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Waltzing Matilda

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Gold $412 Silver $6.60 Wednesday 29 September, 3am Sydney


G'day. A mental health day for me yesterday and I note that the world survived my minor absence and metals went up nicely. The spike in silver to $6.65 would have caught many by surprise. I note that gold has struggled at $412-14 spot and it seems there is plenty of gold for sale up here. It will be interesting to see the determination of the buyers as there appears to be some probing of the downside on any excuse, mainly Euro weakness. Should make interesting viewing I think.

We have had some currency moves of note, including a slightly weaker Indian Rupee, which coupled with some strength in the dollar gold price may put some pressure on the Indian physical market. The London fixes have been solidly around $410 the last few days. We made note a week or so ago when Euro touched 1.23 that we expected gold up around $410, yet it was lagging back at $402. The market suddenly now agrees, for the time being.

The gold market continues to feel like it has some work ahead of it. The moving averages have effectively been cleared with the 200 day at $403 and the 20 day at $405. I suspect we may see $408 again before $415 but the G7 meeting in a few days could throw a spanner in all the works depending on what they come up with. I suspect there will be some jawboning of the dollar higher, although I note in the Buzz that Goldman Sachs have suggested the opposite, and even reckon the odd gold equity might be a good thing to own.

Silver seems to be struggling around the $6.60 level and there has been some aggressive buying today by a large European institution with very strong links into Asia. There has not been a great deal of follow through buying and there are many probes to the downside testing the size and strength of the buyers. I am wary of a pullback to the $6.45 level and see more resistance at $6.75-80. There has not been as much producer selling as many had suggested (well not that I'm hearing anyway). Many expected that they would be very keen to hedge especially as they all "missed the boat" on the way down from $8.50 earlier in the year. It is still banging around above the 200 DMA of $6.48ish and the 20 day is about $6.37.

The Amex Gold Bugs Index (HUI) has been well performed even with Newmont (NEM:NYSE) dragging the chain somewhat, although their announced Reserve increase should be beneficial to the index today. The South Africans have performed nicely today with Durban Roodepoort Deep (DROOY:NASD) and Gold Fields Limited (GFI:NYSE) leading the way. Coeur D'Alene Mines (CDE:NYSE) has finally regained a 4 handle although not with a great deal of conviction and Silver Standard Resources (SSRI:NASD) is nudging $16 after its southerly trip to sub $9 in May. Interesting valuations given silver was $5.60 then and now only $6.60.

I suppose we should be wary of the approaching G7 meeting and set risk accordingly. It may be an interesting old week ahead and I am keeping a close eye on the bonds sub 4%.

The Jets didn't lose.... Again.


Enjoy the rest of your day ...

Laurie.
position in gold, silver, euro, nem, drooy, hmy, ssri

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