Thursday, August 5, 2010

Peter Brimelow Says Recent Bearishness Proved To Be Contrary Indicator

In his latest Marketwatch column, Peter Brimelow credits what he calls the "radical gold bugs" with being right on gold's turnaround. Physical demand from Asia was what turned gold around. The more timing-oriented players turned skittish, if not outright bearish, at about that time.


He points to a certain irony with respect to gold exploration:
[O]nce gold gets to a level at which average gold deposits are viable, the discoverers of somewhat better ones make fortunes. So do patient prospectors amongst the junior gold names. It is a great time for what some deride as "rock hounds."

This is what happened during the circa-$300 plateau in gold that occurred 1993-96, when it was considered a healthy price.
So gold miners are partying like it's 1995, when gold was about a quarter of what it is now. That speaks to one serious bout of margin squeezes.

And yet, from what I've seen in the gold-exploration market, the stocks of junior explorers reporting very good drill results aren't getting much of a kick right now. There are exceptions, but not very many. Indifference seems to have settled into that nether region.

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