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A major problem in the gold market is that many of us are often labeled as gold bugs, when in fact some of us are not. Yes there are many gold bugs in the gold world. They are those who always have been and in all probability always will remain bullish on gold. Then there are those of us who have been bullish on gold over the past few years for numerous technical, fundamental and monetary reasons. However, as the gold market stretched from weeks to months to years, we too have been labeled as gold bugs.

Myself, I am not a gold bug. Do I believe gold will trade higher in the coming years? Yes. Does that make me a gold bug? No. I believe in trends and the reason I got into gold was because what I saw was a major trend.

In the late nineties I felt that the American markets were experiencing a bubble and would soon top out, as would the U.S. Dollar. As gold is a hedge against instability, I thought gold would go up in value during this coming period. During the next few years I recommended individuals begin to purchase gold stocks. The bull market in gold did play out as the Amex Gold Bugs Index or HUI (an index of unhedged gold stocks) increased from 38 to as high as 250 from 2000 to 2004. Gold itself, also did well trading from 252 dollars an ounce in early 2001 to as high as 450 dollars an ounce.

While I am still positive on gold and gold stocks over the longer term (e.g. the next 3-5 years) I am taking a much safer tone over the short term (e.g. 3-6 months). Recently, gold stocks have seen a bit of weakness. As we can see from the graph of the HUI enclosed, the HUI recently declined to as low as 195 or right at its uptrend line. It has since bounced to 201 as we write. However, the HUI is not out of the woods and if it breaks its uptrend line and then breaks support at 190 that would be very very negative and could send gold stocks lower.

(1) The recent strength in the U.S. Dollar – Gold usually trades counter to the U.S. Dollar Index (when the U.S. Dollar Index goes up in value gold goes down and when the dollar trends down, gold trends up). As of late the dollar has traded from just under 82 to just over 84 as we write. If the dollar breaks above 85.25 level we see it rallying to the 87-90 area, which would surely mean that gold and gold stocks are about to break lower.

On a longer-term scale we have enclosed a chart of the dollar going back to 1983. We can see that the dollar has seen numerous declines to the 80 level on the dollar index. All have held and the dollar has bounced off them. Therefore, we do not see 80 on the dollar index going without a fight. We expect a few bounces; such as the one we are seeing at the moment, off 80 before the dollar finally breaks down.

(2) Gold stocks have been lagging the metal since November 2004. We have found that the history of gold bull markets is that the stocks outperform the metal during the upturns. Or the stocks actually lead the bullion before an upturn. Therefore, before any gold rally is to stick we would like to see the stocks begin and to outperform the metal.

As stated earlier in this article I am still bullish on gold and gold stocks over the long haul. However, with this said there are obviously reasons for caution over the short to intermediate term.

I am going to be speaking at the 17th Annual Las Vegas 'Money Show' along with Mike McGowan in May. I'd like you to come and meet us. The show will be held at the Paris/Bally's Resorts from May 9-12, 2005.

The Money Show is the largest investment conference of the year. On average, 8-10k people attend a money show and the event attracts the top speakers in the business.

More than 50 of Wall Street's top analysts, advisors, and money managers will address the issues of greatest concern to today's sophisticated investors and traders, helping you acquire the knowledge tools, skills, and strategies to prosper and profit in today’s market enviroment. There will be a large exhibit hall at the event with over 200 financial services companies and more than 200 free workshops, panels, and stage presentations.

Speakers include Paul Kangas, Ned Davis, Tobin Smith, Ned Riley, Joseph Battipaglia, Bernie Schaeffer, Louis Navellier, and the Aden sisters, along with your's truly. And you will have several opportunities at the show to visit with me.

I will be giving two presentations in the showcase theater along with Mike McGowan.

Tuesday, May 10, 2005 , 2:30pm - How to Achieve Large Profits Through Sector Investing

Wednesday, May 11, 2005 , 2:15pm - Gold: How to Profit From This Year's Hottest Sector

I have reserved a special hospitality suite for the entire day on Thursday. We'll be using it for a full day seminar to discuss such topics as the psychology of trading, the current technical overview of the market, specific stocks and sectors to watch in the coming months, and how to effectively enter and exit positions.

We only have room for 100 people at this event. We will be giving you more information about it and how to reserve your seat shortly.

The entire Las Vegas Money Show WILL be booked up quickly, so please visit the Web site below to make your reservations online today. Registration is free for WallStreetWindow subscribers.

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