Everyone seems to expect the dollar to rally now, not to keep falling

Section:

By Peter Brimelow
CBS.MarketWatch.com
Monday, November 29, 2004

http://cbs.marketwatch.com/news/story.asp?guid=%7B2191C73B%2D688D%
2D4446%2DB25D%2D5B062EB1E884%7D&siteid=mktw&dist=

NEW YORK -- Thanksgiving rally? Gold got as high as
$455 during the U.S. holiday. But veteran gold bugs
remain remarkably restrained.

Pamela and MaryAnne Aden first became famous as
gold analysts in the wake of the Great Gold Spike of
1980. They wrote recently in their Aden Forecast:

"We're more inclined than ever to believe that this bull
market in gold is going to be a big one, which could
surpass the old highs at $850."

The Adens are technicians, much given to poring over
charts in search of esoteric patterns. But, even in the
original techspeak, their nuanced caution is clear.

They write: "The upper side of this third step is $500,
near the 1983 and 1987 highs, which is gold's next
target."

But they add: "We have to recognize it may not make
it this time around."

The Adens' price targets are strikingly specific -- rare
in the business.

They write: "As long as gold stays above $435 ... you
should hold gold-related investments. But if it declines
and stays below that level ... an [intermediate] decline
will be under way. [It will be] the steepest one in the
cycle and if you want to take some profits, [this] would
be the time to do it. But, as we said earlier, we believe
the gold bull market is going to be a big, long-lasting
one and it's best to stay invested throughout the major
rise."

The Adens' bottom line: "Gold's major trend will remain
up above $402, its 65-week moving average."

Harry Schultz's International Harry Schultz Letter, which
just snailed in, is similarly restrained.

Schultz does airily say the eventually that "gold will
possibly be at US$1,000 or $2,000 ... (and oil at $200
or $300)."

But right now he says a gold correction is likely
("Maybe only to $420-430. Weaker case: $400.") His
modest upside target: "$460-$467 medium term."

However, Schultz goes on to add this explanation
(translated out of his idiosyncratic Schultzspeak):

"Such targets aren't vital or practical, as bullion and
gold index and individual gold mine charts tell you
when to take profits and when to buy back, along
the way. Yes, we'll get to $500 before too long
(2005), a big psychological barrier. And still higher
later, but buy and hold would keep your nerves
tight and your profits restricted. ... Sell to take
profits and buy on corrections gives you 3-4 times
the profit potential. ..."

Schultz is unique in the gold world in his advocacy
of aggressive trading (and it's not clear, according
the Hulbert Financial Digest, that it really works for
him). But his overall reading of the gold market --
cautiously superbullish -- is quite similar to the
Adens'.

One long-time, non-trading superbull is Dow Theory
Letters' Richard Russell. He barely even bothered
to comment on gold's gambol over Thanksgiving,
confining himself to a little fundamentalist
gold-is-money tub-thumping.

But he did observe on Saturday: "Don't worry about
gold, if you want to worry -- worry about the dollar."

Actually, there may be too little worry about gold.
The Hulbert Gold Newsletter Sentiment Indicator,
which reflects the average recommended exposure
to the gold market among a subset of gold-timing
letters tracked by the Hulbert Financial Digest, now
stands at 78.57 percent.

The HGNSI was rather slow to react to gold's rise.
But Mark Hulbert thinks it's now a little too
enthusiastic -- although still below its peak of 90
percent.

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