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A Little Underwhelmed

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Gold $423 Silver $7.25 Saturday 9th October, 3am Sydney


G'day. Wow. Does anyone else feel a little underwhelmed by the metals today, or is it just me? With the Euro nudging 1.2425 combined with the pressure build that we had seen in the last few days around the $420 level, I though we'd have had a good crack at the $425+, but not to be. Interesting was the five minute window that held straight after the number, giving some quick moving smaller shorts an opportunity to reverse their positions sub $420 with the Euro up about 80 points. It was a case of the quick or the dead and I'm still very much alive and kicking.

The numbers as they rolled out were pretty pathetic. The Buzz noted that the BLS said there was little "hurricane impact" so the numbers stunk more than many might have thought. I heard a lady from the BLS on Bloomies and she was all smiles and everything in the world is fine according to them. Wage growth above inflation and all that. Yeah right. Whatever are these people on? Speaking of inflation or lack thereof, British Airways (BAB:NYSE) announce today they are gonna lift their fuel surcharge by 6 quid. This won't be an increase in ticket cost per se, as per CPI effect, because a "fuel surcharge" is only temporary(?) and it's not like a true price hike. Another whatever. No wonder wage growth appears higher than inflation. See what Mr. Gross had to say the other day regarding Hedonics, amongst other inflation reporting gripes he has.

That $420 level was a pain in the ar$e for some time this week and it appears that the level has moved up to $424-5 in the spot market. There was some good selling seen above $424 and some profit taking as well, as should be expected. There is much consolidation required above $420 to be done to confirm the break. I am concerned by the size of Open Interest in gold, but it appears that there is more conviction this time around from buyers at these higher levels. We also have the physical market in close support with the world's main physical buyers active at their highest levels in many years. Maybe we are off to the races this time but I'm not getting carried away and very wary of a fearsome snapper and keeping eyes peeled for any signs.

Yesterday's late sell off in metals equities was probably just a bunch of "nervous Nellie's" squaring up before Beeks. Unlucky. The Amex Gold Bugs Index (HUI) is now pushing the 240 level and we are now just a bit more than 5% off making a new high. Some individual issues are lagging the field compared to where they were at those Jan '04 heights. Golden Star Resources (GSS:NYSE) is one that stands out as being some 40% off their high, remembering their shelf registration and the corporate foray with Iamgold may have taken some power out of them, but it's just an observation. There are others such as Coeur D'Alene Mines (CDENYSE) that come to mind as well. Newmont (NEM:NYSE), a bigger weighting, is less than 10% off its high as one would expect from the global gold equity benchmark. Let's see if these smaller issues can return to 10% below their highs in the near term and run the HUI to a new high.

Silver was pretty disappointing although we should be mindful of the extraordinary run from mid Sept where we saw a price rise of nearly 25%. Seems plenty of interest around and am hearing some producer hedging around this $7.25 level.

This weekend we vote for whoever is gonna run this little old island for the next 3 or 4 years. The incumbents are favoured but one never knows what the masses are gonna do. Voting is compulsory here. Personally, they're all as bad as each other, but I will fill in a form.

It's Saturday morning and I'm stuffed. Been a long week and looking forward to punching out a few ZZZ's till 7am when swimming for my 5yo kicks off. Little Billy has turned the corner with his chickenpox and is nearly back to his devilish worst. Now all he has to look forward to is "shingles", the adult strain of the Herpes Zostov virus which is the chickenpox. Now that's a condition that really is a pain. Been there, done that, got the t-shirt.

Tough loss for the Astro's today and let's see if those Jets can make it 4 for 4. Nah. Not my Jets.

Enjoy the weekend, I suspect we may see a spot gold $425 print before the close but more likely settle around the $423 level, just thinking aloud and never advice. A great close for the week, if you're a bull - bears would be somewhat nervous one would expect.

Laurie.
position in gold, silver, gss, nem, jets

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