Not Enough Giddy-Up
Gold $419 Silver $7.06 Wednesday 20 October, 3am Sydney
G'day. Plenty of action lately in the metals with gold shaking off last week's violent technical selloff and it is continuing to harass whoever is sitting on gold at $420ish spot. The physical market was happy to be given the opportunity to buy metal at closer to $410 than $420 and we have seen a steady climb back to the levels that one would expect with the dollar acting as it is. The dollar continues to look like the proverbial dog's breakfast.
The gold price doesn't seem to have enough giddy-up to break the consistent offers around $420. Maybe it is a central bank. I dunno, but the open interest is again hitting 300,000 and could have a few people ready to bail out on any sign of a pullback. I think we will hang around in a range $415-421 until something breaks either way. My guess is we stick around here for a couple of days, testing both ends of the range without causing too much angst to either bulls or bears. I expect any selloffs to be met by the physical market again and that the windows for decisive action will become shorter in duration. The "round-trips" are getting shorter in time, maybe not so much in depth.
Silver looks likely to take its lead from the base metals although many discount the monetary aspect of silver when they are looking at the commodity. I like silver down around the $6.80 level and am seeing resistance initially at $7.10 and then $7.25. I expect that we will see silver back above $7.50 rather shortly, but maybe not till after the election. Producers were seen selling up near $7.20 but not in serious volume. Maybe they can see another leg higher coming our way? The 200DMA comes in at just over $6.50 and I see that many of the silver equities have rallied less than the actual metal itself. Are they fairly priced at $7 silver? Maybe, but what about their optionality and what is that worth these days?
The big news about town is the Harmony (HMY:NYSE) takeover bid for GoldFields (GFI:NYSE). These two South African gold miners would combine to form the largest gold producer in the world by almost any measure. What I see as interesting is the fact that the Russians have strategic interests in these companies and that they will own nearly 15% of the consolidated new entity. On its own, that's no big deal, but when taken in conjunction with the Chinese takeover of Noranda (NRD:NYSE), it appears there is a major U.S. dollar swap taking place with dollars being dumped for resources. If one can't access the commodity from the market at a fair price or there are supply concerns, just buy the mines seems to be a line of thinking. I can't disagree with the tactic, it's pretty bloody smart actually.
Keep an eye on oil as this will affect the market psychology somewhat and am also looking for some retracement of the large base metal selloff, over the coming few weeks.
Vouvray ran in the big race down here last weekend. She ran 4th after being last and stuck in traffic with 400 yards to go. The papers said -
"A Melbourne Cup start for the Queensland Oaks-winning mare Vouvray has been ruled out, despite the mare turning in a stunning performance in last weekend's Caulfield Cup.
Vouvray was carted back through the field at Caulfield in the run to the home turn and was held up for a short time entering the straight before motoring home into fourth place." Fourth prize is a lot less than first (the race was worth $2.5 milion)!
Looks like there is some pressure building in gold here with 30 mins left on the clock, and a break of the 1.2550 Euro may be a catalyst to send us up towards the $425-30 level.
Enjoy the rest of your day .... And the baseball.
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