Gold's rally is done was the overriding email response to last night's offering . Many technical analysts expressed a similar view, including our own (beloved) Gary B. Smith .

Yeah, sure, maybe gold has topped, except somebody forgot to tell gold, which rose 0.7% to $300.60 per ounce today. While major equity averages proved woefully unable to sustain fairly decent midday gains, the Philadelphia Stock Exchange Gold & Silver Index climbed 3.9%.

Still, even gold bulls concede a near-term top may be at hand, coinciding -- not coincidentally -- with rising interest from investors and reporters who up until now have treated the yellow metal like yellow fever.

"Rightly or wrongly I'm positive medium- and long-term and don't intend to trade gold mining stocks, but unless the price of gold stays above $300, the gold mining stocks are vastly overextended," said Jean-Marie Eveillard, manager of the ( SGGDX) SoGen First Eagle Gold fund.

After rising 37% in 2001, the now $18 million fund was up 29.2% year-to-date heading into today's session, according to Morningstar.

Despite near-term concerns, Eveillard remains bullish on gold largely because of a belief Fed Chairman Alan Greenspan's "luck ran out two years ago."

In response to the stock market's crash in 1987, the S&L scandal in the early 1990s, the Mexican peso crisis in 1994, and Long-Term Capital Management in 1998, Greenspan "flood ed the system with liquidity and the various crises were over in a month or two."

By comparison, the bursting of the stock market bubble, the weakening of the U.S. and world economies, Sept. 11, and Enron's implosion "still linger," despite Greenspan's rate-cutting efforts, Eveillard noted. "All of a sudden, we're running into circumstances that are positive for the price of gold."

The Enron situation, particularly, has been "a big knock on the appeal of securities," he said. "Gold's appeal runs inversely to the appeal of securities."

SocGen's gold fund's largest position is in Newmont Mining ( NEM), with other longs including Gold Fields ( GOLD), Goldcorp ( GG), Meridian Gold ( MDG) and Harmony Gold Mining ( HGMCY).

"Less obvious" holdings include Mexico's Industrius Penoles and the preferred shares of Freeport McMoran Copper & Gold ( FCX). Eveillard said the latter are a "close equivalent" to bullion, which his fund doesn't own, because they are leveraged to the price of gold. However, because Freeport's mines are located in Indonesia, there is political risk that some investors might not wish to take.

Speaking of risks, many investors perceive gold -- right or wrongly -- as an inflation hedge. But what about deflation, something more folks on Wall Street are -- right or wrongly -- concerned about?

From 1926 to 1929, the then-largest gold producer Homestake Mining (recently acquired by Barrick Gold ( ABX)) "inched along" while the Dow Jones Industrial Average soared, according to a report released today by Salomon Smith Barney's director of technical research Louise Yamada. From 1929 to 1930, Homestake was flat, before "breaking out of consolidation in 1931, initiating a dramatic climb during the difficult and deflationary years into 1939," she wrote.

Yamada didn't offer an opinion on whether deflationary forces will persist, except to observe "there is clearly no inflation evident."

She also observed that stocks such as Gold Fields, Meridian, Goldcorp, Agnico Eagle Mines ( AEM), and Anglo Gold ( AU), have each produced breakouts from three- to-four-year bases, " a somewhat rare breed of technical pattern of late."

ASA Limited ( ASA) "looks poised for the same," the technician wrote.

Among larger names, she noted Barrick, Newmont, and Placer Dome ( PDG) would emerge from year-plus bases if they were to close above $18 to $19, $25, and $14, respectively.

Thursday, Barrick closed at $18.78, Newmont at $24.13 and Placer at $13.34.

True Confessions

Because I cared (dared?) to write about gold during the midst of the tech-stock boom, I'm teased for being TheStreet.com's resident "gold bug." I'm less sensitive to those taunts now, as gold's position as the "anti-tech" is serving its followers well. When various colleagues (not that one) stop laughing anytime I mention the yellow metal, then maybe I'll rethink gold's merits as a part of investors' portfolios. I'm not saying "dump everything and buy gold," but the goal once more is capital appreciation and anything that helps the effort shouldn't be laughed at.

True Confessions, Part 2

The Nasdaq Composite Index fell 1.7% to 1782.11 Thursday despite the much-ballyhooed better-than-expected results from Cisco ( CSCO), and positive news on retail sales and jobless claims.

With erstwhile support at 1800 being breached, some technicians now believe the Comp is destined to retest its Nov. 2 intraday low just below 1650.

Given that, and with the high drama of the Enron hearings as a backdrop, I'm reminded of a recent conversation with a San Francisco-based hedge fund manager, who manages about $2 billion in assets, much of it in growth stocks.

Eronitis, "along with a number of other phenomena, is making me worry we could very well be at risk for an atmosphere of multiple compression," he said. "I worry about this crisis of confidence with respect to corporations, deflation seeping in with Japan and Argentina, and the U.S. going from surplus to deficit."

The manager, who requested anonymity, is currently buying stocks on weakness and taking profits on any rallies.

"Hopefully, I'm overreacting but compressed multiple environments aren't fun," he continued. "You can be plenty right about a company's earnings and strategy but still have a stock that goes down because people won't may pay as much."

Maybe that's stating the obvious, but I suspect some investors still haven't gotten the message.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to Aaron L. Task.

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