Anyone in the Sydney Market?
"Smart guys know when to sell"
Gold $445 Silver $7.15 Friday 12th August, 6pm Sydney
G'day. Well that $428 solid resistance level got smoked pretty easily, as did the $440 level which could have a bunch of short players squirming in their chairs. That gold actually accelerated through the $440 level suggests a bit of short covering / stoppy triggers but I'm still of the belief that we are a long way from where we will ultimately settle. Silver is just being silver and biding its time while all the focus is on the yellow metal, but I would be surprised if we aren't back at $7.40 in a couple of sessions. Silver is just so bloody cheap in my opinion it isn't funny!
Isn't it always the case that things get interesting while you've got 15 different balls you're trying to juggle? Anyways, it looks to me like we may be headed a little higher but caution may be warranted for those who have made some good wedge these past 10 days. I think it's prudent to consider taking some profit off the table if we get up near the $455-65 levels (and look to review the position on the inevitable clean-out back to $430).
There is a long, long way to go before this commodity bull market runs out, and just being long is not the answer, as there will be plenty of "clean-outs" and severe retracements in the coming years. Managing these periods is what separates the good from the less good. Violent Snapper action can destroy weeks or months of hard fought gains. My old man used to say to me "Anybody can buy a stock, it's the smart guys who know when to sell them". History tells us that there will be some very severe corrections in this precious metals bull, same as in the '70's where we saw gold trade from $42 to $850, but there were periods where 50% retracements in price were experienced. I expect we will see something similar over the next decade. Can you deal with the draw-downs?
So what now? I suppose we'll test higher, maybe to $475 as there is still a lot of short covering that has to be done to "rebalance" the paper market. There will be resistance along the way, in Euro terms, if we take the last few months as a guide. Let's see what gives on "official sales" now that the Washington Accord II has hit its delivery limits for the year. Italy, Germany and France have lots of gold but don't reckon they'll be ditching anytime soon, although there'll probably be a stack of gasbagging and speculation that could affect the prices, although there will be ultimately no sales, IMO. Plenty of "buyers" around with Russia and the former Soviet bloc all increasing their gold reserves, the Middle East are swapping oil for gold, and the usual suspects of India and China etc. are all comfortable ditchin' dollars to get something tangible.
The physical gold market has been happily soaking up gold all the way from $420 to $440. India never stopped buying during this rise, and their traditional buying season is just getting started. Keep an eye on the Rupee as well. South East Asia is still buying and I note that the Aussie gold price is nudging $580 which is just fine by me. The South African miners strike did nothing for gold. I would've thought that halting production from the world's largest producer would generally be bullish. It wasn't, well, certainly not initially. People are not taking much notice of the physical market. They should.
Interestingly, gold is through $445 yet the Euro is sub 1.25. Hmmm. Wasn't the Euro something like 10 big figures higher the last time gold was up here? Gold is moving independently of the associated paper currencies and I would expect a continuation and acceleration in coming months/years. But be wary of the snapper that comes straight back at you.
The silver price is not a concern to me. It will go when it wants to and will screw as many people as is possible, in the process. That's what markets do. I personally take anything under the $7 level as a screaming buy, especially if one can snag some down around the $6.85 level. The market tends to give us a second bite at the cherry when it comes to commodities. I am watching the silver/gold ratio and hoping to see a 65 or so to buy silver/sell gold. That trade appears to me to be a "gimme", but it's just my opinion as usual and never advice. I still see Pan American Silver (PAAS) and Silver Standard Resources (SSRI) as the silver equities I most wanna own. I suspect we'll have an $8 as the big figure on silver, come Xmas.
Make what you want out of this.
I don't want to go through it paragraph by paragraph, but there are certainly some assertions and comments from people that just don't sit well with me. The dollar has got nothing to do with silver! No mention of the massive silver sales this past 20 years or so by the U.S. government, depleting a stockpile of 1.5 billion ounces, or how that added false supply for the last 20 years. I'd better save my breath for Ojai.
It is noted that Rob McEwen, late of Goldcorp fame, has reappeared on the scene with a new vehicle. Everyone wants a piece of it, but I dunno that anyone could ever run across another Red Lake mine! But, management is a big, big factor in commodity producing companies.
The AMEX Gold Bugs Index (HUI) has just about reached my "end of summer" target of $220 that we mentioned in early July. Interestingly some of the top tier golds like GG, are pushing their all-time highs while smaller cap producers and explorers haven't done much at all. Watch as people start traveling down the risk curve as this metals market catches more and more bids. Smaller producers like Golden Star Resources (GSS) - provided that they can address their production issues - are still some 60% from their highs. Exploration companies are doing squat, that's where there are a few fat old targets for sure! The HUI still has a 20% lift required just to retest the Jan 04 highs.
Crude oil may hit that $68 level I mentioned last time, but wouldn't be surprised to see it settle back down to the high 50's in due course.
The property market has some interest for me at present. My ex-wife is selling our old house, and, if things go really well at the auction, I may even get some change! The response to advertising and open houses has been phenomenal. The auction is on 20 August. I am glad to be overseas when it happens. How long will it take for the market to crap itself? Let's hope longer than 2 weeks! Anyone in the Sydney market?
Getting our stuff sorted out for the Ojai conference and we are both looking forward to it. I expect that we won't have to deal with the same sort of weather we are seeing down here at present!
Our big spring racing starts up this week and all the good horses are back on the tracks. I see that Vouvray (3/4 sister to my mare) is 3rd favorite for the $5 million Melbourne Cup. Alinghi didn't race last week in USA. She is due to go August 27 or 29th in a good race over there. My mare, who is still for sale, is due to have a foal in next 3 or so weeks and I still haven't booked her into a stallion for her to shag, 20 days after delivery! The mares don't get much time off, do they?
Maybe back to $441 for a weaker close to the week? Dunno, but be careful.
Enjoy the weekend,
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