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Gold Cup



Gold $386 Silver $5.70 Wednesday 16 June, 2am Sydney

G'day. Again we see an increase in inflation rates in the U.S. and elsewhere. The Poms (English) are running at a 10% annualised inflation rate. The U.S. is only at about 7% based off the "official" numbers as reported today. These are fearsome numbers, especially with nominal interest rates so low. Money in the bank is costing those that save. Inflation just erodes the savings. Nothing erodes gold and silver. Negative interest rates suck and yet we see gold still struggling to tack on a couple of bucks. I guess Sir Alan will again articulate some incomprehensible mumbo-jumbo that there is nothing to worry about with regard to inflation. Does he not see the M3 numbers? Ya just can't print money, hand over fist, and expect there to be no inflation. Inflation is not the rise in prices of goods or services, rising prices are a result of inflating the money supply. More money chasing the same number of goods will send prices up, eventually. See the housing bubble for an example. Inflation is already here, in bucketloads, the farcical measurement does not reflect it, yet.

I note that the "Core" rate was only up 0.2%. This does not include food or energy. Fair enough, but I wanna know what people's wages are spent on if this is any representation of "reality". If I can find a family that doesn't eat or travel or cook, or business that uses no energy then the core rate will be meaningful. Energy and food are "Real" stuff, needed and used by everyone, yet limited in supply. To exclude them from inflation calculations is preposterous. I reckon food, energy, clothing, housing, education and medical would account for about 90% of a typical family expenditure... (beer and credit cards should just about round it out!) To exclude much of this paints an altogether misleading picture of what is economic reality.

Enough of this inflation talk. If people can't see it for what it is doing to their hip pocket, then maybe they've got too much in the pocket?

Gold struggles up to $387 and met a lot of selling interest around that level. I hear from one of my spies that there may have been an Asian central bank lobbing out some of their gold recently. Central Asia is what I'm hearing.... pick a "stan", your guess is as good as mine. Helps explain some recent price action, if in fact it was a CB sale. Good two way flow around $386.50 with Asians first selling, then buying, then selling... the European banks were notable sellers as the Euro drifted off its peak. Lotsa work required to get back to $390, I think.

Silver up to $5.73ish after hitting the $5.63 level before the numbers. I was astounded at how the silver equities got so hammered yesterday, before silver moved down a cent. Talk about a lead indicator. It appears we are pulling back a couple of percent of yesterday's losses, but 7-10% down days are hard to retrace quickly. I'm still not convinced that we won't see below $5.50, especially when we see free falls of 15-30 cents like we have over the past few months. Risk management is a priority in times like this. As I write we have silver back to $5.65 in quick time. It is only paper silver, not the real shiny stuff. Our friends at Mitsui advise in today's metals commentary.. "The Dowa smelter in Japan continues to be shut for silver production causing Japanese buyers to seek 99.99% silver causing domestic premiums to jump to 20cents over London". Hmmm.

The Amex Gold Bugs Index (HUI) copped a flock of uppercuts yesterday and dropped to 176. Anything falling 10% in 4 trading sessions doesn't instill much confidence. The recent low of 168 isn't far away and a test appears likely. Sentiment sux at present. Even some of my mates who are "believers" are getting shakey. Not this little black duck, though. This is a 10 year plus game, not a week or a month. Sure, negative revals hurt, but the underlying reason for owning metals and their equities should be the only criteria when assessing the investment. Nothing is changed in my mind, in fact there is only further and deeper evidence appearing which support the original

That Aussie horse over in England has been scratched from the Jubilee Stakes this weekend after the "blood anomaly". He missed one critical workout this week, due to the owner and trainer not taking any risks with their $22 million colt. He probably could have raced but would have been a little underdone. Fair enough too. I s'pose if it was mine I'd do the same. The July Gold Cup in England was/is his main target so we'll just have to wait an extra couple of weeks to see him go. At least we'll get a form line through his opposition.

Gotta fly, my lady returns to the U.S. for 3 months in 9 hours time... buggar it, as soon as you try and fly, the market gets busy... gold now $389...

Enjoy the rest of your day..... I certainly will (if I get home!).


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