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Dog's Breakfast



Gold $422 Silver $7.22 Wednesday 20 October, 7.30pm Sydney

G'day. Gold was comatose during Asian time today until we saw a little life in the Euro in early European trading and we spiked briefly to $422.50 spot on stop loss buying as the Euro pushed up against the 1.26 level. There is still plenty of selling seen around the $422-23 level and I am concerned we may see some exhausted longs bail out and we return to $418ish again. Silver is again banging into resistance at the $7.25-35 level and may struggle here for a few days.

The Indians are still buying physical gold in the high teens and there have been reports of very strong demand in the low teens, as expected. The Rupee is stronger and the Indian stock market is on fire so there seems plenty of wealth about for the traditional gold buying festivals, which should be very supportive of gold prices.

The metal equities got hit after the close of Comex and issues like Hecla (HL:NYSE) were off 2.5% with the metal 2.5% higher. Go figure. I suspect the underperformance of the metals equities in relation to the underlying spot price movements is more a reflection of market psyche than underlying price action. Many are still freshly scarred from the April debacle and may be a little tentative with the Amex Gold Bugs Index (HUI) still above 220. I still believe that a small capital shift to metal equities (and the metal itself), will see phenomenal moves in these issues due to the simple fact that the market is so freaking small and there are so many paper bucks gonna run at them. When, I dunno, but it won't take a big percentage shift to seriously affect the market. Consider that the Asian Central Banks hold less than 5% of their reserves in gold and that they are accumulating more dollars at an outrageous pace due to the deficit policies of the U.S. Government, and one could easily foresee this type of demand coming to fruition. Gold stocks in Australia have been seriously ignored, in my opinion and I am exploring further exposures here, FWIW. Be very careful as there aren't many left that fit my criteria , but that's me, and maybe I'm a harder marker than others.

Today in the gold, I think we may retest the $424 level and we may again run into whoever it is who is the big seller of note these past few days. I wouldn't be surprised to see a $419 again today after probing the upside but a lot will depend on what's happening in the currencies, especially the Euro (not advice). I think this will be psychologically very damaging if we make a new low for the dollar on this move, especially with the election and all the positive spin and jawboning we are hearing from Fed and people like Snow. Maybe people will realize just how screwed the dollar really is??

Silver could struggle to break up through the $7.30 level and I think it will probably also have a look back at the $7.10 level again before the end of the week. I still like silver around the 6.60-80 level and would dearly love another chance to pick up some more physical down there. Looks like the Christmas presents may be a little more expensive this year!

Today marks the first day of my new "shift". I'm kicking off at about 2am N.Y. till about 10 am New York for the next month or so, thus the metals blurb will be penned before N.Y. open rather than near the close which may be more beneficial to some. Let's see how it goes.

The baseball has been sensational and all I know is that one of my mates is gonna be really happy and one is gonna be really pi$$ed off. Can there be a tie so that neither team wins? That would just make my day.

Enjoy the day, Minyans, and it seems like gold has a bee in its bonnet and might get a wriggle up to that $425 level today. I think we will do a similar trip that we took up to $424 then back again a fortnight back, but there will be some short scrambling should we break upwards of $425. Describing the dollar as looking like "the dog's breakfast" was being kind, it appears. With everyone talking it lower it must surely be about time for a violent reversal and cleanout, but from what level? I'm just thinking out loud and not advice as usual.

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positions in gold, silver, hl, euro

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