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A Clean Out Coming?


Gold $417.50 Silver $6.90 Friday 1 October, 3am Sydney.

G'day. Gold and silver have all benefited from the recent commodity price surge. Base metals like Copper and Nickel, Oil and refined products, grains and soft commodities have all received a lift from the recent dollar doldrums. The G7 meeting on the weekend could drastically alter that environment or at least certainly temper the recent enthusiasm and sentiment improvement in commodities.

Copped a hard time with the currencies early today. Check out the Aussie dollar these days. The Rupee improved a little versus the dollar but nothing of significance. The Euro may well attempt 1.2480 in the next 24 hours but ..... I'm very cautious about further dollar weakness before this G7 bash.

Gold tested the $417.50 level a couple times today after a quiet Asian session. The London PM Fix was sub $416 and I would be surprised if we close gold today north of $418. There was no good news for the dollar again today and some other confidence draining events such as Fannie Mae (FNM:NYSE) derivatives mess and subsequent equity carnage, Merck (MRK:NYSE) and their misgivings today, bonds up 20 yield points in a few days, Oil back near $50, Iraq etc. etc. etc... need we go on? The dollar has a habit of making these fearsome reversals when least expected and we may be in line for a fierce one next week. I dunno but there feels like a clean out coming and a dollar rally would cause the most distress to the market.

Silver popped aggressively this morning on one fund buying 15 million ounces through the futures. I bet they don't want delivery of said ounces so this is just a "paper" long. Someone wanting to buy physical silver in size wouldn't have driven the buying so aggressively, IMO. Therefore, it will be liquidated at some stage, so we will see something of the opposite in due course when they decide to leave the "silver casino". Looks like having a breather around the $6.90-95 but $7.25 looks a likely target. Downside support still figures around $6.45 but initial support may well show through at $6.60-63ish. Silver has its 200DMA at about $6.45 and we now trade over 10% higher. Be careful we don't run too hard, too fast and get outrageously ahead of ourselves.

Newmont Mining (NEM:NYSE) back above $45 and the Amex Gold Bugs Index (HUI) has busrt through 230. Nice. There is still plenty of upside to the equities although I expect some pain in the not too distant future. Straight line appreciation generally fails. Coeur D'Alene Mines (CDE:NYSE) are still outperforming as one may expect given the shabby last 6 months or so (actually a shabby 10 years may be a better indication).

Looks like a pretty strong close coming up....

Enjoy the rest of the day...

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position in gold, silver, aud, nem

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