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Broken Record



Gold $453 Silver $7.84 Tuesday 7th December , 11.40pm - Sydney

G'day. So what's wrong with metal equities? I give up trying to make sense of the situation and am just gonna play those puppies logically. I reckon that there are some issues that are effectively being given away, with gold around the $450 level and not showing many signs of capitulation at this juncture. I'm not saying we won't get a sharp smack down into that low 430's, but as previously stated I think that the time spent down there will be short in duration. Same reasons as usual. The traditional physical markets will be soaking up lots of real metal - blah, blah, blah. I must sound like a broken record these days.(Ask your parents. They were black vinyl things that played music before CD's).

Gold Fields (GFI:NYSE) shareholders reject merger with Iamgold (IAG:AMEX) - so says Bloomberg. Dunno anything about it at this stage and am not in the office, so you guys will probably know more about it than me in a few hours. Plenty more corporate plays in the works, I reckon, as there are some pretty juicy targets for the majors to have a crack at.

Following the Eurozone Finance Ministers' meeting in Brussels on Monday, the Euro Group, the ECB and the European Commission issued a joint statement on FX issues. "We are of the opinion that excessive volatility and disorderly movements in exchange rates are undesirable for economic growth. In particular, recent sharp moves of exchange rates are unwelcome and not conducive to orderly adjustments of external imbalances. All major countries and economic areas must play their part more actively in reducing global imbalances by putting in place the appropriate economic policies. We will monitor the situation closely."

Then we got Mr Taganaki on the job. He's one of the Japanese fiat masters, who reckons the yen is too strong and is not behaving as its fundamentals dictate. He wants a weaker Yen. Well, join the queue, mate. There's a whole bunch of others bleating just like him, all around the world. This could eventually turn quite nasty if countries start getting antsy and do things like implementing tariffs and subsidies and trade embargoes and all that stuff that just pi$$es everyone off. The whole financial system is farcical because it has no real currency. If it did, the scales would eventually balance. That's what a gold based currency does to government, it enforces economic prudence. Currently, everyone just wants to devalue their own, including the reserve currency of the world. It's a race over the cliff. Just some thoughts that probably make no sense - but they do to me.

Plenty of selling above $456 again so I would think we will struggle again through the $455 but may even get a spike to $459 if the sellers are a little slow into action. I want to see a close above $460 this week, and a Friday close up there should excite some technical types. I expect plenty of resistance though on any busts up that move too quickly (let's say 1% a day is too quick) yet a break to the downside should gather some momentum pretty quickly and could overwhelm the buyers (For a little while, anyway), sending us down $20. Not seeing anything too distressing in COT reports and the real gold world is humming along at current prices.

The Amex Gold Bugs Index (HUI) is behaving dreadfully. HUI at 220 is a joke with gold above $450. Buggered if I know why. It just is, so we gotta deal with it. In the interests of disclosure, yesterday I added to my personal positions in a couple of stocks that were on my radar screen this past week. If I can sell the horse that I want to, it would take a couple weeks, I will buy more of the same stocks with the proceeds, hopefully at similar prices. I sincerely doubt that the opportunity will present itself for long enough. Not advice, just sharing the pain.

The Sunday paper down here was interesting. The front page headline was - "Give love instead of gifts" with the sub header "Treasurer's Christmas warning as national debt hits a staggering A$720 billion." When's the last time you heard any politician say anything about consumer belt-tightening? Isn't the consumer the economic saviour of the world? Seems he's maxing out on his debt servicing ability. Things must be grim for those sorts of headlines.

Expected range next 24hrs at 11.40pm Sydney

Gold $451-458
Silver $7.82-8.08

I see that the Jets won again. They are still the Jets so I guess they will now lose their remaining games and miss the playoffs again. It's not that I don't have any faith in them, it's just that I have followed them for 15 years and I know what always happens. Didn't Boston win the baseball this year?

I expect some fireworks in the HUI in coming sessions. I suggest that should gold break the $470-5 level, the HUI will be pushing the 260 high of January '04, and some. Isn't that crazy, a $25 up adds 20% on my guestimation, yet $5 down has taken off over 10% in the last couple days. Let's see what comes of today.

Enjoy the day..


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position in gold, silver, gfi, iag

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