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Men at Work



Good morning and sorry to have been "M.I.A." the past couple of days, especially with all that has been going on. Sometimes though, it can be a blessing to miss all the noise and let things play out as they must.

Plenty of two-way action in the metals of late. And I won't dwell on the past move from low $400 to upwards of $413. Lots to cover so let's giddy-up.

Cowboys and Indians

The Indians are still buying gold physical at $410 based off the premiums in their major importing centers. Conversely, as Reuters reported, the Norwegians dumped half of their remaining gold reserves into the market in January and have said they'll ditch the rest in the near future. Who bought it? Furthermore, who's gonna buy the rest? As I suggested a few days back, with the increase in FX reserves of China and Japan, I thought it would be a good diversification for them to take on the much discussed German 650 tonnes. Someone in Japan must be tuned into Minyanville because a guy called Taganaki, the Finance Minister, said they would look carefully at their FX reserve allocation to Gold. Japan and China have massive FX reserves that recently have distorted their allocations, with gold falling as a proportion. Maybe a top-up is on the cards and what better way to buy than just shipping in some other Central Bank's gold. They're a weird mob, those central bankers. Can they ever agree, on anything???

Further to that, the ECB council members, Liebscher and Wellink basically said rates are just fine in the Euro. So much for all the noise early in the week, that sent the dollar jumping and gold down in quick time. All the Central Bank noise can be very distracting but one must keep the eyes on the prize and, from what I can deduce (and not advice), we are a few years into a long term bull market in all commodities. I note that the US Fed dropped a word or two out of their Interest rate blurb about "significant time" or something... so what? It doesn't change the dollar fundamentals or the commodities for that matter. Sure, we'll cop one on the chin every now and again, as everyone did in the late 70's where gold ran from nothing to lots (BUT NOT IN A STRAIGHT LINE), and we know supply-demand is the king in analysis of physical commodities, especially when priced in a fiat currency that is under significant pressure. At what stage do we foreigners want our money back after sheepishly buying hundreds of billions of dollars of US Government debt, denominated in a falling currency?? Maybe Taganaki-san is feeling the pinch??

Sterling Silver

Silver has closed at 6 year highs and quite frankly looks like it could well be setting up for another crack at the top side. The 6.25-30 level looks very supportive and we should test 6.65 in the not to distant future. Am waiting on some analysis to come in on some global supply numbers. Should be interesting. There is some concern in the market that supply for near term delivery is not going to be enough to satisfy demand. My local bullion dealer here(physical metal, not paper) is experiencing delays of some 5-6 weeks in filling orders even as small as 50kgs of silver. "Show me the silver" could well be the catchcry in the coming months, and I can't seem to find where it's gonna come from.

Golden Boys

It appears we are again looking for higher gold and I would think that with the price action we are seeing, and the violence of the upswings, the line of least resistance is up. Physical demand appears to be saying that the world is pretty comfy at $400plus.

Goldman Sachs just put out their revised Gold forecasts for the year. They are now ok with $400 plus gold and they even suggest the XAU Index could kick another 25% this year. The report is quite a long document and I have only scanned it briefly, but it's good to know that there are some "mainstreamers" starting to see what has been apparent to some for a few years. Reasons they proffer for higher gold, other than dollar weakness are 1) China gold market deregulation and their continued strong GDP growth, 2) the listed ETF on the NYSE in 2004, 3) Geo-political instability and 4) Producer de-hedging. Fair call from GS and I wouldn't disagree too much. They have not touched on physical demand from traditional sources that have more dollars than they ever have.

Anyways, gotta fly, and I trust things will return to normal down here next week so we can really get stuck into the meat of the metals situation. Again, my apologies for my absence and thanks Toddo for the understanding.


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position in gold, silver, euro

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