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Metals With McGuirk: Knowing When to Buy


Gold is behaving like a real alternative currency and will continue to do so...


G'day. Thanks to everyone who sent through good vibes and wishes for my old man who suffered his cerebral hemorrhage/stroke a few weeks back- the news on Dad is as good as one could hope for, I guess. It could be a lot worse but I never like to challenge "worse." People say "things couldn't possibly get worse" and then it does. Do NOT challenge worse!! Sorting out parent's affairs and financials and all has been time consuming and quite frankly a royal pain – but it is nearly all done now. At least Mum knows where the check book is. High energy, smart and generous people running companies and having external directorships and all that, with a philanthropic bent, make it a tough slog for those that have to try and work it all out. Hopefully we have kept the "family" wagon running on 5.9 of its 6 cylinders, whilst maintaining the obligations that were taken on board over the last 40 odd years.

The metals markets were pretty lively while I re-entered the 9-5 world for a few weeks getting everything together for the folks. Accountants and banks and all that don't facilitate much at midnight! The metals market moved $40 lower, quickly and was generally well expected, but was stopped in its tracks by the physical market…again. Shorter periods (sessions/days) of weakness are being seen whereby it used to be months or weeks. Steeper but shorter is what we've been saying and the last move fits the bill. More to come.

Gold is behaving like a real alternative currency and will continue to do so IMO. The dollars keep spewing out of the Fed and the U.S. Government has no idea about monetary or fiscal restraint and so the game continues. Forget about past prices- they don't compare- this is a whole new game that has NEVER been played before. Previously, somewhere there was a currency in the world that was backed by a tangible where people could flee in crises…for the last 25 odd years there has been NONE. Fiat currencies always end in tears - this will be no different except for precious metals holders. Go check out what makes "MONEY" and compare that to what you have in your wallet now. Money should be a means of exchange, a store of wealth and a unit of account – so said my year 8 economics teacher at Christian Brothers Sutherland. Gold is, yet paper dollars fall well short. The dollar has devalued 95% since 1971 on ANY measure. Aristotle got it, way back in 1725ish when he said "paper money will always return to its intrinsic value - Nothing." He saw what John Law (some silly Scottish git with big ideas) did to and they ended up with Napoleon. Hmmm.

Anyway, the point that I have seen no one make in the small amount of attention that I have given the metals, is that there was not one London Fix below 539 in the whole $575-534 mess. In fact the fixes were higher than the close on most occasions, i.e. Comex paper slammed after the physical market closed - especially late in the week. Intraday was wild but the FIX set the price for the 24 hrs. The physical market is on the bid at $540 and no matter how much paper was thrown around, the physical market stopped it all. In fact only the first 3 or 4 trading days in 2006 have seen a fix below $540.

The physical market is flexing some muscle on the down dips and gives confidence to longside players that the "elevator shaft" that we have seen many times the last 3 or 4 years may well be a lot less troublesome going forward. Not that we won't get some nasty falls, but knowing where the physical market is buying is critical in anyone's analysis. Dips are for buying, not selling; especially the steep ones. Momentum players beware.

We saw a lot of these sorts of moves in the past few years where the paper gold market got too far ahead of the physical - i.e. 20% in price terms (390 vs. 330 in 2002 and 420-360 in '03) and this time it was not even 10%. The paper market has a lot further to shoot before I get too worried about the downside, given all current publicly available info. We'll more than likely retest 540 this week, I expect. Look for opportunities to re-enter the market on such a move. The absolute downside I see is $505 (yes 10% lower) but it will take a massive amount of physical metal to keep it down there longer than a week or so.

The gold stocks are marking time and I see a few takeover/merger deals being thrown up. Hmmm. I don't own the bidder (Glamis (GLG)) or the target of the newest release, so it's not a concern to me although the "consolidation theme" is definitely still happening and I reckon there are a few fat juicy targets, undervalued and underappreciated, out there ready to be plucked. I expect the mid tier players to fight against the majors. It will be interesting for sure.

I'm trying to get back into the swing of it all and I have another golden ball or two to juggle in the coming weeks, one that just fell into my lap. I have totally severed my relationship with Endeavour Funds Management and am starting something new. I must do it "my way," coz I have seen every other "way" fall apart when it comes to metals these past few years. Gold is not a currency or a commodity or a bond or an equity- it is very different and must be treated and traded as such. This is "my game"- I must play using what I know the rules to be, not someone else's idea of what the rules should be. The only way is to do it yourself.

Silver - You're kidding. $9-$9.20 is a gimme no matter how bad the charts look or whatever anyone tells you. There just isn't enough PHYSICAL to go around at these prices. Just my opinion and never advice.

Just watch the physical market for all your metals clues.

Life - ya wouldn't be dead for quids, would ya?? Sometimes it gets questionable, though.

Local news

I heard that the Winter Olympics were on – who won? I saw that some Aussie bloke won the "moguls" gold medal … that's because we have so little snow down here that he is used to skiing rock covered hills where if he fell over he'd be dead!! To go down a hill with snow covered rocks would be seen as "luxury." My knees (or lack thereof) preclude such endeavors. Ice dancing and figure skating are NOT sports, although the "grannies" like it judging by the saturation coverage here in Oz. Higher, faster, stronger doesn't fit there – anything that a judge needs to "evaluate" doesn't count. Ice Hockey- we didn't get any coverage but good to see the and get bounced early. The big ice with alotta skill is a great leveler. Hmmm, the NHL should take note.

What are the odds on the Toronto Maple Leafs for the Stanley Cup??? I'll go for 'em with the same $100 that I backed the Steelers with at 15-1!!!

Enjoy the day


Positions in Gold, Silver

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