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Gold $426.50 Silver $7.04 Tuesday 10th May, 11 pm Sydney

G'day. In July 1998, Fed Chairman Alan Greenspan, testifying before the House Banking Committee, stated: "Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise." Well, it looks like there's plenty of lease-able gold about, judging by recent and current lease rates which allows counterparties to borrow gold for a year at about 25 basis points. Back in the olden days when I had something to do with gold derivatives and lease rates, you'd be lucky to borrow gold for a year at less than 2%. Even a 1 month lease rate was over 1% most of the time way back then. Sure, there has been some good sized "de-hedging" by the producer community but there's still a heap of floating gold forward sales to be funded and very low lease rates will help the contango for additional forward sales?

Who is happy to lend gold out for a tenth of the cost of 5 years ago, in these uncertain times, where credit risk (even sovereign risk) should be priced significantly higher? I guess Sir Alan had some inside scoop on "some Central Bank's" modus operandi because he certainly couldn't be talking about the Fed or the U.S. Treasury. They are not allowed to, and to do so would be illegal, I believe. So who's got all the gold to lend out for no return? Did the recent ECB sales have anything to do with it? I don't know what the score is with all this, but it doesn't add up to me. Just some food for thought.

Conversely, silver lease rates are like the old gold lease rates and creeping higher. We know that physical silver is very tight and that there are no serious "official" stockpiles to do what Sir Alan said regarding gold, way back in 1998. I wouldn't have thought Mr. Buffett would be all that keen to have someone else use his metal and hope to buggery that he got it back, all for a lousy couple of percent. Silver lease rates are telling us a lot. Silver is going to head a lot higher, IMO, and a serious lease rate rise will be a pre-curser (not advice but something to monitor).

Anyway, gold is back close enough to $428 and could have trouble here, initially, and then at $432, again. Anything I proffer could easily go out the window on whatever Beeks delivers tomorrow, no matter who makes up the numbers. The range is pretty well set from what I can see. $424-433 looks about it, for the next 24 hours.

Silver could struggle at $7.20-25 again but the downside is very limited, IMO. Not buying physical silver with a 6 as a big figure, as it seems unwise in my view. Sure the paper cowboys might slap it down to the $6.65 level, even $6.35, but, pennies to peanuts, physical silver margins will blow out and we won't get much benefit from any such smashing, no matter what the dollar does. There just ain't enough physical to back up the paper trades. Just sharing the vibe and never advice.

The shares are doing bugger all with Amex Gold Bugs Index (HUI) marking time around the 185 level, again. Everything seems to be repeating itself with monotonous regularity.... me included!

So let's talk about something fun.

The Kentucky Derby was quite a result and many are talking of the longest priced winner in 70 years or whatever. Well, back on 15th April 2000, I owned 35% of a beautiful black filly called Kirkstall Lane, who we entered in the Ansett Australia Stakes. It was a nice $500,000 Group One race for three year old fillies, run over the same distance as the Derby. She started at 200-1 and ran 2nd, beaten a half-length by, unquestionably, the top filly in Australia-New Zealand for that year, Hill of Grace. Allow me to reminisce about the first racehorse I ever owned, seeing as things are so predictable in the metals at present.

The black filly had shown us some very good form in a few early races in the season. She was one of those horses who just fell out of the gates and jogged along behind everyone else and with about 600 meters to run, would take off and just run around them all. She needed an uninterrupted run through or around them as she gave them such a start that she couldn't afford to lose momentum. Sometimes she got blocked for a run and we always just discounted those runs and put them down to bad luck.

Anyway, we were heading for the Australian Oaks on the 29th April and we needed to get her rock hard fit. The problem was that she wouldn't try on a rain affected track. No, actually, she wouldn't try if someone spat on the track and even heavy dew would stop her. The weather in Sydney from Mid-March to mid-April was horrendous, but we had to run her, and just hope to hit some dry tracks, sooner than later. She ran 13-13 in the wet Canberra Guineas and then 13-16 on the 7th April in another good race in mud. We were running out of time to get her ready. We nominated for 13 different races all over the state, between the 10th and 20th of April, looking for a dry track. The races ranged in stature from a $10,000 race for donkeys to the big one on Golden Slipper Day at Rosehill on the 15TH.

By the 13th, when we had to pay the $1000 acceptance if we wanted "in' for the big one, Sydney had 2 days of sunshine in a row but the track was still no good. We decided that we would try our luck and paid up, mainly because the weather was so good in Melbourne and we thought it would continue through to Sydney for the following weeks. So we jumped in. I put out buckets in my backyard overnight so I could check that we didn't get any rain that I might have slept through. Every day was sunny and windy - perfect drying conditions. I awoke on the Saturday of the race to perfect sunshine and empty buckets. I was pretty bloody happy but she had missed so much work we wondered if she would be fit enough to go the 2000m against the best fillies in 'Oz.

We got to the track on what is the 2nd biggest race day in Sydney each year. It was a warm 30 degrees and not a cloud in the sky. The other 65% of the horse was owned by a bunch of close mates from work, so we were going to have a big day out no matter what the result. I bought the official race book and had a look at what they had to say about "Kirkstall". Anyway, the comment at the end of the form said - "eligible for much easier races, should not be here". But they had only taken into account recent wet form and we knew the real deal.

The bookies opened the betting with her at 150-1 and no one touched her except her owners! We got some on at 500-1 at one stage and Hill of Grace was the 4-5 favorite.

We had a chat to our trainer about the race book description and he said - "well, we're here so we better go around, hey" (with a wink and a nod). The jockey was told to ride her dead and he knew exactly what we meant. A few minutes before the race was the most nervous I had ever been and as they loaded them into the gates we all said 'please don't embarrass us" and then they were off.

She dropped straight to last and for 1400 meters we knew we were in the "right" position, but would she be able to do what we knew she was capable of. At the 600m pole the field started to bunch up but Kirkstall was still last but not that far off them. They rounded the turn and the jockey hooked her wide. KABOOM, off she went and picked them up quick smart. Hill of Grace was in the lead and had plenty of company but little Kirkstall kept chugging down the middle of the track. At the 200m pole she was about 2 lengths off them and running hard into 4th and I knew she would run a place. The race caller called her the likely winner with about 75 meters to go saying " and Kirkstall Lane at any old odds could cause the boil over of the carnival" but she just died on her run and missed out by about 3 feet. Wet weather cost her that bit of fitness that would have her in the history books now!

Talk about a high. She ran 3rd in her next race on the 22nd, another half million dollar purse and we were all set for the big one, the Australian Oaks. It rained all day on the Friday with the race on the Saturday. We didn't even have a bet and knew she was due for a holiday and weren't disappointed when she ran 9th of 13. She just didn't like getting her "nails wet".

She broke down on her first go back from her holiday, when I was in New York. Never have I been so gutted. It was like a death in the family for me. Do you know the odds of owning a good horse? It's only the really good horses who break down cause they try so hard. We now own two of her babies and they will race soon.

In February 2003, during a thunderstorm, she slipped over at Woodlands Stud and broke her shoulder and had to be put down.

Ironic, hey.

Enjoy the day.......


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