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Metal Detector



Gold $415 Silver $6.75 Sydney Feb 18, 4:30am

Short and sharp today (sorry). Lots happening in metals and currencies.

Surprisingly little comment in the mainstream media regarding Friday's wild gold night with a $15 dollar range. Rumors of European Central Bank intervention in the dollar killed the nice little rally we had going in the metals. Don't people realize that official intervention only delays the inevitable? See Japan! The gold move from $416ish back to $410 in little over an hour, on a short trading day (after the London market was closed) is indeed remarkable especially in light of the decidedly anemic economic releases of the day. Friday was a good day to be at the beach.

India today has import premiums just at legal levels. In other words, there is still a buyer at $410 and I am hearing good physical demand out of Singapore and other Asian centers. I note that the dollar has made new lows and that there is still no concern from "officials" as the decline has been "orderly". Fear of rising interest rates is negligible and equity markets are on fire. Why then is the ultimate economic barometer, gold, still alive and kicking? It appears to me that there is a little more inflation around than what Greenspan / Bernanke would have us believe. Time will tell.

Gold now solidly above $410 and we could see consolidation between here and $418. A breakout over $421 could see us back to the $430 level pretty quickly. This is where the alarm bells were ringing only a month or so ago and we saw an aggressive liquidation that reeked of intervention. I wouldn't discount the likelihood of a similar attempt to break gold down. Let's just watch the physical buyers for any wavering of their resolute commitment shown these past weeks. They will ultimately control the price.

From where I sit, silver looks like its ready to have a crack at the $7 level, not seen since Mr. Buffett made his little deal a few years back. Physical silver is tight in supply and as such we are seeing very aggressive and volatile trading. Ranges of 5% intraday, warn us that there is a serious battle between the bulls and bears and that there may be stresses developing in a given market. It is my contention that silver isn't stressed much, yet.

Some huge moves in the metals equities with Silver Standard Resources (SSRI:NASD) up some 15% today after announcing some great silver drill intercepts on one of their South American properties. I expect we will see more and more of these kind of moves across the commodity markets equities. The sector is just too small to accommodate huge flows without sending prices violently up (or down). Most other silver equities up appreciably this past week as well.

The HUI (AMEX Gold Bugs Index), after Friday's crushing, is back where we were before all the silliness. Surprise, surprise.

Enjoy the day,


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