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Yo-Yo Ma



Apologies for no post yesterday as I had to run early and it was fairly obvious that there was some serious liquidation of paper gold through the futures markets. People will not be able to finger the FX market as the culprit. It appears the much talked about open interest numbers spooked a few longs who sold into a long market which basically folded its arms and let it slide to the $414 level. This $412-414 level should provide a fair support base as I hear from a number of sources both wholesale and retail, that physical demand was very heavy today.

The Euro is still printing at 1.23 plus. Oil is higher than $50 and may be looking at a $4 or $5 slide but I suspect very temporarily. Base metals all copped a hiding as well. It seems that real assets were overvalued in terms of paper last week. By a lot.

On the physical gold side, Kitco has been showing offers at about spot plus $20 for the real stuff. We aren't that far away from being able to get physical gold at last week's paper spot price for those who were baulking at the premium with gold at $422.

I did not expect the pullback to be this deep without corresponding drama in the currency markets. I expected $417 not $413. Is this a bargain? Maybe today, but maybe not tomorrow?. In the scheme of things, I believe gold near $400 is sound and has little risk to the negative, just opinion and not advice. That's physical gold, not paper. The paper price of gold could go back below $400 I suppose although that would take a lot of physical gold and as such I would expect such an excursion to be very short lived. This selloff will go deeper than most expected, including me. Remember my mate who said last week that the market would do whatever would cause the most pain to the market. Hmmm.

Silver is nearly back to its 200DMA. I think we mentioned on 8 Oct that while we liked the $7.25 print on silver, that we preferred it closer to $6.70. I didn't mean in two days! I expect plenty of support between $6.45-65 and am still comfy that we saw the low for the rest of the year on 13 Sept at 6.05. Silver equities may cop a hard time if we stay below $6.80 for too long.

Reckon the Amex Gold Bugs Index (HUI) is feeling a bit like a yo-yo at present. Wild stuff and great trading opportunities abound. Note that the HUI has run very hard and could do with a breather although I suspect this could be another opportunity to accumulate some issues some 10 or 15% lower than a week ago. Has anything changed in the macro area that would alter one's view of gold or associated equities? I guess we could head down to the $205 level on the HUI which would test many people's patience and intestinal fortitude. This market selloff could be a godsend to any funds looking to accumulate good size in the metals equities. It is always much easier building a sizeable position while the market is providing the liquidity that one would normally have to chase very hard.

Someone once said "buy into weakness and sell into strength" and we hear all sorts of these old ditties. With something as financially sound as physical gold and silver, I fully agree with whoever it was.

Sydney recorded its highest ever temperature for an October day today. A toasty 102 degrees in the old temps or 39 celsius for the decimally inclined. The office aircon doesn't work at nights and its still 32 at 9pm. Gonna be a long night it appears.

Looks like another testing day for the metal bulls although I expect we will look back at this move in not dissimilar fashion to the $419 down to $413 and back early last week, once the paper gold players calm down. I will be very, very surprised if we see $404-05 but you never know and it is my expectation we could be back around $417-8 a little later in the week (not advice).


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position in gold, silver

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