, 2002

Quote of the Day by for-q-clinton

[ThePythonicCow]

That's ok - don't listen to him - we need some more folks to buy in later on, when gold gets more expensive. We're doing fine right now (we gold bugs ...).

[Eric in the Ozarks]

One hiccup from the Rooskies and gold will dump to < $200/oz.

[ThePythonicCow]

Yeah it could dump. Gold is a high risk investment.

If you know an investment that had the gains of gold over the last year or two, without risk, then tell me, which island in the South Pacific has your name on it now?