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Metals With McGuirk: Solid Gold Overseas


Winter hit Sydney today....


"We must be careful not to let our current appetites steal away any chance we might have of a future feast"- Jim Rohn.

I guess that the above quote has been lost on many in Congress, although, true to form, Ron Paul has something to say. Furthermore, don't ya reckon Elmer has got a hide to even talk about this, seeing as he played a major role in allowing it to go nuts? Trying to protect a legacy is all I can come up with as this is not a new or recent development.

Interestingly, Sir Alan made mention of the fact that sometime in the future, the rest of the world will just say "No More" and stop funding the whole crapshoot. Reuters reports that offshore buying of recent treasury auctions fell to only 14% from 21% a year ago. Foreigners are drowning in dollar debt. U.S. interest rates are gonna have to rise significantly to compensate we idiots for taking U.S. Dollar debt. I also read somewhere that the Fed is not gonna publish the M3 data anymore. That should be sending off bells and whistles all over the place. Is it because Bernanke wants to gun his printing presses and doesn't need anyone noting how much is being freshly printed? This is an incredible development and one that has more to play out, IMO.

Gold is just bumbling around in the high $460's and there are some very resolute sellers protecting that $470 area. Good luck to them. While ever we are sitting above the $452 level I'm comfy, and I expect we will consolidate for the rest of this year before we get some "new legs" early in the New Year. No doubt we will have another few cracks at the downside but the physical market continues to frustrate those who want a lower metal price. Note that Platinum and Copper are still "on fire", yet gold and silver don't seem to warrant much attention. There just isn't as much paper platinum and copper as there are in gold and silver. Just keep in mind that gold at $850 in 1980 is somewhere north of $2000 an ounce today. There is plenty of upside in gold with limited downside, IMO. Silver is more explosive due to a serious lack of inventory and stocks in the face of increasing demand. I saw a Samsung "Silver-nano" washing machine advertisement the other day. Hmm.

There have been whispers that there are a few Central Banks lining up on the buy side for a change. On the other hand we have the German politicians bitching and moaning about future gold sales while the BUBA has an opposing point of view. Central Banks are gonna be buyers, not sellers going forward, IMO.

Those that have already ditched their gold reserves like Australia, Canada, Holland, Portugal, England etc., etc., etc. must be having second thoughts, especially with gold busting out in EVERY currency. Gold in Euro terms is the game to watch at present and some stability above that level heading into the New Year could see some big macro players jump on board the golden caboose. Aussie gold is higher than $640 an ounce and continues to climb higher than I have ever seen it. There must be some very underwater hedge books at these sorts of levels, although, if they have the gold to deliver into their books, this should not be terminal - just very painful! Aussie gold companies were the most aggressive hedgers in the world and those that haven't unwound their books could be feeling the pinch. Be very careful of hedged companies if you expect higher gold prices!

I ran across an old speech by a Reserve Bank of South Africa board member which has some useful historical stuff on the old "Gold Standard." The word around is that the RBSA is looking at increasing gold reserves. They join Korea and Argentina as recent supporters of the yellow metal. Hmmm.

Silver had an interesting day yesterday with the London Fix set above $7.80. The physical market is very comfortable at current levels. Dips are there to be bought and I like anything sub $7.50 but dunno if we'll get another crack at the title. There seems plenty of sellers ahead of the $7.85-90 level, which, once broken should see us at $8.20 quick smart. Patience is required and I expect fireworks in the early New Year once everyone settles down after their year end "window dressing" and Christmas holidays. Year-end will provide some wild days, I expect, specifically in the equities.

Hong Kong Long and I had a good chat today and we agreed that there is a better than even money chance to see oil trade down to $52. We had previously thought that the move from 70 to 55 would've done enough, but there is still plenty of paper oil out there that needs to be closed out. We also agree that we will see a new high for oil before the end of winter in the northern hemisphere. Winter hit Sydney today with a massive southerly storm front dropping the temperatures from a balmy 82 down to sub-60, all in the course of about 30 minutes. When is the cold weather gonna hit up north??? The oil/gold ratio that bottomed out at 6ish is back nudging 9ish. Whacko! Nice move but nothing in the scheme of things insofar as the average for the last 40 years is north of 15 so there's still lotsa room for more. I think we'll see 25, and again, not advice.

I got most of my computer issues fixed up but have lost a lot of my company specific stuff. Hong Kong Long noted that in the 15 years that we have worked together I had never been one to store information in any other place but in the space between my ears. True enough, but this is one pain in the arse! Anyway, it is notable that Newmont (NEM) has been unable to trade through $50, which it traded at with gold some 50 dollars lower. Golden Star (GSS) are in the doghouse and don't look likely to change sentiment around them. I'm buying some March '06 calls in both entities. I like the leverage they provide for 2/5ths of bugger all premium. I'm exploring similar trades on Silver Standard Recources Inc. (SSRI), especially on dips down into the 12's.

Local News

Tomorrow night at the Sydney Olympic Stadium, Australia plays Uruguay in the 2nd leg of their World Cup elimination series. Uruguay won the match in Montevideo on Sunday, but only by 1-0. Australia needs to win 2-0 to make the WC Finals and the whole city will be a sea of green and gold tomorrow. I doubt that our lads can beat such a soccer powerhouse but the 80,000 person crowd should give 'em heaps of support and confidence. Lisa and I will be there and first beer is scheduled for 3pm with a 7.30pm kick-off. Australian sports fans need something to smile about following our recent beatings in both Rugby and Cricket at the hands of the Poms. Nothing hurts Aussie sports fans more than losing to England!

We got our new jockey's "Silks" made for Maitrise to race in. They look fantastic and Lisa modeled them today before we packed them off to the trainer for use in her next race. They are red and black hoops with gold sleeves and were inspired by my old rugby club jersey with the gold sleeves being self-explanatory. The black and gold jockey's cap (with a big red pom-pom on top) stands out for miles. She'll win her next start, just because of the "fast" silks!

Enjoy the day


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Positions in gold, silver, GSS, SSRI, NEM

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