This Week’s Commentary – March 15, 2008 – I have no idea

by JDH on March 15, 2008

I wish I knew what to tell you, my loyal readers, this week.

I know that gold hit $1,000 this week for the first time ever. (Of course in inflation adjusted terms gold was over $2,000 in the past, but $1,000 remains a psychologically important level).

My confusion comes from the action in gold. Two weeks ago I said that I thought gold was due for a pause, because the RSI was over 73, and the price was significantly above the 50 day moving average. I said that while gold could continue to run, I expected to see $900 gold before we again saw $1,000 gold, which I predicted for “sometime in March or April.” On Wednesday March 5 I said we were in a normal, very brief consolidation. My confusion comes from the fact that I don’t know if the consolidation is over, or not.

The pause lasted for four days, which isn’t much of a consolidation.

The big guys, AEM.TO – Agnico-Eagle Mines Ltd., K.TO – Kinross Gold Corp. and G.TO – Goldcorp Inc. keep going up. Not much of a consolidation for them.

My gut tells me that $1,000 is an important level for gold, and it is most likely that we will need to pause before breaking through that level. It usually takes one or more tries to break through a ceiling like that.

Therefore, while I remain optimistic on gold, I also believe some kind of pullback is necessary, so I’m holding what I’ve got and not buying more for the time being.


It appears that some action may be happening in the uranium stock market. We chatted last week about UUU.TO – Uranium One, Inc., which finally got a sell signal from Mr. Dines (about six months too late). Everyone on the Uranium One Board took that as a buy signal, and we started buying. It closed on Friday at $4.91, higher than when Dines recommended selling it, so so far, so good.

CCO.TO – Cameco Corp. on Monday announced that they are looking for acquisitions and that no deal in the uranium sector could be too large to be ruled out. You can read the story on Reuters. Who will they buy?I would assume they would buy producers, so possible candidates would be PDN.TO – Paladin Resources Limited, although they said on Thursday that they are not aware of any such potential activity (see story here).

More likely would be UUU.TO – Uranium One, Inc. and DML.TO – Denison Mines Corp., both producers trading at very attractive prices.

Will they start to run? I don’t know, but if I was a betting man, I’d be betting on gold, silver and uranium stocks being higher in two months than they are now.

As always, thanks for reading my brief comments today, and please continue to post your thoughts on the Buy High Sell Higher Forum.

{ 0 comments… add one now }