Gold $441 Silver $7.40 16th March, 11pm Sydney
G'day. As discussed in many previous notes, recent COT reports indicate that there has been concerted selling in gold, limiting price rises in the face of massive increases in most every other commodity price. A startling increase in open interest, in the last few days has resulted in a small FALL in prices. We are talking about millions of ounces of gold not just a few thousand contracts. Obviously there is a very determined seller of paper gold, official, in my opinion, who has been operating openly for quite some time judging by the price action and corresponding futures commitments.
Whomever it is doing the selling has no interest in maximizing gains, rather it appears to me that ex-Fed-Head Volcker's advice is being acted upon. If people require more than 1 guess as to who the likely culprit is, give yourself an uppercut. Mr Snow and GWB's oft-stated "strong dollar policy" must include a weak gold policy. I see no other rational explanation taking into account all publicly available information. If it is a "fund" doing the selling then they should be taken out the back paddock and given a good hiding or worse. No one looking to maximize returns would exit a position is such a manner or institute fresh shorts into what otherwise must be very aggressive buying. It doesn't add up. Anyone who can provide a satisfactory alternate explanation... I'm all ears.
The physical gold market is basically unaffected by such intervention, in fact it welcomes it judging from global demand for physical metal and corresponding refinery congestion. Physical metal buyers should be paying WAY higher than the current prices dictated by the paper gold market. Someone deserves plenty of thanks from us physical buyers! Premiums remain strong throughout Asia, irrespective of the recent $30 price rise. The Philippines are joining a long list of countries where surging imports and rising premiums are continuing. My local sources suggest very heavy demand. Old contacts from my days running around Asia are very useful and provide valuable info with great anecdotal evidence that is generally confirmed in "official" numbers released at later dates. My man in Indonesia, though, hasn't reported much, but then again, he's an oil guy.
I see that there are moves afoot to "free up" capital that is locked away in physical gold in India. This is another "paper" or, as the article states, "virtual" gold proposition. This stinks to high heaven due to it being proposed by Government and involves people giving up their physical gold. I have every faith that the billion or so Indians are smarter than accepting an IOU for their gold. Maybe they should acquaint themselves with some modern history of Government involvement in gold, let's say around 1933 or 1971!! Hmmm.
Speaking of India, I note on Bloomy TV this evening that the U.S. Government is "concerned about the proposed India-Iraq oil pipeline". Is there anything happening in the world that this mob aren't sticking their freaking beaks into, especially when concerning energy? India are gunna be a huge competitor, along with China, for the world's oil that the U.S. currently uses 30% of. The U.S. dollar and the control of the issuance of the "global reserve currency" enters the equation, again.
The gold market just marks time around the $440 level, still above the 100DMA at $433 and the 200DMA at $420ish. It's a bit like watching paint dry at present although one would expect a outsized move in coming days. I would expect upwards but the paper gold market is a funny beast and could easily scare weak longs down to $432 with initial support at $437. Momentum looks a little dodgy but am comfy here until we break below $436. Topside, we should see resistance at $445-6 and again at $449.
Silver had a nice little dipsy-doodle down to $7.24 yesterday, for all of 15 minutes. I have no explanation what could have precipitated such lunacy. Fund liquidation is what everyone says when they haven't got a clue. Whatever.
The Amex Gold Bugs Index (HUI) was just treading water as well. Tick, tick, tick.
The field for the $2.25million BMW Classic on Saturday has been finalized. There are 11 horses in the race. The bookies have framed their market already. Vouvray is the third favourite and she is 15-1! Yes, that's right. 15 to bloody 1. The favourite is Grand Armee at 8-11 and second fave is Makybe Diva at 6-4. Obviously people give no one else a chance to win. As a contrarian by nature, I'm gonna have a little bet on something to cause a boilover.(not Vouvray, as I win big if she wins, no matter what). I like Cheval de Troy at the odds.
I think that the precious metals are in a lull before the storm. My guess is we break out to a new high shortly but then again, another crack at $420 will make many buyers happy.
Enjoy the day...
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