G'day. Tocom in Japan was open today, and most notable was Platinum and Palladium that both traded at or around limit down for most of the day on more fund liquidation. Illiquid and volatile is not a nice combo... not for the timid. Japan is closed for "Golden Week" till next Thursday, so Asia will be minus a valuable source of liquidity during a period where liquidity may be an issue, either way.
Most bank/dealer commentaries today noted the Open Interest rise in gold contracts and the fact that it appears there are lots of new shorts out there looking for gold to fall some more. Fair enough and looks like we won't have to wait too long to find out whether they are correct or if they will be chasing gold higher in a scramble to cover?
The dollar is lower against most currencies, except the Yen. Reckon we've heard that before somewhere. We mentioned on Wednesday, I think, that the Yen crosses would be volatile and that the Yen was worthy of close monitoring. Keep watching!
Indian import premiums are still way attractive for importation and the fall of the Indian stock market of over 5% in 24hrs and we know where the Indians put their money, especially financially scared ones. Seems that physical buyers such as these will be all smiles due to this very aggressive selloff in gold. That it appears to have been rejected down at the $380 level is not a surprise.
Physical gold buying will eventually overpower the paper short sellers... how long does "eventually" take, anyway? Dunno and don't really care all that much because I've already got mine and there's not enough to go around for the rest of the world. Wealth is relative. If you own 10 ounces of gold when only one in 100 people own an ounce, you will be wealthy.
Owning some physical gold is the ultimate financial insurance policy. Think about it this way - let's use a home owner as a hypothetical example... and from the BLS numbers recently on housing sales and stuff, I guess that's just about everyone.
People insure their house and contents, well at least most people I know, do. Let's say it costs 1% per annum. Most people pay it without question and certainly don't look at it as a "waste of money" if they don't have to claim on it over their entire life. They have it for peace of mind as they couldn't possibly bear to lose the house in a fire or whatever, without getting a replacement built PBQ (that's short for Pretty Bloody Quick) as well as the financial consideration of cost of replacement/mortgage payouts, etc., etc. (As an aside, when I burnt down a good part of my parents house at my first time attempt at babysitting my two younger brothers, the friendly firemen told us afterwards that the first things to grab in a fire are the insurance papers and your photos (obviously people come first, but that is implied.) ... but that's another story...
Gold acts the same as your house insurance policy, except it is insuring your wealth. Ask anyone in Argentina what a few ounces of gold would have done a few years back, or Turkey or Brazil or any other country where there has been severe financial stress. But surely not in the "developed world" like Australia or USA, many will protest. History has a funny knack of repeating, largely due to the fact that human nature and emotion overrule historical fact, in every case of fiat currency systems.
Sure, you don't earn interest on gold, but think of it as the "premium" for insuring your financial viability if it all goes pear shaped. I suspect that real assets and capital preservation will be the key focus and that everyone will eventually turn to gold. Always have, and I expect, always will.
The HUI is up a couple and currently stands at about 180. It has got some serious work to do to get back to where we started the year (240ish) and it seems to me that there will need to be some consolidation at somewhere around these levels before we can start the march up the stairs again. I certainly don't expect that we will see many days where most issues run up 10% or more, in stark contrast to what we have seen these past couple of weeks to the downside - in my opinion.
Gotta fly, sorry... will try and grab 3 hrs sleep before the 5 yo's swimming classes. I see the Kentucky Derby is on this weekend... dunno anything about them but it is a big field of runners, so if I was gonna pick a horse to win it, I'd be looking for something that gets back in the field and comes home over the top of them all.
Till next week.
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