Just Look at the Numbers
Gold $397 Silver $6.55 Saturday 13th August , 3am Sydney
"So unaccountable are the prejudices of men on the subject of currency that it is not well to leave anything to discretionary management". - Stanley Jevons, English economist- 1875.
G'day. And so another awful economic release appears on a Friday morning with today's trade balance taking center stage. Consensus was -47 Billion and came in -56 Billion for the month... yes that's per MONTH. Consensus was nearly 20% wrong. Isn't it funny that a number of -30 billion would have killed the markets a few years ago and now it's just another number. Is OIL gonna be the reason for this as well? The old frog and boiling water story is very appropriate these days. Conditioning and expectation management at work. One day we won't bat an eyelid at -75Billion or whatever the numbers come out at. The PPI was a non event and so there is no inflation, just look at the numbers!
The dollar copped a belting following the data releases(could there have been any other outcome?) and gold caught some bids and gradually crept higher before finding some resistance at the $398 level. Yesterday we saw a savage reversal from up here and we may struggle to print $400 today. Yesterday's action was curious (annoyingly so) with gold and the dollar down on the day. Not so today, thus far.
India is importing gold at these levels despite the negative factors lined up against them with the currency and seasonality. My local metal dealer tells me they haven't ever been busier down here and even Kitco's webpage has gold coins like Maples and Eagles where the price skew to the seller's favour is very evident. With gold at $397, they are $394 bid and $417 offered on their screen. If there is so much gold around and no demand , why the mega-skew for physical gold???
The Amex Gold Bugs Index (HUI) got a good boost from the weakness in the Rand as the South African producers generally got a lift of near enough to 10% on the day. Harmony (HMY:NYSE), Randgold Resources (GOLD:NASD) and Goldfield (GV:AMEX) were notable risers in the index as was Durban Roodeport Deep (DROOY:NASD) who don't crack a mention in the HUI at present. Golden Star (GSS:AMEX) also caught some bids and I am interested to see how the big short position that I mentioned a week or so back is brought back into line. 10% of issued stock is excessive, especially compared to the rest in the sector. Compare to Newmont Mining (NEM:NYSE) at 3%, Kinross Gold (KGC:NYSE) at 1%, Goldcorp (GG:NYSE) at 2%, Hecla Mining (HL:NYSE), Agnico-Eagle Mines (AEM:NYSE) and Freeport McMoran (FCX:NYSE) are about 4%. This could be some good sport to watch especially if, as I suspect, the recent malaise in the metals equities has shaken stock from weak hands into holders with stronger conviction and deeper pockets. That's the problem with being short anything. You become a price taker and must pay whatever the market dictates to close out the position. Trading volumes have been light recently in metal equities, so short covering in size could be problematic.
Silver equities have been on a little roll as well with Silver Standard Resources (SSRI:NASD) leading the way. It still amazes me how these companies are being valued. They were $12 on Wednesday with silver at $6.50 and today with silver just 10c higher, SSRI share price is over 10% higher. I'm buggared if I know why.
Gotta fly .... It's Saturday !
Enjoy the weekend .....
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