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Weighing The Metals



"Indeed, there can be no other criterion, no other standard, than gold-gold that never changes, that can be shaped into ingots, bars, coins, that has no nationality, and that is eternally and universally accepted as the unalterable fiduciary value par excellence". Charles de Gaulle, 1965.

Metal snapshot

Gold was roughly at $411.50 here at 11:15am NY, well off its lows in Asia of $405, 12 hours ago. Silver at 6.15 as of last week, even if only for a few hours, looked like a bargain. We have seen the currencies move quickly against the dollar, which looks to have finished its attempted rally back to 1.23 and appears headed lower versus the Euro, again. Let's see how loud the European bankers squeal when the Euro is at 1.30 in the near term. Oil received no benefit from last week's rising dollar though, and at $35 and looking higher, possibly WAY higher), it appears we could be in for an interesting next 2 or 3 months with the big chill in the Northern Hemisphere.

Technically speaking
Expect we see some gold selling around $412ish and again at $418ish on the upside and I still target $401-399 on the downside. Silver put its low in late last week and I still see solid support in the 6.10-6.15 area. I wouldn't be surprised to see $7 silver very shortly. Physical silver supplies are being eroded every day due to the supply-demand imbalance and last week's short term retracement gave a nice bonus to those buyers in the physical markets. There are real shortages in silver and anecdotal evidence suggests delays in delivery of silver bars in countries like UK,Australia,Canada.

Most all of the base metals have retreated some. Nickel has been bashed harder than most. Lead, Copper, Zinc are all off their highs but one shouldn't be looking for a collapse in any prices. Even the new contracts being negotiated in Asia for our Aussie Coal are cranking up some 20-25% price increases. Seems everyone's hot on commodities, one way or another. At least we have some volatility in the markets as there is nothing more painful than watching a metal market that has basically flat-lined.

Seems everyone had a bit to say about gold over the weekend from the Bundesbank jawboning further gold sales to our old mate Dr Mahathir, the former Prime Minister of Malaysia. In my opinion, the Bundesbank will not sell gold in vast quantities as has been suggested by some, nor will many other European Central Banks who have any gold left. The hyper-inflation of 80 years ago is still in living memory.

Mahathir,on the other hand, still swings a big bat in the Islamic world although others may say he is a tad eccentric to downright objectionable. Anyway, this is what Reuters reported; - "JEDDAH, Saudi Arabia, Jan 18 (Reuters) - Former Malaysian Prime Minister Mahathir Mohamad said on Sunday that Saudi Arabia should sell oil for gold, not dollars, to avoid being 'short-changed' by a decline in the U.S. currency." I would seriously doubt any action from the Saudi's on this, as there would be some disastrous flow-on effects, but it is interesting to note that he got a standing ovation at the end of his speech.

Metal Equities
The metals equities should kick off the week on a strong foot after the
thorough hiding they have received this past week or so. Some metal equities are 40% off their highs of a few weeks back and it would surprise if we didn't drag back much of that move in the coming few weeks.

Gold options
Gold option volatility has come back from 21% to 19% whilst this sell off has been in motion. This is still historically higher than normal and some 4% above the VIX. Go figure.

Chinese New Year this week could quiet down the commodity markets and even tempt a few bear raids on select metals, as the "great accumulator" has a few days to party. I also see that someone from the Bank of China has said, as reported on bloomberg that "there is NO Chance of a devaluation of the Yuan this year". Cop that, Mr Snow.

This will be a very interesting year!


PS... what's the deal playing football in the snow??? Over here, we play with no helmets, pads or any of that other girly protection stuff, but no way do we play in the snow....that's just silly.

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position in gold, silver, euro

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