August 2, 2008 – Hurry up and wait

Well, Friday was a bad end to a bad week. Golds, silvers, and uraniums were down on Friday, and down on the week.

I guess the highlight of the week was the return of Punter on the Buy High Sell Higher Forum on July 29. Apparently Punter had a great vacation in Maui, and said that he still sees a capitulation, and therefore is keeping cash and buying selectively. (You can read the post here).

Many of you chimed in with your thoughts, and most are in agreement that there will be many bumps ahead.

Some of the bumps are caused by market manipulation, where short sellers drive the price of a stock down, then cover by participating in a private placement at lower levels, so that they can then drive the price back up. Another common tactic is to sell a stock at the close to drive the price down, which may then trigger technical indicators causing the rest of us to sell. (Here’s the discussion from back in June we had on this topic on the Forum).

My take?: it’s the summer doldrums. Just like last summer, the volume is low, there are no new buyers, and if there is little buying, prices fall.

On the weakness this week I increased my holdings in K.TO – Kinross Gold Corp., AEM.TO – Agnico-Eagle Mines Ltd., and G.TO – Goldcorp Inc., and I bought some DML.TO – Denison Mines Corp.

Did I buy too early? Who knows. On the Forum Depleted posted a Denison chart that shows we are at a critical juncture here; if the lows don’t hold, we will probably see the same type of capitulation we saw last August.

My plan? Monday is a holiday in Ontario, so the Toronto markets will be closed, so nothing will happen on Monday. If we don’t see strength shortly I may assume that I did in fact jump in too early, and I will start selling again and raising cash.

However, it’s also important not to worry about day to day, or even month to month fluctuations. Gold will rise again, and it will be sooner rather than later.

The U.S. government continues to run massive deficits, and even the resource rich Canadian government slipped into the red for the first two months of this year. Interest rates will have to rise to keep foreign money piling in; the dollar will continue to be devalued, and therefore by the end of this year I fully expect gold to be much higher than it is today.

And that’s it.

It’s the summer. Let’s not over-think it, but if you do have thoughts, feel free to post them on the Buy High Sell Higher Forum.