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Strange Brew

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Gold $395 Silver $5.88 Friday 2 June, 3am Sydney



"If you aren't in debt you can't go broke and can't be made to sell, in which case "liquidity" is irrelevant. But a leveraged firm may be forced to sell, lest fast-accumulating losses put it out of business. Leverage always gives rise to this same brutal dynamic, and its dangers cannot be stressed enough.... But long term thinking is a luxury not always available to the highly leveraged, they may not survive that long"... Roger Lowenstein in his book, When Genius Failed



G'day. The long awaited Fed interest rate tightening was a decidedly uneventful event, as one would expect given the pre announcement posturing, all in the name of more "market transparency" by the Fed. Gold went down and up a little and currently sits basically unchanged to late Tuesday. Silver is lower and we saw some brief fireworks yesterday as somebody decided to dump silver at any price late in the day. Silver fell 15 cents lower without the seller clearing all that many ounces. Strange, for sure. See my earlier post today replying to Prof Succo's question on the "unusual" price action in gold lately.

India is importing gold again judging by the premiums applicable to the major centers, even though it is not a "Gold season". I spoke with a Sydney physical bullion dealer today and she tells me that purchases of metals has not slowed at all and that she is seeing very little selling from the public. Interestingly, she has fielded more enquiries regarding silver purchases than gold.

Gold now looks trapped in a tight $391-$396 range and the topside should be well protected by the moving averages that provided stiff resistance a week or so ago. I noted in Buzz that I thought we may see a good sized dollar rally in the next few days which could cause some angst for gold owners. Nothing has changed in my longer term outlook for a significantly lower dollar but there will be reversals, and the gut feel is that there's a good chance presently. Just an opinion.

Silver is pretty messy at present with little direction, and we seem to be just trading the range of $5.70-$6.2. It may be like this for a while over the summer months, with some violent tests at both ends in very skinny markets.

The next 24hrs could be interesting for the metals, heading into the long weekend. Will any short covering appear to push us back through the MA's? I wouldn't be too keen to go home and short gold over the July 4th weekend (not advice). There's a lot of stuff/potential out there that can send gold higher but not much on the other side of the equation, from my vantage point, anyway.

Have gotta fly , apologies for the brief post today .... Lots more tomorrow for sure.

Enjoy the rest of your day....

Laurie.

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