Interesting Commentary:
The precious metals were all lower this trading day with gold holding
the
$260 support area, silver attempted resistance at $5.15-$5.18 and failed,
and platinum and palladium were lower due to some strong physical selling
in the Far East.
The Tiger Fund, run by Julian Robertson, was the rumored seller overseas
last night. But, of course, they would not comment. Other anecdotal
evidence would demonstrate that the sellers were Russians. Nevertheless,
this selling ran palladium down $8, and platinum about $5.50. These markets
looked on the verge of breaking out on the upside last week but it was not
to occur.
I have been writing in this newsletter that I strongly believed that the
Bank of England has a hidden agenda in their proposed gold auctions. It was
my contention that the goal was certainly not to maximize their financial
return but truly spoke to other motivations. On Friday, the Bank of England
released the terms and conditions of their auction on their website
( www.bankofengland.co.uk ). I was struck by four facts in a cursory
reading of the offering.
(1) All of the gold will be sold at the lowest acceptable price.
(2) Physical inspection of the gold will not be permitted.
(3) The gold is sold "as is".
(4) Now, the most unbelievable and preposterous condition. And, I quote,
"While the description of the gold set out in Parts II and Parts III
above is believed to be correct, neither HM Government, HM Treasury,
nor the Bank of England, makes any warranty, express or implied,
with respect to the weight and quality of the gold."
All prejudices aside, what the hell is going on here?? I do not pretend to
understand the motivations of the British treasury, but it certainly
appears that this auction has been specifically structured to sell the gold
at the lowest possible price. And, if so, why?
With the Financial Times gold conference now occurring in London, there was
a great deal of official announcements: As follows:
*Germany officially supported the IMF sale of as much as 10 million
ounces of gold although they were concerned that this sale had not brought
more professional review and that better alternatives were available.
*The Swiss government said that they expect to have a legal framework in
place next year to allow the bank to start selling the first of 1300 tons
of gold from their reserves. They also commented that the preceding number
would not exceeded in regards to their sales.
*Taiwan's Central Bank said on Monday that it had no plans to sell down
their gold reserves, despite sales by others.
*South Africa suggested that future official sales of gold be conducted
in a regulated manner through the BIS to ensure market transparency and
stability.
The Bullish Consensus was released today and shows that sentiment toward
gold is at it's lowest reading since June 30, 1981 at 13. This would
indicate that everyone who wants to sell gold already has, either sold
their long holding or gone short. This must be interpreted as a danger sign
for shorts in the market. We will have some recommendations below.
Just more data point on gold, Macquarie Bank estimated that around one
quarter of Western world gold mines, or about a fifth of Western world mine
supply, were operating with total cash costs higher than current price
levels. It is a truism that a commodity can not sell under its cost of
production for very long. This economic tenet must be expanded due to the
large above ground supplies of gold but it does give one a sense of the
future of price levels should the official sales moderate or if the price
drops much further.
Lastly, silver keeps moving out of Comex depositories at these relatively
low prices. As of this date, about 75.8 million ounces remain and this is
only about 1.4 million ounces from the low seen in February of this year
when silver concurrently made its highs for the year. Please keep a close
eye on this data point. Frankly, it makes us very bullish, all we need to
see now is rising lease rates to really get us bullish.
Lease rates in platinum are now about 5.5% per annum. At this time, we
would strongly recommend the physical purchase of platinum and its
subsequent lease into the marketplace using our reverse repurchase program.
Not only do you benefit from a potential rise in price of platinum (and
naturally suffer from a decline), but you can receive an income stream
higher than current T-Bill rates.GOLD OPEN POSITIONS:
LONG 2 UNITS AUGUST 275 PUTS BOUGHT AT $3.30 CLOSE $13.30
LONG 1 UNIT AUGUST 270 PUTS BOUGHT AT $4.50 CLOSE $9.60
YESTERDAY'S RECOMMENDATION: As per our recommendations, traders covered
5 units of August gold shorts at this morning's opening at about $261.50 to
yield a profit of about $4200.00.
We took profits of about $4200.00 this morning and our open positions have
a mark to market of about $2500.00. The market looks like it wants to go
higher here. I look for a move to $264 or so. It was somewhat positive that
the market held $260.00. RECOMMENDATIONS: none.SILVER OPEN POSITIONS:
LONG 2 UNITS OF JULY SILVER BOUGHT AT $5.08 CLOSE $5.105
LONG 1 UNIT OF JULY SILVER BOUTHT AT $5.095 CLOSE $5.105
YESTERDAY'S RECOMMENDATION: none.
Nothing really to say but the next 10 cents up will be tough sledding. The
weekly charts are looking really good but the daily charts look overbought.
RECOMMENDATION: none.PLATINUMOPEN POSITIONS:
LONG 2 UNITS OF JULY PLATINUM BOUGHT AT $364. CLOSE $362.70
LONG 2 UNITS OF JULY PLATINUM BOUGHT AT 368.20 CLOSE $362.70
YESTERDAY'S RECOMMENDATION: none.
I think this market could easily rally into the $380's. All the conditions
are there. High lease rates, rhodium skyrocketing, palladium strong,
technicals strong, daily charts strong. Use a stop close only at $355.00 on
the positions above.RECOMMENDATION: none.
Naturally, all investors who hold precious metals should look into our
reverse repurchase program whereby they can capture current lease rates. It
makes no sense to own physical precious metals without gaining a stream of
income. Please call with any questions.PALLADIUM:
YESTERDAY'S RECOMMENDATION: none.
Although I think this market is going higher, the risk/reward relationship
is just not attractive. There is nowhere to put a calculated stop. We could
see a $40 drop and the market could still be good. No thanx.
RECOMMENDATION: none.Leonard KaplanChief Bullion Dealer |
