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Breed 'em Tough


Gold $418 Silver $7.20 Thursday October 7th, 4am Sydney

G'day. What a funny old session this is proving to be. The initial Gold spike, trying to run us up and through to a new high for the move, was rejected smartly and, after the opening 15 minutes gold looked likely to fall away and push down into the mid-low teens. Some dollar strength versus the Euro was cited as a catalyst for the aggressive move back to the $420 resistance a short time later.

The Euro only struggled up to 1.23 so I don't buy that one today, sorry. Gold struggled through $400 with the Euro at 1.2280 a month or so back. It cleared $410 with the Euro at 1.2325 a few weeks back and today was hitting $420 with Euro a little lower. There is some evidence that the Euro and gold relationship is breaking down. Is gold acting on its own these days? There did appear to be some determined sellers at $420, resolute in their defense and maybe some of the buyers decided that it was too hard today and tossed in their hands sending the yellow dog below $417 in a few minutes. A weird one today, no doubt, and it's not over yet.

Silver had a crack at the $7.25 level mentioned in buzz as the 61.8% retrace off the $5.50 low of a few months back. There seems to be some conviction to the buying although the market has been pretty thin and volume is moving the market somewhat more so than expected. Silver is up 20% since the intraday low of $6.05 on 13 Sept. How do I know that date? I wrote it on the whiteboard here at the time (9am NY) that we had just seen the low for silver for the rest of the year. On the same day I also noted that the silver/gold ratio was at 66 - 1. Today it is at 58. Anywhere north of 65 is a low risk entry level for such a trade, IMO. I expect that by the end of the decade we will be looking at something closer to 20-1. (20 ounces of silver to buy an ounce of gold ). Just thinking out loud and never advice.

I sold a few Silver Standard Resources (SSRI:NASD) the last couple of days and am converting them to silver bullion. I had these shares since 2001. Silver was $4.60 an ounce and SSRI was about half that. In other words my SSRI cost me about half an ounce of bullion. Today they are $16 with silver at $7.15. I can sell my SSRI now for 2.25 ounces. At these levels I'd rather have the metal. Sure I lose some leverage to the price, but I am only talking 25% of my SSRI holding so I'm indifferent to that argument. Just trying to illustrate some of the thought processes.

Is this that unusual??

Looks like a close up in the middle of today's range and it basically leaves me scratching my head and wondering what's coming next. Gut feel is $414 before $421 but what would I know in this bloody market?

They breed 'em tough down here to play rugby.

Enjoy the rest of your day... I've gotta fly - I forgot just how bad chickenpox can be for a 2 year old tearaway boy.

position in gold, silver, euro, ssri

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