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The Big Dig



Gold $388 Silver $6.05 Thursday, 27th May, 2 am Sydney time

G'day. Gold trades a little higher on the open in New York, following a quiet Asian session and a short-lived spike in early Europe up to $393. Couldn't go on with it and we are currently seeing good two-way trade around the $392 level. Silver mirrored the gold move and briefily traded at $6.16 before finding its feet at $6.10ish level in NY.

Gold gave up a few bucks early but seems well supported at $388-90, but certainly the pressure is being applied to the downside. Option expiry in the OTC market could explain some of the price action. My daily indicators are turning up for the first time since mid April, and my shorter time frames are already rising, for those that care. Similar for silver.

Looks like gold could test lower again today with the midday action now at $388 + or -. Not convinced that there is much to this selling, but am wary of a pullback to $384. Euro is still 1.21 and Yen sub 112, so we can't blame dollar strength for the $5 move down from the day's high.

I wrote a brief note yesterday on the Amex Gold Bugs Index (HUI) and where Nemont Mining (NEM:NYSE) and Coeur D' Alene Mines (CDE:NYSE) were back in 1996. when the HUI was at these sort of levels. Some smart and alert readers pointed out that they are entirely different companies now and we aren't comparing apples to apples. I agree and apologize if what was written misled anyone with regard to current price versus past prices. I assumed that many would do some digging and analysis and work out what is a comparable price etc. It was a point in a direction to do some work on. I agree fully that share price comparison is certainly misleading on face value. As one of your other professors quickly noted, CDE has issued many shares over the decade in question and so today's price is not comparable. Agreed. There are many issues to take into account when comparing historic to current share prices. Some are tangible, others not so. What is the value of good or bad management? Dividends? Share splits and consolidations? Hedge Books? Reserve depletion? Index compilation/addition/subtraction or weighting consistency. And on we go...CDE and NEM were only chosen as examples because they are the biggest North American producers of the metals with some history. Apologies if anyone was misled or confused, as the aim is to get people thinking outside the box, asking questions, and looking at history for clues about where we are and where we are headed. Digging for yourself and learning is much better than being spoon-fed info whether correct or not. When you get a result from your own investigation and analysis, the rewards are sweeter for sure.

The Globe and Mail in Toronto has an interesting article on gold. No comment from me as you should judge it on its merits or faults on your own.

A Citi-FX research report dated 25 May, floated across the desk today on the oil price. Interestingly, they say that there is a potential for crude at $70 a barrel if we have a double bottom in place, which would require a weekly close above $41.15. They also say, "Although the move is improbable, how many improbable moves have we seen in recent years??" Fair observation when one looks at some of the metals and other commodities and currencies over the past year or two. How inflationary would that be??

Gotta fly...enjoy the rest of your day.


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position in gold, silver, aud, cde, nem, oil

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