Post by
PGMBOY on Jun 05, 2006 2:52am
Harry Schultz Hello, $3000?
Schultz's scenario
Commentary: Veteran gold bug sees price soaring to $3,000 an ounce
E-mail | Print | | Disable live quotes By Peter Brimelow, MarketWatch
Last Update: 12:01 AM ET Jun 5, 2006
NEW YORK (MarketWatch) -- Advantage, Schultz. The veteran gold bug called the recent gold break. Now he's getting cautiously cheerful again. Long term: Hello, $3000?
Harry Schultz of the International Harry Schultz Letter has been publishing so long, since the early 1960s, that I regularly get email from readers insisting that he must be dead. He denies this.
Dead or alive, Schultz is soaring right now. According to the Hulbert Financial Digest, his portfolio gained 130.85% over the year ending in May, vs. 10.6% for the dividend-reinvested Dow Jones Wilshire 5000. Over the last five years, Schultz gained 21.94% annualized vs. 3.63% for the DJ Wilshire.
Shultz's long term record is much weaker, partly because the HFD has sometimes found it difficult to follow his complex, sprawling and highly idiosyncratic publication.
Like most veteran gold bugs, Schultz has actually been quite careful about the metal's rise, unquestionably from bitter experience. Last time I checked, gold was about to break through $700 and he was positively scary: "Price in near vertical surge that increases odds for a sharp & perhaps deep consolidation pullback. The 50% retracement level on the run-up from July 2005 lows is currently 550, which coincides with intermediate closing support of the Jan-Mar 2006 trading zone. Spinner & MACD [two technical indicators] ... Chart bullish/overbought." See May 8 column
But Schultz's macro conclusion was still bullish. The general public was still asleep, he argued, and when they woke, the gold price would rise more sharply than anything yet seen.
Gold went up a bit more, but then it broke, closing on Friday at $636.80.
Schultz' latest letter arrived on Sunday night. He writes: "We've dropped to a major support zone (620-592) where it will be relatively safe to buy ... So now I recommend increasing your percentage of gold to 25%- 30%. But, as I'm not certain this correction is over, please delay buying until the down channel is broken."
In other words, Schultz wants this level to hold for a while.
But Schultz's long run is as apocalyptically bullish as ever: "My view has always been: current governments (which are bank-owned) won't voluntarily return to a gold standard, with its discipline on money creation. But, when the price roars to, say $1,600, they'll quite possibly be forced to do so, to appease a clamor for sound money - e.g. Bretton Woods II. The price could go to $2,000 while they debate new rules. Washington insiders would see it as their last chance to save the US dollar as a reserve currency. If they don't, the euro, yen or yuan could make a bid for that status ... If no rules are made at $1,600, gold could keep climbing till they do. Hello $3,000."
Schultz has always advocating frenetic trading - he says he often buys and sells in the same day. He writes: "This market is going to $2,000, but en route it will most assuredly crash 3-7 more times and it's not smart to ride it down. Most people can't bear the pain when their stocks fall 70% as they will if bullion dips only 30%, as it often does."
Other veteran gold bugs, notably Dow Theory Letters' Richard Russell, flatly say this can't be done. Russell wrote Friday that he sold no gold or gold stocks in the recent break.
Right now, however, something is working for Schultz. As of Sunday night, he was holding gold stocks in his model portfolio: