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McGuirk Alert


Good morning,

My apologies for my absence this past week. Technology is a great thing...when it works. Seems I can crash "unbreakable" systems without even trying.... Oh well.

A quick review of trading last week saw some long liquidation on moves up to $400 with very solid physical support from the market below $393. The employment numbers were pretty flimsy to say the least and the spike in gold was certainly impressive as some weak shorts scrambled to cover. It appears from where I sit that there has been some significant short selling done and it wouldn't surprise to see further short covering on a break above $404ish.

The physical buyers in Asia and the Middle East have been active the past week with gold below the $400 level. It would appear to most observers that India is aggressively buying the dips. The Istanbul Gold Exchange showed February import volumes at similar levels to mid 2003 when gold was at $350ish. Traditional buyers are loading up on any declines in price.

Bloomberg has a story on the "new" Washington agreement which has settled at 500 tonnes per annum Central Bank sales. That is an increase from 400 tpa of the previous agreement in 1999. No big deal from my point of view. I was interested that England didn't sign up, after the abysmal handling of their sales over the past few years. That was without doubt one of the most insane auction processes that I have seen. It virtually guaranteed that the BofE would get the worst possible price for the nation's gold. Incredible.

Silver is the talk of the town these days. Fair enough too with silver nudging $7 for the first time since Mr. Buffett bought his stash. I note that Deutsche Bank has been taking the lion's share of the deliveries in the Comex. European buying??? We are seeing regular 30-40 cent daily ranges which translates to 5% moves per session, indicating some serious stress in the market. I am keeping an eye on the physical market for sure.

The metals stocks are all doing ok. The HUI back above 230. Major silver stocks like Apex Silver (SIL:NYSE),Coeur D Alene Mines (CDE:NYSE), Silver Standard Resources (SSRI:NASD), Pan American Silver (PAAS:NASD) and Hecla Mining (HL:NYSE) are all performing as one would expect in the environment. Silver is such a small market (market cap of the combined companies listed above is only about $5 billion)... which makes it so explosive.

Unfortunately we are drawing to the end of our summer here, and the annual fly fishing trip to the South Island of New Zealand is beckoning. I have missed the last two for a number of reasons but am certainly headed across the creek this year. I will be on leave from this Thursday for a week only. There are no phones let alone computers where we go, so I will be flying blind for a week... It actually does some good being blacked out for a week, not listening to the noise. When we come back sometimes we see things a little differently.... Let's see.

Good to be back on deck ... until tomorrow.

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positions in ssri, paas, cde, gold, silver

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