Back From the Flu
G'day. Quiet weekend laid up with the flu. Needed the rest apparently. Anyways, plenty of good sport on the box and the weather wasn't that flash, so no real loss. Got a chuckle out of this ..... Real assets .... Someone took the vibe a little too seriously.
Gold was typically lethargic for a Monday and we saw 2/5ths of buggar all going on while the USA was kicking off the footy season with a Jets win. As unusual as a Jets win, we saw gold move decisively higher in NY after a pretty ordinary start. That there were no significant currency moves occurring was not lost on smart observers. Many may cite oil as a reason. Is there some gold demand emerging that's not related to currency moves? Could it be that gold went up rather than another currency falling? Is there real demand that is overpowering the paper sellers.... Nah, it's just one day, but I like it! I expect at some stage in the future (DAYS, WEEKS, YEARS, WHATEVER) that gold will outperform ALL fiat currencies and show itself as the only true money. It's just a matter of when, not if, IMO. I'm feeling decidedly patient today and I expect I'm gonna need it in spades over the coming months. India is still sucking it all up judging by the premiums and even Kitco is spot plus $20 for a 1 ounce bar. Real gold costs way more than the screen price, if you can actually get it. Silver is worse.
Silver, on the other hand was royally screwed early in NY and touched $6.05 briefly. A gimme, thanks. Caught some bids and was back above $6.15 quicksmart. Suspect we try the $6.10 again on the dip although am hearing that industrial consumers want sub $6 before they step up to the plate for fixed price metal. Again, I find the rationale for such somewhat disturbing. Hanging out for another 25c or so, when the upside is unlimited and volatility is increasingly wild, is not a very smart bet in my view. The consumer of silver should be more concerned with consistent, uninterrupted supply than with what it's gonna cost him. Little bits of silver stop big bits of industry working! Silver can double in price and it won't affect the cost base of many products, but the product won't exist / work without silver. Silver is good stuff!
The little pop in gold has taken us back above the DMA's and we rest on the downside trendline off the August high (as Todd points out in the Buzz). Keep an eye on pennants in the charts in different time frames. I suspect we may have a breather around the $407 spot level in gold and the CPI on Wednesday may give us some more legs yet conversely, could give us the old sucker punch from behind and drop us back to the $398-95 levels. CPI means nothing. Inflation is in the M's. Anyone who takes the CPI data as anything other than a joke is either delusional or a Fed Governor. Take your pick, although they are not mutually exclusive judging by recent comments emanating from the keepers of the printing presses. Just honest opinion as usual.
There was talk of Dutch and Italian gold sales in the past couple days and Reuters just announced that Italy will NOT be selling their gold reserves. Central Bank sales should mean nothing to gold. Asian Central Banks will (IMO) and can take every ounce that any idiot Western Central Bank may want to sell. It wouldn't even hit the market. Japan is running Gold at sub 2% of their FX reserves. Take it to 5% and they buy lots of Europe's gold for dollars instead of buying those useless Fed IOU's. Simple.
The Amex Gold Bugs Index (HUI) still hasn't taken out Friday's high even with gold $5 higher. Getting too hard to work those puppies out on a day by day basis. Coeur D'Alene Mines (CDE:NYSE) is leading the way and is still only 50% of its shareprice of 5 months back. I still don't like them as a company and they are fun to play on an intraday basis but until they sort out the Wheaton River shitefight they're off the list. I note Hecla (HL:NYSE) is now $6.20 and seemingly bulletproof. That's a worry in itself. Just for your info, I am lifting 20% of the HL stock that I bought (personally) at $5.10 a month back and sticking it in another metal company that is significantly more speculative. Not in anyway a reflection of any dissatisfaction with Hecla and I still have them in both my personal and professional portfolio's (The same dollar exposure and all).
Minyan David correctly notes how small the trading volumes are of the major metals issues. I concur. That the market has been this resilient in illiquid times gives me some heart, as well as the fact that this market is so small that any capital allocation towards the metals should have a dramatic effect. Don't forget that liquidity, or lack thereof, works both ways.
I still can't get the old "wait till after the election" thing out of my mind as I look at what catalysts could send metals higher again. The dollar should hold itself together for a few more months and may even rally hard one more time pre-election, even 5% or so. But it can't change the inevitable ending - the same result of EVERY fiat currency system in history. Oblivion. I dunno when and don't pretend to. It's not a pretty thought and dismissing it outright like many I know, is just going looking for trouble, IMO. People insure their cars and houses, why not their finances?
Enjoy the rest of your day .......
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