Gold and Stocks No Longer Are at Odds

However, Schaffer cautioned that gold shares appear extended vs. the metal itself and are subject to "gut-wrenching pullbacks." He suggested investors "don't chase rallies" and look to establish or add to gold stocks on pullbacks.

Frank Holmes, chairman and CEO of U.S. Global Advisors, a San Antonio, Texas-based money manager with over $1.1 billion in assets, offered a similarly upbeat view of tech and gold during his presentation at the Money Show. He suggested $360 per ounce would be a good point for investors to re-enter or establish positions in gold/related shares. That forecast was based on an assessment the dollar was set up for a near-term technical rally, perhaps coinciding with President Bush's trip to Asia.

While the dollar stabilized late last week and Monday, the greenback slumped Tuesday after the Asia Pacific Economic Cooperation summit concluded without comment on currencies. The greenback fell to 109.59 yen vs. 110.27 late Monday, the euro rose to $1.1654 vs. $1.1639 while the Dollar Index dipped 0.1% to 92.34.

Expectations of long-term dollar weakness underlie Holmes' bullish view on gold; there's a 65% inverse correlation between the two assets, he noted. (As an aside, Realmoney.com contributor Howard Simons has demonstrated there's a lack of correlation between returns on the dollar and stocks over the long term. Problems can arise near term if the dollar moves sharply and/or is manipulated by governments, but that's different than simply equating dollar weakness with equity weakness.)

The dollar is also a big factor in Holmes' bullishness on tech, noting the sector generates 48% of revenues overseas. Dollar weakness aids the competitiveness of U.S. products vs. overseas rivals while currency translations provide a top-line boost. For example, second-quarter results at IBM (IBM Quote) and Intel (INTC Quote) were each greatly enhanced by overseas revenues.

Regarding his optimism about gold, Holmes also cited rising demand from India and (especially) China, decreasing mine supply, a reduction of hedging by gold producers and renewed investor interest in the metal, which he said the much-anticipated Gold ETF should crystallize -- especially among U.S. pension funds.