The dingo ate jo baby?
Gold $404 Silver $6.60 2.30pm New York
As the dollar goes, so does gold. A very disappointing day for any metal-head out there. The scene was set for a nice burst to the upside with a weaker dollar and buoyant Asian physical buying, but this was tempered by good selling at levels where one should have expected some stoppies to be triggered and we could've got a little wriggle on to the upside. Maybe tomorrow??? Who knows?
India is a red hot buyer down here at $400 per ounce and premiums suggest plenty of room for more. ....Reuters carries a comment by a Rothschild dealer:
"Gold has now tested the $395 support three times this year, and on each of the previous occasions it has bounced strongly. Will that be the case this time?" asked Martin Mayne, associate director at N M Rothschild in Sydney. "If the extent of the pent up physical demand from India is anything to go by, I would have to agree that a move higher is likely." Shanghai Gold Exchange premiums of over $3 per ounce suggest strong demand there as well. Physical silver is still very tight.
The gold and silver price action has been curious these past few months. We have seen some incredibly volatile periods followed by the typical grinding action we have seen today. Note how aggressive down days are (4 x -$12... of which 3 are on Friday) versus the work required to move say $5 higher on a given day(1 x +$8). Seems the rush to get out is seriously more aggressive than any rush to get in. Or is there a disconnect between the NY close in Comex versus the physical markets of the world?
My little 5 year old girl, Jacqui, loves the board game "snakes and ladders". You know the one, ladder up/snake down. It's fun to watch a little kid land on number 87 (or whatever number it is) which is the big long snake that takes you from hero to zero. It seems the gold market has its own game going , and whilst it appears there are no more snakes than there are ladders on the board, the snakes are twice as long. Lots of little ladders being wiped out by landing on one snake. Silver seems a more even board at present with lots of snakes and lots of ladders! Gold is kinda like climbing the stairs and then falling down the elevator shaft...
Gold was pretty well stopped in its tracks at $404 with good selling seen from European trading banks. Stop-loss buying around $403-4 failed to eventuate and although gold closed on its highs for the session, there was little follow through buying. Watch the dollar.
The HUI(AMEX Gold Bugs Index) is grinding higher again with Newmont(NEM:NYSE) and Coeur d'Alene (CDE:NYSE) contributing strongly. CDE has had a 15% high/low range in the past 10 hours on a 2% move in silver price. That's called leverage. Good if you can catch it and way painful when it goes against you. There are plenty of other similar plays out there in my opinion.
Barrick(ABX:NYSE) CFO was on Bloomberg talking about how good everything is over there. I am not overly concerned with the "cheerleading" crowd but I was interested that they made no mention of the hedge book or its mark to market. Hedging and management attitude to it should be a primary factor in anyone's assessment of a mining company.
Reckon we are building for another test of the $408 level, then $413 but hey, some central bank bonehead can blow it away with one slip of the tongue, intentional or not. Which reminds me that I saw Greenspan talking about Fannie and Freddie being somewhat of a threat to the US financial system..., now there's a story that should make interesting fish and chip wrappers in a few years. But we won't go there today. Nevertheless, talk won't make a lick of difference in the global currency markets, especially when they move from what Mr. Snow has stated is "orderly decline in the dollar" to a "disorderly decline". Dunno when it's coming but the current policies of the central banks should ensure it. Just my opinion... and remember, patience. Tick, tick, tick.
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