One of the cardinal rules in the gold market has been that the "Bank of England must receive the worst
price" and I would expect gold to fall slightly as we approach their auction of 20 tons of gold next
Wednesday. The BOE has lost well over 52 million pounds, so far, on their scheduled auctions of gold
and with 2 left to go, there is scant time for the trade to take money from such a willing donor of funds. I
fully expect that any bull market in gold will be held in abeyance pending such a donation by the BOE.
Following the lead of Goldcorp, a Canadian gold producer, IAMGOLD has converted virtually all of its
corporate cash holdings into gold and is going to offer to pay future dividends in gold. They state that
they believe that gold is money and that gold is undervalued at current levels and that their stockholders
are better served with such plans. To quote Mr. Bruce of that firm, "Our view is that entire industry
should believe that gold is money. If we don't practice that belief, then we can hardly expect Central
Banks or anyone else to give it that dimension". This is a most heretical comment from a gold producer,
who have previously believed in just selling their production, and in some cases a goodly portion of their
reserves, and is most welcome to the goldbugs of the industry. There seems to be a very substantive
trend at present among the gold producers. Not only may we see less forward selling and hedging but
also it appears that we may see the beginnings of a belief among them that gold really truly can and will
rise in price.
Their has also been articles on the minesite.com that there exists anecdotal evidence that much of the
"black money" (currency hidden under the mattress and the like) in Europe, is being switched into gold
rather than Euros. Many of the citizens of Europe still are apprehensive of the Euro due to nationalistic
or perhaps economic reasons, and it would appear that gold is being purchased with these illicit funds.
To me, it just makes sense. And, while the statistics will never be known due to the nature of the trade,
this conversion could be very significant in size. Only the price of gold may perhaps tell us of the true
size of this situation. But, all in all, a bullish factor.
kitco.com
It was also most instructive to note that the precious metals traded on their own merits for the week; the movement of the USD and the equity markets had very little effect on
prices, if at all.
In gold, significant demand shifts were seen as prices powered higher. As "saber rattling" continues to
escalate between India and Pakistan, the Indian Rupee continued its death spiral, hitting new all time
lows. While the decline of a local currency may create buying of the precious metals in some countries, it
will certainly have the complete opposite effect in India. I look for demand to drop significantly during
this period of time. Also, as prices shot through the $285 in spot gold, there are reports of selling out of
China and Hong Kong. Gold KiloBars, which were selling at a goodly premium the week before, were
being offered at slightly under spot, indicating the dishoarding of product. On the bullish side, it appears
that the Swiss Bank has gone back to their usual sales profile of selling about * to * ton of gold a day,
rather than the 2.2 tons a day that occurred in the previous 10 day period.
[and lastly]
The statistics above would sway me a bit to the bearish side, not to the point of recommending outright
short positions, but to the point of caution. I distinctly dislike trading against the commercials, or
contrarily with the speculative crowd, as history demonstrates that is usually a bad bet. Next, the small
speculators are now at about a 3-1 ratio against the small shorts, and these guys are rarely right. All in
all, I believe that barring any news; it would be prudent to establish long positions at lower prices.
Aggressive investors might also consider beginning to establish short positions by selling some
near-term out-of-the-money calls.
mixed it up a bit 4 ya...how i kinda see it... |
