tippet, this speaks to those exact issues>
m1.mny.co.za
PRINCETON, NJ -- The automated stop loss
selling that accelerated gold's losses late into
the week were bad enough, but Friday's news
that N M Rothschild & Sons, doyen of the
bullion market, is pulling the plug on its
American gold desk is probably worse.
And just to add to the misery, CSFB is
quitting its seat at the prestigious London
"Fix". Compare that with 15 years ago when
there was not a back that wasn't stabbed as
gauche North American and European banks
muscled in on the quintessential English
institution. The Fix retains a certain allure, but
only because it reflects opaque traditions from
a bygone age rather than the wealth it
produces.
When the Rothschilds and CSFBs of this
world decamp from the bullion business there
is no illusion about the poor state the market
is in. The timing of the announcements is
especially demoralizing since it adds weight
to a snowballing consensus that gold failed its
easiest test on September 11.
Hard-wired to sell
In a client note distributed earlier this week,
Mitsui analyst Andy Smith was hardly
surprised that gold retreated as soon as the
first bombs tilled Afghani soil. "Any gold
trader surviving the carnage of Day 1 of the
Gulf War (a $20 fall between the pm fix
January 16 and am fix January 17, 1991) has
it hard-wired into his DNA to sell first at the
sound of missiles; analyse second."
There is an intriguing link with small
speculators who hold less than 200 Comex
100 ounce contracts. "The few times these
Johnnie Come Latelies have run net long
positions near or over 100 tonnes, the gold
price has cratered; quickly."
The lesson is that these speculators are weak
holders who think the world is automatically
safe because there isn't a stream of body bags
being shipped Stateside.
They got a wake-up call on Friday, didn't
they?
First class anthrax
Just as the small specs were about to
celebrate another 100-hour victory, it turns
out some killjoy has been mailing envelopes
of dusty anthrax to media outlets in the U.S.
With one death in Florida and a new case in
Manhattan, the world is decidedly unsafe
again. And it will remain so for a long, long
time.
As a result, physical gold and gold equities
immediately recovered some of the losses
from this week. Spot gold shot up more than
four dollars and the Philadelphia Gold and
Silver Index tracked that movement almost
point-for-point.
After edging toward a net short position for
the week, it appears that Comex traders are
reinstating their long positions ahead of the
weekend. Better safe than sorry when bullets
are also a currency.
As gold bled out its terror related gains, the
mass media was quick to pounce on the
metal's diminishing "safe haven premium".
With not a little defensiveness, a number of
gold bugs emerged to say that gold has never
been a safe haven (surely they jest?). What it
is supposed to be - if not a refuge against
disorder – is left to the imagination.
How about that multiple
If you want near-term fundamental reasons
to stay engaged to gold, just have a look at
the equity markets. The Afghani's can count
on precision bombing of the Taliban, but S&P
500 investors must cope with clusters of
unguided profit warnings.
All the while corporate earnings are sliding
toward the abyss, but prices dangle near
pre-attack levels. The earnings multiples are
simply unsustainable if you replay the words
of the leading analysts from January who
were having convulsions about historically
high ratings. Those ratings are back – and
there is even less justification for them.
As the trickle-derating resumes – death by a
thousand cuts versus a well-aimed axe blow
to the temple still has the same result – there
will be a negative impact on the dollar. With
the inverse relationship between gold and the
dollar firmer in recent months, there is even
less reason to panic about the gold in your
portfolio.
Investment marketing
At the Mining Investment Forum in Denver
there was something of an outcry about the
gold industry's reluctance to promote
investment in the metal even as they pursue
new markets for jewellery and industrial
applications.
The problem is that people with sunny
dispositions inhabit the world of marketing,
branding and image making. The last thing
gold needs is a surfeit of smiles and
pleasantries. It needs worrywarts dreaming up
posters of the paper assets of the middle class
being destroyed by fire and brimstone while
behind them bowler-hatted robber barons
gleefully manhandle carpetbags brimming
with bullion.
Gold needs someone to make a point. It will
ultimately make the point itself, but a lot of
people could be saved a lot of heartache if we
just passed on the political correctness. It
would also give the likes of the Wall Street
Journal less opportunity to write things like:
"As the stock market boomed in the 1990s,
Wall Street collectively snickered, as gold hit
20-year lows and failed to maintain even
temporary gains."
The middle class may yet snicker last as it
continues to buy gold coin in record volumes
based on nothing more than intuition. |
