Hi Thomas. A good read from the USA Gold site..............
MARKET UPDATE (01/09/98) AM-----Gold dropped again this morning to below the psychologically important $280 mark but then recovered somewhat to hover just above $280. In London, gold hit $278.70. Silver got hammered yesterday and fell another $0.16/oz today before rallying. From a technical viewpoint, today silver bounced off its 40-day moving average at $5.61. Heavy buying and volatile trading are the words we are hearing from the silver pit. Yesterday, we reported that a group of buyers involved in the silver market were taken by surprise by the amount of silver available in the physical market despite reports that actual physical silver supplies were waning. COMEX silver stocks dropped another 23,000 ounces overnight. Physical gold on the other hand remains tight with COMEX gold stocks dropping another 1,621 ounces overnight. Looking back just to October 1997 and the warehouse stocks stook at over 918,000 ounces. Go back one year and they were at 1.5 million ounces. Thus, it is easy to see that the lowest gold price in 18 years is stimulating demand. What will happen to the gold price when the warehouse stocks are nearly depleted?? We think that a price explosion is just ahead. Gold prices must go back up to where mines can produce at a profit and be able to replace all of the gold they borrowed from the central banks!! One point which everyone in the media misses is that the central banks have lent more gold than they have actually sold. A loan of anything implies that it must be repaid in kind. Now if 80% of the gold mines cannot produce gold at a profit and thus must shut down, then how in the world will they ever be able to replace the borrowed gold? With this understanding, it now becomes clear why gold is at or near its low point, and that a huge short-covering rally lies ahead.
Today's gold market action has to be attributed to more short-selling by speculators on paper perhaps associated with the dollar strengthening on world markets in the wake of another disaster in Asia --this time in Indonesia. The Indonesian stock market plunged 18% yesterday and the rupiah plummeted on rumors that strongman President Sukharno might not run for re-election. There was also talk originating from the Sukharno administration that Indonesia might declare a moratorium on its debt. Reuters carried a story saying that Indonesia was "far more serious" than Korea's debt debacle. This latest crisis has prompted an emergency trip by the head of the IMF, Michel Camdessus, to Indonesia where he is meeting with high-level policymakers from the U.S., European Community, and Indonesia. Interesting observation: the IMF bailed out Indonesia earlier last summer with about $20 billion, just before Korea came unravelled. All attention was focused on Korea for several weeks and then Indonesia is back in trouble. Which Southeast Asia nation is next? Or does the economic flu bug now show up in South America? By looking at the recent performance of U.S. bank stocks (Citicorp, Chase Manhattan, J P Morgan, Bank of America), something ominous lies just ahead. Rumors are that Brazil is on the ropes again despite the "re-structuring" that was accomplished with the Brady bonds several years ago. Today, the dollar appears to be slightly lower after yesterday's meeting between U.S. and Japanese officials. We don't know what transpired at this meeting, but it is favoring the Yen today at the expense of the Swiss Franc and U.S. currency. U.S. bonds continue to hover at 4-year highs, as scared money from Asia pours into this "safe haven."
Finally, Thailand has joined South Korea in launching a scheme to pry gold out of the hands of its citizens to service the national debt. At this point, it is considered as "voluntary." Who knows if these leaders will follow in the steps of our U.S. president, Franklin D. Roosevelt, and just resort to outright confiscation? |
