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Swallowing Razor Blades



Gold $387 Silver $5.70 Friday 10 June, 3am Sydney

G'day. Short and sweet today, sorry, as I have a date at 4am. As has been the case for the past few weeks, gold was pretty steady in Asia and Europe before moving aggressively in NY. The currencies have certainly had an impact and high yielders like the Kiwi, Rand and Aussie are up lots today. Gold hung around $383-4 all day before the move up in Comex to the $388 level. The London fixes were under $385 so the physical market got some cheap stuff, I guess. Silver held the $5.60 level nicely, and the consumers who were lined up to buy below that level may be having to pay a little higher in coming days. Target is back to $5.92 in the near term.

I see that the silver equities got smashed harder again after I posted yesterday. Some were down 8% on the day and these were not small, tin-pot explorers or juniors. The top tier pure silvers like Pan American Silver (PAAS:NASD), Hecla Mining (HL:NYSE), Coeur D' Alene Mines (CDE:NYSE) and Silver Standard Resources (SSRI:NASD) copped a hiding. Interestingly, with silver at $5.60 yesterday, some share prices are some 15-20% above where they were when we touched here a few weeks back. For example SSRI traded at an intra-day low of $8.65, with silver at $5.51 on 10 May. Is there more coming to the downside for these equities or were the previous lows a big over reaction to the downside?

The Amex Gold Bugs Index (HUI) was not immune from the bashing. It was down from Monday's 198 level to yesterday's low of about 183. Gold was $392 and now $387. Have the shares been hit too hard? They have set the metal's direction lately, and maybe HUI is suggesting lower metal again. Today's equities rally is muted at best. Maybe everyone is already looking forward to tomorrow's holiday. I know I am - an opportunity to have a big Friday night rather than sitting here looking at blinking screens, is certainly very appealing. When all my mates are biting the dust or they have their "wobbly boots" on in the early hours, I'm just waking up (although the first beer at 8pm is like swallowing razor blades; toothpaste and beer don't mix).

I see that crude oil is kicking through $38.50 a barrel. Crack spreads are attractive to refiners but only in the high end lights such as Jet Fuel(kerosene), Diesel (0.5% Gasoil), and Gasoline. The notable exception is for the residuals like High Sulfur Fuel Oil (180cst HSFO). This crack has collapsed from +$2 per barrel, to negative $6 a barrel. This stuff is the dregs of the barrel that goes through the refinery. It is used in shipping, power generation and can be further refined to produce asphalt and bitumen. It is high in sulfur and slow burning and awful for the atmosphere. There is a glut of this stuff as the refiners are going gangbusters, shoveling as many barrels of crude as possible through their plant to supply the motorist with gasoline. Power plants throughout Asia will be happy, as will global shipping.

I noted that the Aussie horse that is in the UK to race next week, is reportedly unwell. Apparently a blood test showed an abnormality. I would be very, very careful if I was a bookie and thought about letting his price drift out. He has missed no work, has no temperature, and hasn't left an oat in his feed bin. I would never suggest that this could be a ruse to get some better odds, but stranger things have happened on racetracks in the past. I suspect that even at 90% fitness, he will pi$$ it in. The Sheik who recently bought him probably doesn't give a toss whether he is paying 2-1 or 100-1. It's all about the win, not the money.

Enjoy the long weekend.....


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position in gold, silver, euro, crude, cde, paas, ssri

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