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Gold $395 Silver $6.17 Friday 28th May 2004, 3am Sydney

G'day. The dollar filled its strides again today and we got the expected pop up in the metals. Gold initially tested the $395-6 level before a breather but signs of life are emerging later in the session. Reckon we could test $400 before the weekend on some book squaring in thin markets as we wind down for the long weekend. Risk is back to the $388 level. Gold was $405 - $410 in Dec when the dollar was just touching $1.22 Euro on way to $1.28+. Some catch-up to come for the gold price, maybe?

Silver looked very strong on the way to $6.20 and this area we have targeted for some time. Has it entered a type of killing zone whereby any attempts to push higher will be met with very heavy selling from those who may have missed out on the way down and who will be keen to bail out given an opportunity?? Think we may see $6.05 before $6.25 but I wouldn't punt the house on it! I think there could be some difficulty putting on the next 15 or 20 cents, but on the other hand we could see some adventurous players try and drive it higher and trigger some additional buy stops, which would set the cat amongst the pigeons for sure.

Gold imports into India have slowed somewhat and the import premiums suggest disinclination at these levels. The Rupee can wear some of the blame here. Locally, my retail-size physical metal sources tell me they have never been busier, with people arriving with $10k and walking out with a couple of 5 ounce bars. Untraceable and untaxable real money, ya gotta love it. Governments and central bankers hate gold because of these characteristics. Wait till someone in charge floats the idea of banning gold because it is the "money in the hands of of the evildoers" and so we better ban it. There is a precedent. Roosevelt in USA in 1933. Go read about it. Then have a look at the history of prohibition (of anything) and decide for yourself whether a black market is the ultimate supply-demand market and fair price mechanism. Why do they flourish in these periods? I don't seriously believe anyone would be foolish enough to try and outlaw gold but you never know what will eminate from the halls of power going forward. By the way, when gold ownership was made illegal in the USA for 40 odd years under threat of massive fines and long jail terms, most gold owners / holders refused to give up their gold and a black market grew.

The Amex Gold Bugs Index (HUI) is up through 200 again, whacko! Only another 30% rise required to get us back to the highs of a couple of months ago. Interestingly, two of the bigger laggards in the index today are Golden Star Resources (GSS:NYSE) and Coeur D' Alene Mines(CDE:NYSE) who regularly lead the charge, in either direction. Maybe the $5 margin level has a few people nervy? Seems that the equities are a little reluctant to get too far ahead of the metal this time. Patience, people!

I was watching the Stanley Cup finals the other day, enjoying a super-fast, graceful yet disturbingly violent game, with my girl from North Carolina. The chardonnay was crisp and the chilli prawns, superb. She knows her hockey and pours a fine drop! A keeper for sure. What I did notice was the music that was played over the speakers during a break in play. A great young band down here called JET has released a song in the U.S. recently, and I couldn't believe that they were being played to get the crowd pumped up. You know you've made it when you get played at a big sports event!!! They rock ... glad we can share some of our "culture"!! Wait till our fave band, Powderfinger, takes over the world.

A close over $395 and $6.15 would be further evidence that we have seen a bottom for this retracement and we are back to climbing the stairs again. When is the next elevator shaft we are gonna fall down??

Enjoy the rest of the day....


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Posit in gold, silver, gss, chilli prawns, cde

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