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Back on Deck

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Gold $408 Silver $6.66 Friday 27th August, 3.30am Sydney

"Don't worry about the world coming to an end today. It is already tomorrow in Australia." --- Charles Schultz


G' day. Tough couple of days and thanks to all who sent their best wishes for my Mum. They ripped a hen-egg sized tumor out of her guts on Tuesday after a very sudden illness. The doctors say that they think it is "contained" and they are doing their biopsy stuff now and get results in another day or two. Best result one could hope for given the initial discussions and fears. Deal with facts only. Worrying about anything else is a waste of energy and like I told Mum before she went into theatre - "95% of things that you worry about don't happen. The 5% that do, you can't do anything about ... so don't worry."

So what happened to gold? It went up, then down and up some and down some and we are back at $407 in the middle. I note the $410-12 spot level was well protected and there has been good support in the $405 area as one would expect. The physical market has been soaking up a lot of metal on any dips and premiums in India suggest that they are a good buyer around these levels. The Argentina Central Bank news I touched on in the Randoms last week has had little airplay. They snaffled up 42 tons in the first half of this year. They obviously have had some nasty experience with inflation and currency debacles and maybe they are following the sound, reasoned approach to reserve diversification and are exploring other alternatives to the dollar. I bet they aren't the last to grab some cheap gold.

Looks to me that we are in a new range of $395-415 up from $385-405 recently. Something will have to give, either way, to break out. I see Todd and Prof Succo are looking at the dollar with some confidence. Interestingly, a couple of my colleagues here are in the same boat and some of our models are suggesting likewise. I think IF we get a good dollar rally, it will be a cleanout of the shorts and there will be some sentiment change but inevitably, the primary trend will continue in time. What time? I dunno.

Silver appears well backed at $6.60-50 and I hear there has been some producer hedging done in the last few days, mostly option related. I hear that the delta has been readily absorbed by the market. Need a day or two to come to grips with this animal again so won't try and guess what's in store for us in the near term.

The Amex Gold Bugs Index (HUI) is still hugging the 200 level and I note that many issues have held much of their gains of late last week and early this week. Golden Star Resources (GSS:AMEX) has had a breather since the wild run up last week and I will be interested to see what kind of reduction there has been in the short position since the cessation of hostilities on the corporate side.

I note that the Australian gold sector has been ignored this past week or so. The world's gold stocks were running hard yet the Aussies didn't break out of a waddle. Catch-up may be in the offing although there aren't that many left down here worth the worry.

Base metals are whippy and I see that Nickel has copped a flogging the last few days. Everyone is still all hot on oil. Dunno why. There is plenty of crude around, its just crappy grade. Refined products are what is required and I note that there is some discussion about a new refinery being built, somewhere in the U.S., the first in over 30 years and it will take a few years to get cracking(pun intended). The "greenies" probably will nix it out of the gates.

Good to be back on deck and thanks again for those that sent their regards during the week.....


Laurie.


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