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Anemic at Best



Gold $392 Silver $6.60 Tuesday 3rd August, 5am Sydney

G'day. Did someone forget to open the metal and foreign exchange markets today? Since 10am NY these markets have been comatose. Terror warnings gave metals a little boost in Asia, with gold trading up to $394+ and silver topped $6.60. London AM gold fix at $393.25 and the arvo fix at $391.50 set the scene for the rest of the day. Ho-hum.

The dollar has behaved a little more solidly than one may have expected given recent developments. That the Euro is back testing the 1.20 level indicates that there may be more to the dollar rally, and I am hearing that a break of 1.1980-70 should trigger stoppies and send Euro lower, although I am also hearing some Asian buyers of Euro are accumulating in good size below 1.2030. May be a nice battle to come in the next few days.

Gold and silver were anemic at best. Silver managed to hold its hard fought gains of last week and gold didn't move outside $391-392 for the last 4 hours. Interestingly, the open interest numbers for gold show significant liquidation of spec long positions and we currently sit with total long positions similar to the result of gold's April debacle. One may have expected a greater selloff based on the amount of long liquidation and addition of further short sales. That we could hold the $388ish level in the face of such hostile market action is heartening to remaining bulls. $390 isn't a bad base to be starting again from. India is still importing strongly.

The Amex Gold Bugs Index (HUI) has recouped about 10% since last Tuesday although volumes are light and some issues appear to be dragging the chain, while others are all the rage. Sentiment is a funny thing. The mid-tier producers have been hardest hit yet and haven't recovered as well as some of the top tier names. I'm watching the short interest in some of these smaller issues, as there could be a scramble for stock should we see any significant jump in the gold price. Not necessarily to $500 or anything like that, just a break back above $400 may get a few metal equity short sellers nervous and maybe create a little excitement.

I note that Golden Star Resources (GSS:NYSE) has short interest of about 15 million shares out of a total of 133 million(more than 10% of issued). The average volume of the last 20 days is about 1.1 million shares per day. The shorts, if they are required to cover, need to buy every share traded for 10 days or more. What could that do to the share price? I understand that there is corporate activity and that there will be arbitrage positions involved, but 10% stands out like a sore thumb compared to many other metals issues. FWIW.

Unfortunately today was a great one to have stayed home in bed and recover from my 20 year school reunion. What a blast that was.

The biggest news of the day is that my girl arrives back here on Thursday night. I will be absent on Thursday and Friday, but as I live only 300 yards away from the office, I will be "on call" should things get moving. What chance a quiet market?

I find out tomorrow about the sale of my mare. They did all the examinations and stuff today and a decision is required in next 48 hrs as she is due to foal on 10 August and if she does before we sign, the terms dramatically change - my way.

Enjoy the rest of your day......


position in gold, silver, euro, gss

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