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Wallaby Stew


Gold $406 Silver $6.30 Thursday 23rd September, 1.30am Sydney

G'day. The FOMC announcement was exactly what the market expected and so the currency markets got their knickers in a twist and gyrated all over the shop. In the end not much changed. That anything moved as a result of said announcement beggars belief. The market is getting frustrated/bored and it feels to me that we are building pressure for a serious move one way or the other. My view is it will be something like - dollar weaker, U.S. yields way higher, commodities higher and equity markets lower, FWIW. But the surplus liquidity sloshing around the globe could prove me totally incorrect (for a while longer, anyways). I think the New Year will be something else, no matter who wins the election.

Gold gave back nearly all of yesterday's gains and I see this $404 area as a great accumulation area for physical. Note where the Euro was with gold $5 higher yesterday morning. Note how solid the fixes have been around that level for the past week and I suggest that the downside is increasingly limited due to the physical market. I note that there are more ructions regarding European Central Bank gold sales. I have mentioned before that I think that any official sales will be gladly absorbed by Asian central banks and it will have little effect on the market apart from maybe some very short term initial reactions to any jawboning (who knows maybe others will join Argentina in their battle for reserve diversification???).

The Rupee has been steady and premiums suggest India is still importing gold at these levels. Dubai reports increased demand for 22 carat jewelry. Kitco is still selling at spot plus $20 for an Eagle - why so far from "the market"?

Gold $403-410 range in spot and silver $615-45 as best we can foresee. Suspect just watching the currencies will be as good a proxy as watching gold.

I note that the silver equities all got a nice wriggle on following the close of the gold market yesterday, with most adding 6-7% on the day. The gold miners also had a fair day with the usual suspects putting up some impressive gains of over 5%. There should not be too many holders of metal equities that would have been upset going home yesterday arvo, although we have seen some of those gains eroded today. Interestingly, recent gains have not been reflected in the Australian gold sector and I believe that this has been an overlooked region of the global industry. The Amex Gold Bugs Index (HUI) was 196 on Sept 8 and today around 214 shows a fair 10% or so return, versus a $9 move (2%) in the price of the underlying metal. That's how leverage is supposed to work but remember that this happens both directions. Nickel has had a great day thus far up near enough to 5% on the day and most other base metals were a little stronger.

Oil still doesn't look like heading back to $30 anytime soon and it appears there are a bunch of companies warning that things aren't as flash as what we were led to believe. Things are sure getting interesting.

Not much excitement here at present although I think metal short sellers will be a little more anxious today than they were a week ago.

Enjoy the rest of your day....

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position in gold, silver, euro

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