Full Metal Jacket
Note: In our quest for furthering the educational mission, Minyanville will be adding metals commentary in the coming year. Below is a missive from Australian Minyan Laurie McGuirk. Please note that nothing in this column is intended as advice.
London Gold Fixes of 17/12 were $407.50 AM and $408.25 PM on the day.Gold rallied hard late in New York,closing at its highest since early 1996 and briefly touched $413 in the aftermarket. Most commentary suggests the late rally was all due to dollar weakness.Might there not be any substance to the argument of an emerging realisation that Gold (and Silver) are a true store of wealth in these uncertain economic and geopolitical times,and as such, there is some minor investor re-allocation seeking such safe haven? The dollar is an easily acceptable excuse as to gold's strength, yet the inflation hedge argument is the target of scorn and derision by the "experts". "What inflation", they all say."Check the CPI", they say...
Consider the following:
Gold at 7 year highs and up 30% from its low this year. Silver at $5.71, a level not seen since Mr Buffett announced his little shopping expedition of early 1998. Platinum at $850 ,a 15 year high. Lead up 55% since mid -August 2003. Nickel up 80% since 1 July 2003. Copper up 25% since 1 October 2003. Zinc up 20% since 1 July 2003. Crude Oil up 20% since Mid-Sept 2003
These are all raw material input costs that can't be hidden or absorbed when pricing power is eroded for finished goods and the impact will appear in many forms in due course.But there's no inflation. Whatever.
Anway,enough of that inflation heresy. Asia took gold back lower in TOCOM but again found resolute support from physical and trade buyers above $410.London was pretty quiet again and the Fix was set at $410.75 although it appears there may be some test of lower levels today.I expect the 407 level to hold and I hear stoppies on the upside at 414-15.
Silver was taken higher in London by Soc Gen and traded at 5.73 until some US banks came in and unloaded some which quieted down the cheeky frogs.For the time being,anyway.Upside target is 5.85 short term with solid support in mlow 60 and if things get really ugly,5.40ish. Silver is a wonderful metal... both industrial and monetary... and it has a massive structural deficit that has consumed about every ounce of silver ever produced, but that's another day's discussion.
The Rand has been smacked harder than a red-headed stepchild lately (no offense).Down nearly 10% in a couple of days.This is great for the marginal Sth African miners as they have underperformed lately due to the Rand strength.Is there a nice pick-up on the way? Similarly Aussie metal equities are sadly underperforming and most are trading lower than when gold was at $350!
Note the EC President moaning about the Euro strength and that it will hurt their recovery... No shvitz,Sherlock.... but no amount of
words can change the market. It goes where it wants.
Reckon we will still see dodgy action in metals equities until the New Year as most go protecting their profits,ensuring some sort of payday for their year's work.Some equities are moving 10-15% per day and provide great opportunities,both ways.Just be quick and don't get greedy.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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