Something About a Girl in a Wallaby Jersey...
G'day. How can so many "experts" make a call on the economy that is so far wrong that even commentators were looking for another zero on the published numbers. I was "on leave," remember?? My Lisa arrived from USA on Thursday night and we had to get re-acquainted a number of times ... Long flights play havoc with the memory. On Friday night we sat around waiting for Bloomberg TV to tell us the employment news. I was quite long gold and silver, so was a bit antsy. At 10:15pm she asked me what "all the fuss was about" and why was I so interested. I explained briefly what the deal was and its effects. I mentioned to her, after one of the commentators said that consensus was north of 200k jobs, that I reckoned they'd be lucky to get 40,000. She didn't grasp the implications of what I proposed, but when the number came out at 32k, she just thought I was a smartarse and opened a nice bottle of Hunter Valley Shiraz. Life is good down here at this juncture. (Lisa doesn't have anything to do with banking, finance, trading or economics ... she's a real normal person!)
The dollar crapped itself, again, and the violence of the move was impressive. Gold and silver disappointed somewhat, especially from my vantage point on the sofa. I thought we may have seen a break of the $402 spot gold but gold was contained to a $7 rally on the day and closed just south of $400. I guess there was a heap of press on the weekend that tried to explain away the mess that is the U.S. economy. Either way it doesn't matter much, the market is getting a little taste of FEAR. Fear in matters financial will eventually lead to Gold, after U.S. Government bonds become "scary" too.. A mate who I spent 14 years working with in a previous life said to me this morning "smell the fear ... Greenspan is gunna have to pull a hare out of his arse to reverse this ...".
The 200DMA is again being tested this time on the upside. I suspect there will be some defense around $400-02 but am comfortable that the physical buyers of the world will provide solid support should we get reason for a dollar rally. I note that India is still an importer even after the large rise on Friday. I see that Turkey's imports of bullion went nuts in July setting records for the last 15 or so years. Dubai is on fire. Someone is losing a lot of physical whenever gold heads towards $390. The downside risk is not dead. There will be further buying opportunities although I expect the depth of corrections will become shallower as more physical gold is removed from the market. I wanna see $402 in the rear view before I get too excited although am comfy that real gold buyers will provide very serious downside protection should they get an opportunity.
Silver has done buggar all. Sure it kicked up to $6.85ish but it had been the subject of some intense buying pressure in previous days and so we can excuse its rather shabby performance on the day. Today's 30c round trip in the early New York market shows how irrationally this market is trading. Be VERY careful in this market, both ways. As always this is not advice, but I think anyone playing from the short side in silver is playing Russian roulette. Previous selloffs have gained momentum on such days as today and this violent reversal may indicate some shorts don't have the same balls as before. I still see $6.45 as support and after $6.90 goes then we look at $7.22-28 as the next resistance.
The shares have disappointed the most. Some issues are trading lower than they were a week or two ago with the metals some 5-10% lower. There's lots of examples of whacky valuations but this is an easy one to discuss... Hecla Mining (HL:NYSE) is today trading at 5.15 with Silver at $6.70 and Gold $401. So what, you say. On 3 August, HL was trading $5.45 with silver at $6.50 and gold at $391. I know there has been some base metal moves that will have some impact but there is no logical explanation as to equity valuation apart from the fact that there are morons playing in the metals equities market (myself included). Has everyone been scared out of these markets due to past nasty experience in April-June??? I guess so. Watch out when they return as this multi-year bull market just keeps rolling along. Sure there will be some scary days and tests of faith but secular bull markets try and shake everyone out early and only the most disciplined make the really big bucks. Look at a chart of gold from 1976 to 1982 and you will see that most of the bucks were made in a few short intervals of acceleration. Miss those periods for whatever reason and you miss most of the gains. Don't be too cute in this market. The Amex Gold Bugs Index (HUI) is comatose.
Oil is still nudging $45 and that's not good for inflation or the U.S. economy, but then again we all know that, but no one can do anything about it or is likely to. Base metals have had a tough time on the "economic slowdown" story, but I think this could be sadly misleading. China isn't gonna slow its voracious appetite for commodities, in my opinion. There are over a billion of them and they want stuff too. The U.S. is not China's only market. Why would China be looking at a takeover of Noranda, Russia with Harmony etc. They don't trust market supply and want the source. Hmmmmm.
Sorry to have missed the excitement on Friday night.... But that was nuthin' compared to Saturday.
The All Black rugby test match was certainly a memorable one for my girl. I presented her with a Wallaby jersey on Saturday so she could wear it to the game. There's something about a girl in a Wallaby jersey! The game was huge and the Wallabies won 23-18. The aftermatch party in Sydney was bigger. The headache of one little bird has just dissipated ....
Enjoy the rest of the day....
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