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gkc
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Joined: Feb 24 2006 - 11:51am
Gold and Well-Run Producers are in a Buy Zone

Still, the best bargain among the miners is Yamana Gold (AUY at the NYSE, YRI.TO in Toronto). At under 10 bucks, the zoomies are giving you a bargain. As the Hulbert Digest notes, sentiment is overwhelmingly negative. Bad news equals low prices. Buy the bad news, because gold itself, as measured by the August and December contracts, is in a roaring bull market. You buy the short-term dips when the longer-term metrics are still positive. Is this a lock? No. It is simply how you trade -- buy low, sell high. "Low" is negative sentiment and a short-term crash in price. "High" is euphoria.

This is a liquidation sell-off. Weak bulls are bailing. The August contract at the Comex is off by 30,000 contracts, over the last 5 trading days. The December contract is building, and now stands at 91,000+ contracts. The large speculator bulls still outnumber and outgun the large speculator bears by a margin of 3.5:1. If you don't believe that, then go to CFTC.GOV and check out the weekly COT report yourself. If/when gold goes into a bear market, the large speculator bulls will switch to the short side. Now, we are not even CLOSE to that dynamic.

You can mind-fuck the news (and trade with the suckers -- after all, EVERYBODY watches the news and everybody loses money...), or you can observe the facts. Liquidation sell-offs at the Comex are to be bought within the overall context of a long-term uptrend.

A good second choice would be Gold Corp (GG, NYSE), which has sold off into horizontal support at 40-42.

Buy the dips, and ignore the shit-slingers on CNBC. Otherwise, stay out.

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