Fear and Greed
Gold $422 Silver $6.50 Tuesday 11th January, 11.45pm Sydney
G'day. It was another weird one in the different markets, with oil being the wildest of the rides on the day. Plenty of room for a lot higher oil prices, I reckon. The metals were pretty quiet and I suspect they are headed higher, and pretty quickly, given all the available info I can run through my processor, just thinking aloud and not advice. This particular processor, called a brain, has been getting a little rusty of late, having had a few days at the beach with the kids and then enjoying the City before they head back to school. Summer in Sydney is pretty special.
I hear that Mr. Snow is out blowing his trumpet about the 'strong dollar" while others at places like the IMF are spilling their guts on how bad the U.S. deficit situation is getting. Lots of talk and plenty of action on the currencies is the order of the day. The dollar is going way worse than the $1.37 level or whatever the recent low was against the Euro, from where I see things. It's just a case of when. It won't be long either, although the amount of official intervention and manipulation of the various markets will delay the day of reckoning for a while longer. Anyone suggesting that this doesn't and isn't happening has little grasp of reality. Central Bankers always lose when it comes to intervention. Eventually. Anyways, I would prefer to be a buyer of Euro anywhere near 1.30 and would be somewhat worried if went through to 1.27 (not advice). There is NO fundamental reason for the dollar to do anything other than devalue against everything. Except of course that everyone gets on one side of a trade and it gets whipped by the leveraged players which I suspect is exactly what has happened this last couple of weeks. Whatever. The dollar is going down, again in my view only and not advice.
The physical gold market is very much alive and well with Indian premiums indicating that gold is being readily sought and imported freely at current levels. Shanghai premiums indicate robust demand in China and Hong Kong. Dubai jewelers are having record sales quarter after quarter. Even people in Sydney are out buying gold sovereigns at close to spot prices. Yep, I went and had a chat with a large coin dealer here in Sydney the other day and ended up walking out with a bunch of gold coins with pictures of old dead people on them.
I was thinking about what to get my nearest and dearest for Christmas and was wandering aimlessly around Castlereagh St when I happened upon a bunch of antique jewelers and coin dealers that I wasn't previously aware of. I had a good chat with the keepers of the shops and was surprised at their reactions when I mentioned that gold coins should become more sought after in coming months/years. They reckon it's been that way for the last 12 months or so. We talked about the prices of coins and stuff. What I know about gold coins or numismatics could be written on a postage stamp. But I do know what an ounce of gold sells for and what the gold content in a coin is (provided I've done some small amount of research).
To cut a long story short, I ended up buying a bunch of gold sovereigns and the like. I decided that for each person that was on my list, they would each get a gold coin minted 100 years before they were. I also wanted to make sure that each present was different in its own way. Buying coins at spot plus a few percent is as easy as buying bullion except that you get the bonus of having something with a story behind it.
I walked out with a bunch of coins, some minted over 150 years ago with roughly 7 grams of gold per coin. I paid the gold content price plus a nominal percentage. That the coin was 100 plus years old is a nice feature. I scored some sovereigns from England, Australia, Italy, France and Austria with old fogies like Queen Victoria and Napoleon III printed on them. They're pretty cool and can be made into all sorts of great jewelry and stuff - but only at the right price!
I also found this set of gold coins that they had for sale. It was some sort of "special" collection from the Perth Mint. It looked a little familiar to me, at first glance. The price was very prohibitive. It was pretty sexy, though. Then it struck me. I won a Gold Price "guessing competition" at the Australian Gold Conference in about 1998 and the prize was exactly that set: a mint set of that year's Aussie gold coins. Each coin from the 1/10th ounce puppy up to the 1 ounce beauty. That was one little pissoir that I was happy to win. Best I hit the old safehouse to check my facts whether it's the same set. I also saw the 1 kilo silver Kookaburra coin. A coin that weighs more than 2 pounds is something else! Great gifts for newborns - you can buy their weight in silver!
Speaking of silver, I am viewing this is a screaming buy (not advice). I can't get the timing right lately; whether we are buying today or next week, but sub $6.50 will be seen to be a gimme in a few months. In fact, if silver hasn't traded at $10 before Christmas 2005, I will be standing, sans jeans, somewhere in North Sydney. Just thinking out loud but I am very, very bullish about what I see as the greatest metal on the face of the earth. The DMA action is interesting as is the open interest numbers in Comex. Something's brewing down there and I can't put the old finger on it, yet. Just quietly, I think it's got 10% downside but it has many hundred percent upside. My kinda odds!
The Amex Gold Bugs Index (HUI) should put on 20 points pretty quickly, IMO. Many equity issues in our space are now being priced off a spot rate equivalent of about $380, IMO. I don't want to get caught up in who or why but we have a situation here that is almost unfathomable to me. We know what the dollar is doing. We know the monetary and fiscal policies of the issuer of the world's "reserve currency" will certainly make the dollar worth less than it currently is. Why would the producers of the only real money and wealth be so badly treated? Do people not understand the present value calculations of something like a goldmine? Goldmines don't halve in value like they just have in our equity markets. Just keep in the back of your minds - "reserve depletion" and the lack of exploration dollars that the majors haven't spent in the last 7 years. There are companies with sizeable unhedged production, significant resources and exploration upside for those looking for some fat old ducks to put on the table in 12 months time. As always, just the opinion of someone who should be asleep.
Just sleeping out loud here - Maybe Greenspan is "the greatest"? Not a far king chance! I will bet London to a brick, that he is written in the history books as "the guy who let the dogs out" regarding the debt that cripples the USA. Maybe "Helicopter" Bernanke's "printing press" is going to be the greatest fraud ever committed on mankind? It is WAY bigger than John Law and France. Maybe gold is just a metal? I will believe that when you can buy a gold saucepan at Sears. Maybe I'm just a young fossil?
Man is driven by two things : Fear and greed. Be on the right side of that trade.
This ramble was nearly finished about 2 hours ago, but the luscious Lisa arrived home from the first class of her next 3 year's course at the Gemology Association of Australia. I know, I've said it many times, rocks don't count! I have tried to talk her into gold and silver benchwork but she likes those shiny, sparkly things. Three years is a long time away, and I reckon it's easier to work with kilo bars of gold and silver, than it is digging up some old rocks and hoping for a bit of green or blue stuff in the guts? I'm gonna get belted for that, I'm sure.
Also, by way of further excuse, the movie "Mystery Alaska" was on the idiot box when she came in, and, as there is no NHL hockey because of the strike, it was worth a watch. She likes her hockey!
The warning shot has just been fired - a pair of silky thingys thrown down the hallway.... I gotta go. Maybe there is something to looking at rocks under a microscope?!!??!?
Enjoy the day and don't be surprised that we haven't just seen the low for this dip in the metals.
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