There are hopeful signs a bottom may be forming:
- Gold has not broken 97 lows and Dec. gold consolidating despite Yen weakness, apparent worsening Asian and Russian turmoil, significant drop in Asian physical gold demand, reported producer hedging, increasing short interest, and other such events that would induce a drop in price. (indeed an argument could be raised as to what is keeping it up)
- massive gold short interest suggests most short-players have entered the market
- the XAU at LT support with most majors holding at or above prior trend lows with increasingly tight daily ranges while capitulation in the secondarys is rampant
- in the commodities, the CRB held LT support, some analyst's now favor a bottom in oil, and although perception of large surplus of copper has driven the price to 11 year lows, Asarco reports inventories declined by 130,000 tons since beginning of year. and represent less than four weeks supply, a level which has historically indicated tightness. Shortage of intermediate copper products and lack of scrap forced Asarco to reduce production at its refinery by 15%.
- Gold demand increased 50% in 2Q, 9% less than record 2nd Q in 97. A 28% drop during 2nd half may account for price weakness but if no CB sales, 300t shortfall expected.in 2nd half
- economic stimulus measures expected from Japan should provide psychological Asian boost
- stronger gold-seasonals coming in play
- favorable ECB announcement expected in Oct/Nov., LBMA predicting higher gold by year end
- silver approaching correction target and support, continued inventory depletion despite economy
- wage demands, income and employment rate suggest PPI and CPI may have bottomed
- CB's providing global liquidity
- LT bonds failing to make new highs despite favorable market sentiment and "safety net" news.
Of course, all this could change by the morrow.
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