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Metals with McGuirk


There will be no more streaking Laurie!


Gold $476 Silver $7.78 Sydney 10 October, 9pm Sydney

G'day. Gold and silver are off to a flyer this week with a nice bunch of bids hitting the market early in Europe. Silver jumped a quick percent and a bit, while gold just tacked on a few dollars extra to the last few weeks of rally. Fair enough too but expect sub $470 again pretty quick on some profit taking, not advice.

Been busy the last couple days reading my testimony from the Western Australia Supreme Court of 6 weeks ago. Nearly 6 hours in the hot-chair is not a recommended stress reducing activity, especially when asked about stuff from nearly 10 years ago. I just had to sign off that it was a transcript of what I said in court. I'd have thought the tapes would have been sufficient but apparently not.

Gold is doing exactly as one should expect after the big recent jump up to the 470's. We are working-off an overbought condition, just by marking time. I wanna see another few weeks/month above $450 before I officially move my "floor" up from $420 to $445. I wrote a year or so ago that I didn't think we'd see sub $400 again this decade. I'm still very comfy with that call and happy to run Goulburn St naked should it happen (Walker St is on alert from last time I lost a bet). That the Sydney Regional Police Headquarters is on said street, and literally next door to our apartment, is not a concern. Yeah, I know, I got caught with a similar bet earlier this year when the Amex Gold Bugs Index (HUI) sold down through the 180 "streak" level. Photographic evidence was provided to any doubters.

This is a much, much safer bet. I have India, the Middle East, China and the total history of mankind and money behind me, not some technical traders doing whatever damage they can in as short amount of time possible. The $435-38 level should provide MASSIVE support on any "liquidation", all things being equal. Just my opinion and remember that we are talking about a timeframe that is longer than what an hourly chart may throw up.

The Indian Rupee has been weak recently but from what I can gather, they are still very comfy slurping up metal on dips. Their stock market has been on fire lately and the wealth effect is bubbling along nicely. All anecdotal evidence suggests that India is a buyer at these levels.

So much talk about Inflation these days, you'd think the Fed Heads just discovered it!! How many of those people have been talking the walk lately? Do not consider that interest rates are headed anywhere but up, even when the economy slows "officially". Inflation is way, way, way higher than "official" pronouncement, that is evident to any person, even primary school kids who are seeing their allowance eaten up before their eyes. The school "tuck-shop" is increasing prices. I remember when I was a kid, a cheese and vegemite sandwich was 6 cents at the school canteen. The same sandwich now is 80 cents. Milk in Sydney just went up 8% in one government-approved whack. Now, we know that cows don't do much more than eat "free" grass so what's the deal?

Transportation to market is what the "official" channel dictates yet we know that is just a small part of the equation. Has anyone worked out that the farmer was working all day for free, and that now he wants a pay rise? Maybe his property has risen in value but you can't do much about that except take out equity (incur debt) or sell up. There's plenty more of this stuff coming from across all sectors of the economy, in my opinion.

I noticed an article that said that only 14% of households in California can afford the median house price, down from 18% a year ago. Wage pressures are building or a property collapse. Not nice, either way. I bet, a lot of both.

Silver is such a wonderful little beast. How many people got "scared" out of their long position around $7.30 lately? Patience and resilience are indeed virtues when it comes to silver. Is anyone watching that silver/oil trade? Buy silver/sell oil - not advice, same as 3 weeks ago! I do get concerned that silver does get a little far away from itself occasionally, but I don't see that area for at least another buck or two- given all information available to me.

HUI is still trapped around that 240 level and can't see what's gonna break that 220-250 range of the last few weeks. Yeah, it's a 10% range which would see a thousand points if we were talking the Dow. Gold will likely have to break out through $490 before we see a new high for HUI. I reckon it's 75-25 we see the low side break but there are just so many holes appearing in the US economy/dollar that I won't write much off. Remember the 1973-1981 gold bull did its most damage in only about 18 months. There were some freaky sell-offs along the way, mind you. I am looking a little further down the credit chain for some fatties, who are abundant, rather than the HUI components at this juncture. The advanced juniors are where to be, not advice.

