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The Lull Before the Storm


Go get 'em Exceed and Excel


Gold $407 Silver $6.50 Tuesday 13 July, 4am Sydney

G'day. No posting on Friday, I'm sorry. Both my kids were crook, so I spent the weekend playing nurse. Friday was pretty tame so was a good day to be MIA. Sydney had its first rainfall since Easter throughout this past weekend. We got about half an inch of rain. We certainly need it as our dams are mostly at less than 50% capacity and we have severe water restrictions in force. Interestingly, water usage/storage is not an election issue here. It should be one of the biggies. Water is another "real asset" that will be highly sought after in the near future, in my opinion.

Precious metals had a rest day today, trading in a tight $2 range and apparently subdued going into the plethora of data to be released later in the week. I thought we may have been a little higher in gold in Comex this morning following all the chatter on terrorism and intelligence failures, way higher crude oil and no dollar strength of note. I guess there could be some interesting policy announcements in the lead up to the election, as well as plenty of mud-slinging about all manner of past and current decisions which could quickly change the dynamics of the metals and currency markets.

It was interesting that the Yen rallied early in the day on the back of the election results and we saw it trade at about $107.55, but reports have indicated that the BOJ was sniffing around the market and this was enough to reverse the move, and we sit unchanged to last week's close. I don't like playing in markets like that, sorry. There are fairer places to lose my money than in that market, in my opinion!

The Amex Gold Bugs Index (HUI) is still clawing away at the 200 level and I note that the market capitalization of the whole index is still south of U.S.$50 billion. This is about the same market capitalization as Yahoo!. What would you prefer to own, every company in the HUI or a tech company with a P/E of about 100??

I guess today we can have a little breather in anticipation of what could be a very wild old week. I am still targeting silver back at $6.25 and gold back at $392-5 on any releases that are dollar friendly and we could see gold touching $418-22 and silver $6.90-7.15 if the data sucks and people act decisively. We should also be aware of the oil price and copper when we are looking at the precious ones. Oil above $40 is not dollar friendly and is massively inflationary to the U.S. economy. Either we get noticeable price rises and the consumer wears it and then wage demand increases appear, or the inflation is eaten by the producers/suppliers which erodes their margins and profitability. Either way it is not a nice development. All the OPEC jawboning will have little effect, in my opinion. Nothing runs on crude oil, it needs refining and additional refining capacity in North America is non-existant. There is excess refining capacity in Asia, so maybe the world oceans will soon be crowded with tankers of refined product on its way from Singapore to the U.S.

I note that Exceed and Excel has been retired by the Sheik after his failure last week in the July Gold Cup. He will go straight to stud and his fee has been set at $55,000 per go. Not a bad job, hey. He will serve 120 mares in Australia and 120 in Ireland each year. Do the math, it's a lucrative and fun retirement, one that any male on the planet would gladly accept, I'm sure.

Enjoy the rest of today, as I think this may the lull before the storm .....


position in gold & silver

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