Exceed and Excel
G'day. Metals are looking pretty healthy today with a weaker dollar helping the cause. Gold caught some bids from Asia and Europe which pushed it through the $385-6 level that had provided stern resistance on a few occasions over the past couple of weeks. Silver trading above $6 looks fine and appears to be still looking for a test of $6.25 in the near term (not advice) although one should expect some tough days ahead, as well.
Gold again opened fairly in New York but could not breach the $390 level in the early going. Commodity currencies and some high yielders like Aussie , Kiwi and GBP have fared well again today. Silver broke up to $6.10 before having a breather a little lower. The Amex Gold Bugs Index (HUI) posted a strong close yesterday and looks likely to push the 200 level again.... maybe this week? Interestingly, the HUI started at 200 when first built back in 1996. Note that Nemont Mining (NEM:NYSE) was trading about $57 back then and Coeur D' Alene Mines (CDE:NYSE) was over $20. Sure, a lot of water has flowed under the bridge since then with these and many other metal equities, but it is interesting to go and look back occasionally. Those were 1996 dollars as well which we all know are worth way more than today's greenback.
Very good two way business was seen on good volume at the $390 level until an option player satisfied the buyers in gold and we drifted back off a few bucks. Two U.S. investment banks were prominent buyers of both metals in the early NY session, and the names doing the trading suggest some good buying interest from funds. Just my best guess on that one. We haven't really seen any short, sharp violent spikes that would indicate stop loss buying from any new shorts, so it will be interesting to see the price action if we can edge up a few more dollars.
Metal equities have regained some composure after a fearsome hiding over the past quarter or so. Many are still wary having been singed/burnt in this recent abrupt reversal and others are probably waiting for confirmation that the underlying metals have resumed their uptrend. Sentiment is still against the sector, but the inflation genie is out of the bottle and it won't matter what kind of farcical CPI measure is used and reported; the populace is feeling it and seeing it everywhere. Patience will be required (and that's saying something, coming from possibly the most impatient person on the planet!), but I believe that patience, combined with plenty of ticker, will be handsomely rewarded. Just my 2 cents worth on the subject, never advice!
I was watching Bloomie TV when I got home about 5am yesterday. The lovely Monica was chatting to an analyst about crude oil and she asked whether there was a crude oil shortage and what about refining capacity etc. etc.. when she mentioned the poor physical characteristics of the Saudi crude (compared to say, Tapis or Minas ), I guessed she'd been talking to one of the Minyans or she has access to my computer! ... either way, it's good that the point was raised. I still am of the opinion that we will see crude oil and the refined products trading at significantly higher prices, prices that seem implausible today. The 1970's oil shock mess lifted crude to over $30 a barrel. What's that worth in today's dollars? Only about $75-$100 per barrel?? (My best guess.) I'm not saying that it is gonna happen but people should be aware of all the risks and outcomes, not just the pretty ones or the happy endings. Imagine a $5+ gallon of petrol. Ouch. Apparently there is a good article on this subject in the Times, I understand. I dunno which country or city Times it was in , but a mate informed me of it while hunting down some historical oil prices. If anyone finds it, I'd love a sticky ( look) at it.(derives from "sticky-beak")
People must realize that crude oil is cheap and that it will be repriced higher, OPEC intimated such just a couple of hours ago. Also the fact that cars, SUV's (or whatever they call those car / truck thingies), trucks, aircraft, most heavy industry and petrochemical / synthetics industries don't run on crude oil but on refined products. Refining capacity in the U.S. is basically maxed out today. Refineries can't be built in a week and they don't come cheap, so there has been essentially no increase or investment in refineries in the U.S. in the past 30 odd years. Crude supply is not the issue at present. High oil prices equal INFLATION in the U.S. economy, no matter which way you cut it. I see that the airlines are putting a fuel levy on their ticket prices. It won't show up in the CPI numbers because it isn't a price increase, but a temporary (yeah right) levy!
The metals are working their way towards the close in very lackluster trading although some selling has appeared just now. Volumes are not heavy and maybe we will get a few quiet days leading into the holiday weekend. It appears we could hold a 5.80-6.20ish silver range and $378-393 gold range for the rest of the week, although with so many price influences currently in play, I prefer looking at much shorter time frames at present. 30 minutes can be a long time in the metals, especially in our current environment. Currencies should dictate the next couple of days, I think.
The horse from down here that I mentioned yesterday, elicited about 20 emails asking for his name. Exceed and Excel is his name. How appropriate.
Enjoy the rest of your day.....
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