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Gold $419 Silver $8.20 April 6, 3.30am Sydney

"There has not been a refinery built in the U.S. in 20 years. So if you produce more crude oil but you can't refine it, it's not going to translate into (lower priced ) Gasoline"... Adel Al-Jubeir, Saudi Arabia, April 4 CNN Money, on OPEC production cuts.

This sounds vaguely familiar to what some insomniac down in Australia was saying last week, to those that cared to listen. This is a serious inflationary issue that has not hit the radar screens of most analysts. But it's the "non-core" inflation, you will hear, so it doesn't exist! All the usual excuses will come out..." It's a one off spike"..." energy prices will come down, they always do"... "seasonally adjust it" .... Energy prices don't appear to have that much downside, in my opinion. Transportation doesn't run on crude oil.

The metals markets have had their quietest day in the last week or so, although silver is showing some sort of pulse in the last 90 mins today, jumping 10c or so. Base metals have generally had a breather and some off quite sharply recently.

Interestingly, physical demand has stabilized gold in the mid-teens and there appears some resolute buyers around the $413-4 level. Welcome back, Mr. and Mrs. Singh! Gold in Euro is still pushing 350 again and sitting at 10% higher than a month ago. Those looking at the Euro for a guide as to gold's fortunes could well be watching the wrong ball. Check gold in the local currencies of who is doing the buying! Again, my technical people are flashing warning signs, but I think that we could well see technical analysis fall short, due to the only LAW of economics..."supply and demand".. the rest are just theories, models, myths and fallacies.

Silver still well bid on any dips down to $8 and just below. It would concern me to see a close below $7.85. I see that one of my physical bullion dealers is buying physical silver basically at spot prices and selling at a serious premium above. Indicative of a tightness in supply. Supply and demand must win out in silver... eventually. It is slowly being priced into the physical market but not the paper market, from where I sit.

I watched a Bloomberg report on metals yesterday and Barclay's came out with upwardly revised metals forecasts. It amazes me how analysts just lift their forecast , once they look a lot out of whack. Nothing changed fundamentally for silver in 3 months. Their previously forecast average of $6.40 for silver in 2004 was pretty bullish for a bank. They have lifted it to $6.90...(It's coincidental that the average for silver thus far for 2004 is $6.82 I'm sure)... Next revision will be to $7.40 in 3 months, I s'pose. (not picking on Barclays, it's just that they were the guys who came up on the screen. I'm sure we'll have another example soon.)

I fielded a few enquiries regarding how to buy physical silver in the USA. I don't know as I haven't needed or tried to before. Maybe there is a Minyan or two out there who can share their experience. I understand that deals in physical silver and gold but I have no knowledge as to their credentials. I'm sorry, but looks like you're on your own with this one.

I note the lackluster performance of the metals shares. Investors do not see the rally in precious metals as being sustainable at these levels. Nemont (NEM:NYSE) is still swinging around the $45 level. The Amex Gold Bugs Index (HUI) is currently just over 10% off its highs set early in January this year. Gold is less than 3% off its high for the year. Volumes in the metal equities are off as well today, well certainly by Comex close, anyway. Have people become a little complacent or are they focused on another "game" at present? It is my contention that precious metals is "THE" big game in town and will be for the next decade.... Why?... because gold and silver are real money, in a world awash with debt, IOU's, printing presses and Central Bankers.

Wow... only a $5 range in gold and 15c in silver today ...go back a year ago and that was as volatile as we'd seen in years! Get used to it.


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