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You've Either Got It, or You Don't


Have a Happy Australia Day, Laurie!

Gold $426.50 Silver $6.78 Tuesday 25th January, 10pm Sydney

G'day. Tomorrow is a public holiday here in Australia. It's Australia Day, the same as the 4th of July or Bastille Day or whatever the National Day of your country is called. Basically it involves lots of booze, prawns and lamb-chops while watching all the entertainment on Sydney Harbour with a grand finale of a massive fireworks display. Hopefully the weather will be appropriately hot and sunny as beers always slip down easier when you've got a sweat up.

Gold appears to have stalled somewhat up around the $428 level and it appears we are settling into a range of $428-420 and I half expect we'll be retesting the $421 again in the near term in the paper gold market. Otherwise $432 beckons on a bust of 28. The up trend is still intact and any dips will be greatly appreciated by Indian physical buyers. The rest of Asia and a few notable others seem pretty keen to load up on dips as well. My "sovereign dealer" down here in Sydney has standing orders a few bucks lower, at spot plus a few percent.

Speaking with some colleagues this morning and I noted that there was a somewhat positive view towards the dollar, on a trading basis, not a fundamental one. I can't disagree too much as it's not really my game and maybe we need to see $1.27-8 in the Euro to flush out a few more dollar longs who have held on through this nasty start to the year. If such transpires, we may even head down to 1.24-5 or so as momentum players pile in. It doesn't change my view that the dollar is inevitably screwed in the long run, but the market will slam as many people as possible and it seems that a dollar rise will do the most damage. There is no way we have seen the low for the dollar, but we may have seen it for a few weeks or months. I note a senior Chinese official has come out and said ""China doesn't have conditions to adjust the renminbi (yuan) exchange rate at present" so I guess the massive deficit issues aren't gonna die too quickly. Just thinking out loud as usual, and not advice.

Furthermore, we discussed how quickly the market changes its focus as to economic or fundamental drivers, depending on what's happening in the world and the psyche/sentiment of the markets. One day it's interest rates, next month it's the deficits or the oil price impact on the economy or blah, blah, blah. A year or so ago, oil at $50 was seen as disastrous for the U.S. economy. Today it doesn't seem to matter much. What changed? People just get used to it, that's all. Deficits that would have caused chaos a few years back don't matter any more. One's focus changes depending on one's view as there is always something that one can take from the fundamentals to back up one's own argument.

I completely agree with such sentiments but preface that with the fact that with precious metals and oil there is an actual real, physical asset that has to be delivered and that significantly changes the dynamics of those markets compared to bonds, equities and currencies. Sure the paper players can win the day for a while in commodities and drive the prices around but in the end the physical market will set the price. Gold has seen such action in the last few years. India stopped buying at $350 when gold shot from $330 to $390 and the price then fell back under "their" level for a brief while. The next run up over $400 and they stopped at $380. The price came back to the physical. Same again when they stepped in at $395, then $410 and recently they were buying at $445+ yet stepped aside and are sucking it in here below $430. Indian inventory is being built on all dips. Hmmm, What's the next move?

Silver could also look to trade back into the top of the recent range, somewhere around the devil's number - $6.66 and maybe a little lower. I still contend that every dip into $6.50ish is a wonderful opportunity to load up with some bars of the real stuff rather than some IOU or claim on some silver in someone else's possession (not advice). I just dunno if you'll get much of a crack at such levels. I have mentioned previously that I reckon that one day everyone who has a claim on physical silver will ask for the actual metal and guess what, there won't be enough to go around. That will be an interesting spectacle for those who already possess their silver bars! Commodities will always revert to the only LAW of economics- supply and demand. Silver is screaming at us.

Metal equities don't appear to be too badly placed at present although many issues are still some 50% of their value of a year ago. Go figure! I know that the blood all over my personal portfolio is only temporary and am comfortable that those recent highs will be seen as a bargain in the years to come. I believe most people will make their money on the "way in" rather than on the way out, which is to say that judicious stock selection and timing your entry will be way more important than when one decides to sell. This game is gonna be long and occasionally terrifying, but certainly a very profitable one. Just my opinion as usual.

Some of the Aussie juniors are screaming buys, IMO. Remember that the Barricks (ABX), Anglos, Placers (PDG) and Newmonts (NEM) have done two-fifths of bugger all exploration the last 5 to 10 years and need to replenish reserves. The mid tier producers like Goldcorp (GG), Agnico Eagle (AEM), Meridian (MDG), Golden Star (GSS) and many others are all in play too. Either way they play it, increasing size will entail slurping up many quality juniors and explorers because it's cheaper then drilling their own. They are all gonna have to takeover juniors who have done the recent hard yards and I reckon the Aussies are on pole position for when the flag drops. The Canadians also have many juniors who will be snaffled up but I am a little less up to speed on those puppies compared to my guys down here. Either way, the little guys are gonna fly as the big boys go after them. I always look at historic goldfields as many have not given up anywhere near the gold that they contain. Most haven't been looked at in a hundred years and there are a bunch in Oz that stick out like a sore thumb. Never advice but ....

I see Mr Snow reckons that there is a deep commitment to addressing the deficit issues and that they're gonna fix social security in a flash and all that. You know it's hitting the fan when they come out and say something's a priority, especially when there's so many big problems hitting at once. Remember that Dutch story about the boy with the finger in the dyke?

I will be taking the lady and the kids out tomorrow to watch the start of the Great Sydney Ferry Race up the harbour. The "pirate ships" regatta (the Bounty and all the "tall ships") is also fantastic and our Air Force acrobats hit the skies around 3pm. Fireworks at 9pm means it's gonna be a long one for them (and me)! School summer holidays end this weekend so the little ones are playing hardball. At least we can watch the fireworks from the verandah, over a convivial shiraz or two.

The sale of the mare fell over today. The buyer said that she is "too small" for their stallions. Well, she wasn't too small to win some nice races and nearly $100k in prize money. I thought bloodlines meant more but obviously, as in most things, size matters. I dunno why they just don't get a big stallion to shag her to compensate for her "lack of size". That's what I've done so far. It's not the size of the horse that matters to me, it's more about the size of its ticker! You can't teach determination and the will to win. You've either got it or you don't. My "little" mare has it in buckets and the stallion she is in foal to was the World Champion Miler in 1998. I'm buggered if I know but I'm not gonna give her away! She was her mother's first foal and first foals are acknowledged to be the runts of the family. Her Oaks winning sister is much bigger and she was the third foal. Anyways, it means that metal equities will probably get slammed now as I've got no spare wedge to throw at them. (wedge= slice of the pie= money). Yet.

Enjoy the day and have a beer on Australia day for me, wherever you are in the world.

position in gold, silver, nem, anglo, abx, pdg, gg, aem, mdg, gss, oil

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