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Metals With McGuirk: Good News For Metal Bulls


This is nothing compared to what we are gonna see in the coming years!


G'day. What a crazy couple of days in the metals markets, and none too soon for my money, thank you! No sooner had I walked out the door with Lisa, heading out for the big soccer match against Uruguay, did the phone start ringing and it was all good news for us long suffering precious metal bulls. That I received 10 calls during the game regarding gold's rise was somewhat annoying, given the circumstances, but I don't care too much when it's headed north in such a fashion. I really worry about the pullbacks!

I was really enjoying the soccer match and getting right into it when the phone rang. "Uh, oh" I thought, "Gold must be getting slapped," I said to Lisa. How wrong was my initial reaction! London was telling me gold was $475. "Nice. Let me know if it hits $480 or $470," was all I said. The after-match party was continually interrupted with calls like: "hey Golden Star Recources (GSS) or Silver Standard Recources (SSRI) is up 10%" or some such news. I didn't want the night to end, and it didn't. Everywhere I looked people, were all smiling and happy, beer was free and the prices of my favorite/only financial assets were going for a nice old run up. Does it get any better than this??? Bloody oath it will.

It is my contention that this is nothing compared to what we are gonna see in the coming years. The bullish share and metal price action, Minyans, not the free beer!!

The first thing that comes to mind after such a nice violent run up is: "where's the clean-out?" I would be surprised if we didn't trade back to $477-8 before we head up through $490. Currently in Asia we are trading at $488 and I suspect we will see some profit taking in Europe. Silver just nudged $8.15 and I'd expect some trouble between here and $8.22. On the other hand, I spoke to my old mate Rossco today, who had a brief look at his charts and reckons there is no requirement for a pullback in either metal from what he sees. He likes a print of $515 in gold and close to $9 in silver before any real concerns enter his thinking. Hmmm. Rossco doesn't know anything about the physical markets but I note what he says, every time. He's been trading for 20 years in all sorts of different markets and, as he used to sit opposite me for 11 of those years, I know his credentials. For a bond trader (at this juncture), his is a very bullish voice when it comes to metals! I'd still think some short term (< 3months) put options at $475ish may be worthwhile on any further spikes. Timing.

Others have their opinions which I won't go through or discuss in much detail; what others reckon is up to them. Some are well reasoned while others are just plain fanciful IMO. Gold at $350 an ounce, as suggested by the Barclays fella is unlikely, nah, nearly impossible given the flood of dollars in the world, which shows no sign of slowing. If gold were to fall to such levels, does one really expect China, Russia, Japan and all we other fools who have accumulated dollar debt, to sit around and not swap it to gold? Well, at least some of it, coz it won't take much to soak up all the gold in the world, such is their dollar holdings!??? Argentina hasn't waited and South Africa is getting itchy fingers. Mexico is looking at a silver backed Peso, as are some other South American central banks. Wait 'till Australia and some of the other "smart" central banks realize that they have screwed up badly and wanna get "ours" back! Fair dinkum, I've heard some wild stuff in my time but $350 gold in today's environment is something I'd expect to hear in a loony bin. India is a buyer in world markets at $480. What do you think they'd do with a 30% discount?? There is NO justification for a significantly lower gold price in dollar terms. Sure, maybe $420, but $350 - what are they smoking over in London??? As for the bullish side, $800 by decade's end is way too low for mine. That's the equivalent of about $300 in 1980 (when the high was $850ish). Let's get real here for a moment. The world/U.S. dollar is in a much worse financial situation than way back when Volcker did his work!! How about a four figure price - that doesn't have a 1 as the first figure??? Look at gold's history!!!!! In case you missed it, I am a gold and silver bull. By default, I am a paper money bear.

"Paper money will always revert to its intrinsic value: nothing." --Voltaire.

Smart dude that Voltaire bloke.

The close tonight will be big news. A close above $482 will make new high closes on weeklies and there's only a week till month end. Hmm. Beware of window dressing.

Much is being made of the Russian announcement that they "may" look at doubling their gold reserves. China is suggesting its citizens buy gold. The Japanese were all over gold this past week. India is still buying. South Africa, as the world's largest producer is slowing production due to rising costs. Gold reserve replacement is just not happening fast enough. Gold has broken out in EVERY currency including the Canadian dollar, which has been the last one out of the gates. It will take a lot of real metal to force the price lower for any period of time. London Gold Pool, check it out.

The HUI is on a tear but still many issues are well off their January '04 levels. Golden Star (GSS) is up 10% from its low. So bloody what! A 10% rise from $2.10 is nothing compared to a 50% fall from $5!!! Many of the other issues are making headway and are breaking out of their 1 year consolidation areas. But still the market refuses to "believe" this metals rally is sustainable. Some bigger players are waking up, though! Volumes are nothing out of the ordinary. The Sydney Morning Herald didn't mention gold AT ALL today following the recent price action. Go figure. Even Aussie gold stocks are up but not much comment anywhere - suits me just fine.

There has been some discussion about reserve replacement for the majors. Barrick going after Placer is an example but not one I like or wanna get involved in. I think that people like GSS, Meridian Gold (MDG), Kinross Gold (KGC) and Glamis Gold (GLG); all fat targets as they have known reserves. I think advanced explorers, close to feasibility or further advance are gonna get gobbled up pretty soon, and especially on a good pullback. Just my take, no edge and I'm happy to be wrong!

It was noted in my early Wednesday posting that President Bush was out yabbering across Asia and I made mention of his reference to the Japanese economy and the use of the word "broke." Gold started rising from that minute. He has since had a verbal crack at China as well. It is not that smart to start pissing off your biggest creditors. Would they ditch some bonds and buy gold just to say, "Pull your head in?" I dunno, but they'd be the last people I'd be pissing off!

Local News

Massive country-wide festivities followed the victory of the Aussie soccer team over Uruguay in what was the best sporting event I have ever attended, bar none, and I've been to plenty of "big ones." The whole of Australia went crazy after the penalty shootout and it topped the atmosphere/celebrations of the Sydney Olympics in 2000.

As many would be aware after Ojai, Lisa and I have been known to throw back the odd convivial lager/vodka at special occasions. Our "goose" was well and truly cooked on Wednesday. It was possibly the biggest drink I have been involved Sydney. (Rugby Tours are a different story, and we might venture there in next Friday's metals).

Our pub across the road, the Macquarie, put on free everything for us locals after the match and I don't recall them shutting the doors for 36
hours! It was a big party.

Many would have seen, the match went down to a penalty shootout and a bloke named John Aloisi scored the last penalty to put Australia in the World Cup finals. Lisa thinks he is the hottest man around town - must be that dark Italian look. When he ripped his shirt off after scoring the big goal, Lisa nearly did the same!!

From an article recently published in Inside Sport magazine, he discusses taking penalties: "The biggest one I took this year was for Osasuna against Seville, in the Spanish Cup quarterfinal. We were away from home and Seville went one up, and just before half-time we got the penalty. There were 50,000 people whistling for me to miss it, but I scored. A real pressure penalty is in a shoot-out. I don't ever want to experience that." - Hmmm.

Upon recovery, Lisa and I headed to Bondi Beach for the famous "Sculptures by the Sea." Culture? Who says we don't have any "kultcha" in Australia!

New Zealand has been announced as the host country for the 2011 Rugby World Cup. That's close enough to home for me.

Enjoy the weekend.

Positions in gold/silver/gss/mdg/kgc/glg/ssri

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