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Aussie Rules!



"Nobody should be puzzled as to whether a market is a bull or a bear market after it fairly starts. The trend is evident to a man who has an open mind and reasonably clear sight, for it is never wise for a speculator to fit his facts to his theories"

Edwin Lefevre from Reminiscences of a Stock Operator,1923.

Well,Well,Well.... markets don't go one way,do they.

Metals across the board have been belted in the past couple of days. Corrections occur in every market, every day, so don't run out and neck yourself if you're feeling a little down in the dumps. If you're jumping for joy, cool, just don't fall in love with your position as they generally will come back and bite your backside. Just remember 5 days doesn't change the long term trend.

The daily Gold chart has the 200 day moving average at about $375, the weekly at about $310...that's a fair discount to spot in the current environment. With gold closing on $408 it appears a test of $400 is inevitable, sometime soon, maybe not today BUT....

Goldman was the big buyer late yesterday around $408ish when it appeared that we were in for an absolute hiding. Today the Japanese went after gold early in TOCOM but serious physical buyers arrived to hold the low at 407.50 in Asia. India (the world's largest gold player) is a buyer here judging from the local import centre premiums. FYI the hourly gold 200 period moving average is just on $420. Entry timing is as important as entry level.

Since then it's all been about the dollar. Euro looks likely to test the $1.22-23 level. Gold expect a test of 401-399 in near term.... this appears to be a short term dollar correction. No metals fundamentals are changed (except that every freaking Central Banker in the world is saying how good everything is, how "their" currencies should be lower and that there is no inflation). Astounding.

Some metals equities are some 40% lower than they were a month ago and gold was lower back then. Hmmm. Dunno what kind of valuation technique they are using but it does pose some questions about metal equity valuations. The "normal" analysis of a business does not apply to metals/mining. In most analysis, one would look for the lowest cost producer of a given product as they will enjoy the biggest cashflow benefit from a rise in their underlying commodity/product. My contention is that if one believes that a given commodity/product will rise in price then one should be targeting the HIGHEST cost producer as they will get the biggest margin benefit.

Think about it this way... if goldmine A produces at $100 and the price is $300, they make $200. If the price rises to $400, they make $300 or an increase of 50% of their margin. Goldmine B produces at $290 with the price at $300. He makes $10 per ounce. Skinny, but making something. If the price is $400, he will make a $110 or his margin increases by 1000%. Who is the better buy???

Silver has been crushed the last few trading sessions but again is some 20% higher than a month or so ago. Very solid physical support at 6.15ish and anecdotal evidence suggests a very serious shortage of deliverable metal in the "retail" market (up to say $25k). Long delivery delays across Europe (3 months plus) and also here in Australia suggest a tightness in physical supply. Hmmmm. Show me the silver (if it's available)! Something's cooking in silver and I suspect it could get a little scary.

The base metals all followed suit and gave back a little/lot of their massive gains the past 6 months.

Coping well in the 90 degree heat here although those in North America must be freezing their bits off right now...

Enjoy the weekend


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position in gold, silver

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