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Go Figure


Gold $395 Silver $6.50 Thursday 12 August, 2.30am Sydney

G'day. And so it came to pass. The Fed does exactly what everyone expected and gold gets knocked for a few percent while other currencies did two-fifths of buggar all. It's easy to blame the "soft spot" in the economic growth story on higher oil prices. If the economic story was/is so juicy, why are the leaders of business dumping their shares whenever they can? Do "Insiders" know something that Sir Alan doesn't?

Gold was very stable throughout Asia and had only dropped a buck or so in Europe before N.Y. opened. Gold shot up to $397.50 at Comex open on some stop loss trades in thin volume before someone took the big stick to the yellow dog and took us down to $393.25ish. This occurred whilst no other major currency moved more than a quarter percent against the buck. Gold was down 1.4% at one stage. Go figure.

My hourly indicators all converge at about $394.50 as support and it is being severely tested. I am not concerned about all the noise out there till we trade below $392 and I suspect there will have been a move in either the Euro or Yen that will be telling.

There were some currency moves with the dollar losing ground, mostly Euro-Yen plays on the back of the oil respite, did little for gold as well. Something isn't adding up here.

Looks like silver is range trading between $6.80-6.30 and we are currently smack-bang in the middle. Many of the silver equities got hammered again today. In January this year silver made its first foray above $6 since May 1998. Pan American Silver (PAAS:NASD) was trading at $15 in Jan, yet today with silver 10% higher in price, PAAS is at $13. Does this make sense? Sentiment plays a part for sure but who's doing the valuations and what are they plugging in as a forward silver price? It must be south of $6 by any logical deduction. Sometimes it is just easier to throw the hands up and have a snooze, than try and work out what pushes the buttons of the equity players in commodities. Fair dinkum, people, this is not some tech stock with "intellectual property" that no one can value, these guys have REAL STUFF(that affects so many sectors of the economy) and it has a quantifiable, definable value. People have little idea what WON'T work without silver and interestingly, there is no substitute in many cases. I had better stop banging my head against the wall on this valuation stuff, the screws holding my cheekbone together are rattling so hard they're gonna pop outta my eyeball soon. (Titanium screws, not silver in this case ... maybe I'd better go ask for a trade in?).

I note that the Golden Star (GSS:AMEX) / Iamgold (IAG:AMEX) merger had another twist today. GoldFields (GFI:NYSE) upped the ante and it appears to have taken control of the game. What was most interesting to me was the initial reaction by GSS share price with a rise of some 7% early on. Obviously the market is more comfortable with GSS just digging up metal and leaving the corporate stuff to others. Still, it's a long way back to the recent highs for GSS, merger or not.

The oil price is blamed for everything these days. If oil comes off another $5 or so I expect we will hear that this is bad for gold. The run up wasn't much help to it so I don't know why any decline should adversely affect gold, but nothing would surprise me anymore. The oil/gold ratio we discussed a few weeks back is evidence.

Enjoy the rest of your day .....

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position in gold, silver, gss, paas, euro

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