Treasury secretary likely to leave soon, Republicans tell NYTimes

Section:

By Peter Brimelow
CBS.MarketWatch.com
Monday, December 6, 2004

http://cbs.marketwatch.com/news/story.asp?guid=%7B8BA6CCFB%2DCAFA%
2D4AA7%2DA52F%2D7033A9596E1A%7D&;siteid=mktw

NEW YORK -- Gold has followed up its Thanksgiving
celebration: Friday's New York close, just over $455,
attained a level not seen since early 1988.

But short-term bulls are hard to find. And gold shares
were dramatically unimpressed. The AmEx Gold Bugs
Index (HUI) was down 6.5 percent last week despite a
$3.55 bullion gain. Thanksgiving week, it was
unchanged despite a $5 rise.

The index closed 10 percent off the years high, even
though gold itself is 5 percent higher.

Damage to the junior shares has been worse.

This sickliness in gold shares is currently the gold
bears' most influential argument. They revere the
alleged forecasting prowess of gold equities.

A case in point: Long-term chartist Martin Pring, who
is generally not unsympathetic to gold.

Pring unhappily notes in his latest Weekly
Intermarket Review: "... The shares made their high
many months ago. ... Such divergences have often
warned of vulnerability in the past. ... On Thursday the
share index was extremely weak and violated a major
up trendline. ... Please forgive us for being unequivocally
bearish on the yellow metal over the next few months."

This despite Pring's having no quarrel with the gold price
chart itself.

A happy bear is The Gartman Letter, which has no history
of sympathy for gold. Assuming gold cannot exceed a
short-term uptrend channel it detects, and noting the
share weakness, TGL exulted on Friday: "We shall now
go on record to say that we have almost certainly seen
the highs for gold for weeks, if not months, into the
future. $455-456 shall be the highs ... against which we
can actually sell gold short. At the very least, we'd be
not at all surprised to see spot gold trade back very near
to the $405-$410 level, over the course of the next month
or two."

Gartman's extremely expensive service is said to be
influential with (and perhaps influenced by) a number of
large and active institutional traders.

The heavy selling on the highs last week suggests someone
was acting on Gartman's opinion.

One of the few short-term optimists is the remarkable
Australian Web site www.ThePrivateer.com. Combining
erudite and apocalyptical economic commentary with
dramatic chart work, this service said Saturday: "$US
gold is now well into the second leg of its post-2001
bull market, and you have literally nothing to worry
about."

This comment is linked to a 22-year $5 x3 Point and
Figure Gold chart. Designed to display major
momentum changes, it is indeed impressive.

Another short-tem bull is www.lemetropolecafe.com 's
Bill Murphy. He bases his expectations partly on trading
experience. He said on Friday: "I've never seen so many
gold bulls who are short-term bearish. The short-term
bears outnumber the bulls by an enormous percentage.
Having traded markets for 25 years, sometimes in
substantial amounts, it would be a first for me to see
so many so short-term bears (in a bull market)
accommodated, and then allowing them to get long to
ride gold back up. Markets don't work that way."

The other reason Murphy is upbeat: continued
unflinching offtake from the Indian and Arab physical
market (data supplied by my brother, John Brimelow).

Murphy's point: Buyers of gold equities are
overwhelmingly North American. Buyers of bullion
are Indian and Arab.

Can the former be expected to predict the latter? Or
will physical demand ultimately prevail?

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