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Commodity Corner



Gold $376 Silver $5.60 May 12, Sydney 2am

G'day. A pretty volatile few days and looks like more to come in the commodity markets, especially while most currencies remain so weak against the U.S. dollar. Note that I didn't say that the U.S. dollar was strong.

The high yielders like Aussie and Kiwi have been crunched versus the dollar but not against gold. Gold at its high of $430 and the Aussie at 80c had the Aussie gold price at about A$540, today 378 and .6920 gives us about $545. ... gold held its value to an Aussie owner, yet the paper currency did not. Remember that gold is priced in paper, paper isn't priced in gold.

Gold was again knocked lower in early New York and troubled the $375 level for some time and appeared to have weathered the initial storm. I am somewhat reassured that we are very near a bottom for this correction, by the way gold rallied back hard yesterday from $372, even with a stronger dollar. Yesterday's massive volatility in some of the metal equities also suggests confusion as to future direction. They lead gold down, will they lead it back up?

Physical trade has been very robust in all centers, according to my eyes and ears around the traps. Indian premiums are easily accommodative of imports, although their currency has been hit a little over the past few days, on concerns of a hung parliament following their elections. There has been some producer buying seen during the sell-off and one would expect that the big hedgers, such as Barrick (ABX:NYSE), Placer (PD:NYSE), Anglo (AU:NYSE) amongst others, would be grabbing this opportunity by the throat. Consider that ABX has over 10 million ounces forward sold, the mark to market decrease in the last few weeks has been some $600 millon. I bet their counterparty bankers are breathing a little easier, as that's a huge dent in their credit exposure, but only if they close out.

Silver is getting kicked pretty hard right now and has retested $5.55. Not surprisingly, there has been very strong physical buying with demand in Hong Kong and China up sharply and premiums in Japan are up strongly with silver trading at London plus 13c per ounce.

The equities have been crushed of late although there was a little sign of life in some yesterday. I noted the staggering reversal of some issues following their opening some 5% lower than the previous close, yet finished up 10% on the day. Couer d'Alene (CDE) was a glaring example. Nice work if ya can get it.

Apologies for not posting yesterday as we were run a little ragged down here with all the currency moves and stuff...

Enjoy the rest of the day...


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positon in gold, silver, AUD, CDE

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