Forum Archive Index - June 2004

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Phaedrus/Mick,
 
>
>Blindly following brokers recommendations is a very risky business!
>(See chart below)
> 
>Hugh, I would be very interested in a good trading system that
>utilised nothing but "fundamental analysis and hard facts". The
>concept is very appealing. How well would such a system have done 
with
>CRS? Would it support holding/buying CRS at the moment? 
> It is interesting to note that Paterson Ord Minnett used fundamental
>analysis and hard facts to support their ill-advised and ill-timed
>CRS "BUY" recommendation. This recommendation came just after 
CRS
>price action had fallen below a trendline that had been unbroken for
>a year.
>

I'm not here to defend Ord Minnett, or Hugh, and don't class myself as 
an expert in gold.   However, I too would be interested to know what 
'fundamental analysis' Ord Minnet used.

The sort of analysis I would be looking for would be profitability - based 
on the ten year average gold price.  I would want an estimate of 
dividend yield assuming the gold price was at that level.  Because gold 
has a long term 'growth' (sic)  profile of just matching inflation and no 
more I would be looking for a yield of 5-6%.  And I would be looking for 
low exploration costs.

Those are pretty strict criteria I know, but that is the sort of trade off I 
would need to invest in a very high risk industry like gold.     

If we assume that Ord Minnet are not total fools (and let's not debate 
that one!) then my conclusion is that there are no fundamentals for gold.
A terroist attack?   By how much in dollar terms will that raise the price 
of gold?  Note that 'gold will go up' is not a satisfactory answer.  If the 
price of gold is driven by fear and greed, largely unquantifiable 
emotions, then I contend there are no 'fundamentals' for gold that you 
can reliably profit from.     Personally I think gold is something that 
should be left purely to the T/A guys, or (even better) avoided.   

Hopefully Mick is not a client of Ord Minnet!  ;-)  

SNOOPY





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