I read an article on Bloomberg today that kinda angered me a little. I don't wanna pick on anyone but this article has holes as wide as the Sydney heads in it. He nearly got close to the mark when talking about a world awash in dollars looking to park somewhere safe. He never even looked at the role of money, fiat currency issues, declining mine production, leasing or most other things I would describe as "critical" in any analysis of gold. The article is factually incorrect - in real terms, 1980 gold is about $2000 in today's money. This article is just plain outright rubbish. Gold has doubled in the last 5 years. Sure it has lagged but there are significant reasons as to why. I will not take the article apart, point by point, but just FYI, GFMS has been so far wrong the past 5 years that nothing they say holds water with me, unless they are talking about physical demand, which one can't really doctor. Indian and Chinese demand is way up. GFMS said so a couple of weeks ago. The author does not appreciate the difference between "paper gold" and real "physical" gold. Anyways, from the last few lines of the article, I give you -

"Gold's lateness in joining the asset-price bubble is a good indication of how far gold has fallen in the esteem of investors. Equities, bonds, real estate, oil, commodities, art and just about every other asset has shot up in the last five years. Until recently, not gold.

Interest rates in the major economies, with the possible exception of the U.K., are going up. There will be less easy money around. Growth is about to slow, reducing the prices of all commodities, including gold. The gold rally is likely to be the last for commodities for quite a while. If it goes to $500 an ounce, anyone buying will be in for a rude shock."

Easy cheap money doesn't run to gold, it FIRST runs at ski chalets, art, racehorses, flash cars, boats as the author contends. SMART money runs to gold. He doesn't mention that "easy cheap money" EVENTUALLY creates the environment for gold to flourish (inflation) - it doesn't drive it initially, but it does, eventually. Big time. The French fiasco in the 1700s, Weimar Germany and more recently the London Gold Pool are the closest examples I can refer you to. They are but a web-search away! Pick your favourite search-engine and have a peep. I don't give a toss who you use. But at $250 plus per share, Google must be getting heaps of people doing their searching through that great library that is the internet!

The market is at a critical juncture, in my opinion. We head back to $450 on a clean out or push for $490 to take out the last high, 18 odd years ago. I am indifferent to either. Sure my retirement equity fund will look a little worse off, but that is not a concern. I can't touch that for another 25 years. The end result will be the same. Physical gold has no master, except the person who has it in his possession. Everyone knows why I own gold and silver and my reasoning only gets more validity with each passing month. There are so many commentators in the financial world who haven't a clue about the gold market-per se. It's all dollar driven-remember! They all know a bit about not too much. Gold leasing and derivatives are the first that come to mind. I don't think many can comment on this, unless of course that they worked in the paper gold market from 1995-2000. Sure lots can be learned through some reading and analysis, but anyone personally involved would be unable to comment at any depth, due to confidentiality restraints. I am legally unable to discuss much about my previous gold life, and so, I would respectfully ask that people don't ask. Sorry. As for "gold" traders, there's the futures market and that's all they know. Ask about Indian physical demand? "Where's India" would be the most likely reply. Technical analysis doesn't count too much in my eyes when it comes to a physical/monetary/political commodity. Finished.

I spoke briefly with Hong Kong Long today and he tells me that the crack spreads have gone nuts the past few months as we know. I did note, though, that residual fuels like 180cst Fuel Oil have gone from a positive $2 to a negative $10, just like we have talked about here these past few years. There's a sheetload of crude oil around (and fuel oil due to refinery runs) but crude oil doesn't make cars or tucks or planes move. Consumers of fuel oil, such as shipping lines should be happy the crack spread has taken out a fair bit of the pain of high oil prices.

I see that the Champion Aussie mare, Alinghi, ran a shocker on the weekend. Que sera sera. 2nd up after such a long spell could also be a factor as usually the first run back can "flatten" horses. I do believe I said that she is a much better horse on hard dry tracks and that I am uncomfortable with her in "the wet". Hong Kong Long, who's family was a well entrenched book-making family in Sydney back in the "old days" told me one day out at the track - "Odds-on, look on" and "Don't bet in the wet" - never forget those rules. His grandfather told him that at 7 years of age. Write Alinghi off at your peril but I think she should be sprinting, not doing a mile or mile+. I'd put her in a 6 ½ furlong race, against anyone at WFA weight for age), on a dry track- and see what gives!! Maybe Johno and Jonesy (her owners) are looking for a fatter price?? Hmmm.

My little filly, Maitrise, ran a trial on Friday last week at racing HQ in Sydney - Royal Randwick. She did very well and it looks like she will trial again this Friday before a crack at her first start in a real race. Her dad, Commands, is the leading sire in Australia this season. Her mum was our own little champion, Kirkstall Lane, who I told you all about in a previous posting.

Lisa has her gemology exams in the next fortnight so things are bound to be edgy around the stable. I'll just keep my head down and let whatever happens, happens. She'll be sweet, no worries. You know the type - reckons they know nothing and then dumbfounds everyone with a casual comment indicating more than their knowledge and understanding of the subject. Self-deprecation is not good for anyone.

Enjoy the day...


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Position in gold, silver, milk, commands

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