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Another Perfect Day in Sydney


It's certainly warmer in the land of Oz!

Gold $420 Silver $6.70 Tuesday 1st February, 11pm Sydney

G'day. The recent ranges have held in both gold ($420-428) and silver ($6.55-6.80) but gold looks the more likely to breakout from my vantage point. Unfortunately for my bank balance it looks like it may be heading for the 200DMA around the $412 level given the aggressive capping that has been in effect for the month of January. The daily speaks for itself.

I have read and heard many different theories trying to account for the market action and I believe that there will be an announcement at some stage in the near future of some official sales from one quarter or another. I note that there are calls again for the IMF to dump some bullion to relieve "poor countries" debt loads. I still believe that whatever the IMF or anyone else wants to sell that the Chinese, Russians and others will just back up the truck and take whatever is on offer. They've stated openly that they don't like the buck or where it's heading and I contend they will ditch some of their pile of paper for a stack of shiny bars. China has been quite vocal recently in discussing moves away from the dollar, and any official sales, in volume, would be seen as an opportunity to do just that. But all the jawboning by the likes of UK's Brown just throws up some uncertainty for the hedge fund world and gives some a reason for some fast money action.

Some suggest that the Iraq vote led to a fear "premium" late last week. I didn't note any such thing and the price action doesn't support such a contention either. Yesterday's rather violent NY sell-off was supposed to have been an unwinding of those scared longs. Whatever. People should just accept that some market participants are trying to knock it down on any excuse. But they simply have no idea what's happening in the real world of gold as they're playing with paper gold. The real market is the physical market and it's bubbling along very nicely.

Premiums in India suggest they are still importing the stuff at a very good clip. Asian premiums suggest solid demand. Vietnam is importing gold out the wazoo. Dubai jewelers are having a wonderful time selling high carat stuff. Even my Sydney coin man had a guy walk in yesterday, and bought every sovereign in the shop (more than 50 coins), at spot plus a few percent. The buyer didn't give a tinkers cuss about what year it was minted but he didn't want any numismatic value, just the gold content. Even my best mate, Hong Kong Long, left Sydney today with a 1863 Italian 20 Lire piece (definitely not trading at face value!). Hmmm. Seems there are plenty of people who are after the real stuff.

Did anyone realize that if bullion banks want to lend gold out these days because they had some spare or had over funded their hedge books, they have to pay someone to take it? Yep, you heard right. Pay someone to borrow your gold!

I noted that Dr. Doom, Marc Farber is calling the dollar way stronger this year and alludes to 1.15 Euro. Maybe so, but the fundamentals don't support such, IMO. Sure, everyone is talking a lower dollar, even Mr Microsoft himself, and so a contrarian trade looks appealing but I should think any such rally is just a pause in the inevitable decline in the dollar. Another $147 billion of debt for Q1 can't help the dollar's fortunes. Increasing one's debt levels when you can't pay back what you already owe can't be financially prudent. How long will the greatest vendor finance scheme in the world's history continue? My guess is the Chinese are full to the gills with U.S. Government IOU's. But bonds don't want to sell off either??? Something's gotta give one way or the other.

Silver has plenty of friends whenever whoever decides to smash it down to the high $6.50's, low $6.60's. You can nearly set your watch by it, such is the consistency of the seller to turn up each day and try the same move. Surely a seller interested in maximizing revenues would behave somewhat differently. Someone is trying to screw around with this market and there's every chance they're gonna be gelded, sooner rather than later, IMO. $6.55-85 is still the range and I am looking for $7.12 or $6.30 on a "for real" breakout (not advice).

The Open Interest in Gold is over 100,000 contracts off its highs late December so I guess there's plenty of room for people to pile onto the gold bus. Having a starting point at above $420 should have some short-side players rather edgy. I suspect there are many, many new shorts added in the last week or two, so the chance of a good pop is not unrealistic, although it must be remembered that we haven't had a $10 up day in the last however long, yet had more than a handful of minus $10 days. $412 doesn't look that far away, though, and maybe we need to take that medicine before we can get back to the real game at hand - Real Assets versus paper assets. Opinion only as usual.

The Amex Gold Bugs Index (HUI) is still hanging by a thread to the 200 level and surprisingly didn't cop a few up the clacker yesterday. I would've thunk a $5 downday would see HUI down more than a few points. Maybe no one's got the guts to short any more gold stocks at these levels. Some Minyans have asked my "opinion" as to the Goldcorp (GG) / Wheaton (WHT) / Glamis (GLG) crapshoot. As per last week, I'm waiting until the death until I commit, either way. I know which way I'm leaning at present, but in all honesty I just wish they'd all pi$$ off and leave my Goldcorp alone! But seriously, there's still over a week to go so there's no rush and what's to stop a Barrick (ABX) or Newmont (NEM) from stepping up and taking them all out? Who knows where it's all gonna end up?

The big cricket game on Sunday was a blast. Talk about "the older we get, the better we were"!!! Some of the worst cricket ever seen on the College Oval was intermingled with some occasional brilliance. Cricket is normally 11 a side. We played 19 a side. It was the equivalent of playing baseball with a 7 man infield and 9 outfielders. Runs were hard to score! It was semi-serious competition, at times quite so whenever a few of the more talented lined up against each other. There were 5 guys playing who captained the College 1st XI in their final year (1980-84) and between us we scored a total of about 30 runs! I scratched around like an old chook for a very ugly 7 runs and embarrassingly wandered off after being bowled out by a guy who played basketball, not cricket! (I blame the turf wicket, not my sudden lack of skill). I also bowled a few overs and still can't stand up straight or raise my right hand above my head. But, in a moment of unusual clarity and co-ordination, took a highlight-reel catch, one handed over the fence without spilling my beer or dropping the smoke from my mouth! Lisa nearly pee'd herself laughing! That made the day worthwhile from a sporting viewpoint. Socially, it is the best day of the year for a very tight bunch of mates and their families. Same time, same place, next year.

Today was another perfect day in Sydney, only 35 Celcius and not a cloud in the sky. The Southerly Buster has just arrived and the lightning show and thunder is spectacular. It doesn't get any better, trust me.

Enjoy the day and am a little worried the paper boys will push us down to the 200DMA and soon.

position in gold, silver, gg, nem, abx

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