Gold $452 Silver $7.72 Tuesday 30 Nov, 11pm Sydney
G'day. Seems there is a bit of substance to the buying in gold these days. Previously one would have expected to see further declines as the rally has run out of some momentum. I reckon that any retracements will be very short in duration and won't be as deep as many will be looking for. That's not to say we won't cop a few $10 down-days again but at the moment gold looks to have very limited downside judging by the action in the physical market.
China and India are buying real gold at current dollar prices. The authorities in India have aggressively defended their dollar "peg" (the unofficial one that keeps them competitive with China) recently. China appears in no hurry to help the dollar out. Think about the number of central bankers who have commented on the dollar recently. From Russia to the Philippines we heard one thing or another and we really know that something's seriously unbalanced when Greenspan himself could find nothing nice to say about its prospects. It was ironic that both the Treasury and the President were harping on about some "strong dollar policy" appearing blissfully unaware of the market's opinion or that of the Fed. That gold is only trading around $450 given the global macro position and outlook, looks way on the low side from where I sit. This should be no revelation to anyone as I make no secret of the fact that I have been a precious metal bull for 4 or 5 years and reckon this game has made it to the end of the first quarter or thereabouts.
Anyway, I am looking for another probe to the downside that may get some legs but am confident that the physical market will not be easily scared. In fact it should give paper longs much confidence that the physical players are dealing at the same level. I think the paper market will spurt again close to $475 pretty quickly after a dip maybe to $444. The daily chart hasn't had a red day in weeks and basically hasn't turned negative since $404 on the way back up from $385. Looks very strong no matter how you cut it. GDP or something out tonite? Won't make a difference to the long term trend for gold. UP.
Was talking to a mate the other day about some gold stocks and he asked me about an interesting market neutral trade I liked. I thought the most risk manageable (so many instruments to play with to get an exposure), could be long Newmont (NEM:NYSE) and short Barrick Gold (ABX:NYSE). Not meant as advice but simply to illustrate the thought process here. Basically the biggest unhedged versus the biggest hedger. ABX must have a negative mark to market on their hedge book that would have their bankers quivering at the date. I commented on it at $410 an ounce and they were 16mln ounces hedged. Give them the benefit of the doubt on their hedge closeouts and say they are only 14million ounces hedged now. The MTM went another half a billion into the red. Why they didn't close out down at $385-90 a few months back is difficult to comprehend, given their publicly stated desire to quickly reduce the hedge book. They are talking one thing and walking another, it appears. Compare that to what Lassonde and NEM did about hedge closeouts and their stated non-hedge policy, then this is the most obvious trade in the sector. There are a few risks that should be taken into account though, so do some homework on index inclusions, liquidity in extreme circumstance, operational risk (mine collapse/flood etc. etc.), derivative closeout provisions in hedge documentation... blah blah blah... Just my opinion but with two similar entities as these, the one with a hedgebook is gunna underperform the one without one, especially that big a hedge book.
The Amex Gold Bugs Index (HUI) again looks like it's ready to retest the 250 level and then new highs up in the 270's. There will be a case of some metal price consolidation up here before we can relaunch, IMO.
A few of the Aussie small caps have caught some attention and grabbed a few cents a share which is to be expected. This is an untapped market I reckon, which is very small and is gonna get real crowded as more people start to "get it" about gold. A few cents usually means 10% down here!
Silver did well and held above $7.50 all day. Looks likely to test $8 before long. Watching the 200DMA for signs of getting too far ahead of itself again.
Oil up some more and could retest $55 pretty quickly I reckon. Grains and base metals could also continue to get a wriggle on and expect further solid gains going into Xmas. Just thinking out loud and never advice.
The weather wasn't as bad as we thought it was gunna be down here. Only 38celcius. Nice.
Reckon the range for the next 24 hrs as at 11pm Sydney ...
Enjoy the day and watch the bonds- they should be yielding 5% - just my opinion.
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