Richard,
Here is feedback to the morose RR.
Midas du Metropole
"The Gold Market and Precious Metals Commentary"
Q. Little Bear is in the 'doghouse'. Which table do you think he'd be under ?
A. Gold, of course. But he is hopeful.
March 9, 1999 - Spot Gold $292 up 70 cents - Spot Silver $5.24 down 4.5 cents
Technicals -
A fierce battle is on. Well, Café members: Indiana Jones, Shaka Zulu, James Darren, Anthony Quinn, Gregory Peck and David Niven did all that what we asked them to do - silence the "Guns of Navarone" resistance at $290. That was no small feat. That means that all those gold borrowers at the $290 level over the past two months are now underwater just a tad. While the battle for control of $290 was won by us in the short term, they will not give up the ghost without a further, fanatical fight. The trading volume on Comex today was a very heavy 110,00 contracts versus the 1999 daily average of 35,492 contracts
The intensity of the shorts to hold the line is why the price of gold sold off today from today's high of $294.10. Goldman Sachs led a barrage of selling that took on spec short covering. The big surprise of the day was that the open interest yesterday went up 1741 contracts to a new recent high of 196,105 contracts. Most observers were looking for a big drop in the open interest as a result of spec short covering. The open interest increase is very good news. It means new longs have entered the long side. It also means the gold borrowing shorts are having to get shorter to try and keep the gold price from rallying too far, too fast.
The gold game is just that right now- a game. We told you that Goldman Sachs was a big buyer last week. Was the market starting to get away from them as they have so much more buying to do? So they sat on it today, hoping to draw in more sellers? Based on analyst comments after the close, it worked as most all were immediately bearish. The intrigue grows ( see Goldman comment below). The fact that the price of gold sold off $2 from its high today is just an example of how intense this struggle over the gold price is going to be. It is one we think the shorts are going to lose and lose big. The already lost the battle of $290 at Navarone. Soon, they will lose the war and their effort to keep gold off the radar screen for the investment world. We could easily get a first strike move to $340 in the months to come and then reach our $405 objective by year end.
Silver is trading like a typical silver market after a liquidation. Normally, it takes two weeks for it to regain its composure and trend higher again. This time may be no different. Early in the day with gold moving up nicely, silver was sold off. Part of that was due to the unwinding of long silver/short gold spreads. In our opinion it is only a matter of time before silver resumes its upward price course. We still see $9.78 before the end of the year.
Fundamentals -
"China denied a report by I.D.E.A., a consultancy, that the government set up a research committee to determine the timing of a devaluation. Still, mounting concern helped spur an outflow of funds large enough to prompt China to raise interest rates for U. S. dollar savings by almost 1 percentage point. Chinese investors are buying dollar-priced gold to protect their assets from a devaluation, traders said. "Every time there is any kind of currency crisis, it's good news for gold," said Tony Cadie, an analyst at Rice Rinaldi Turner & Co. in Johnannesburg."
According to John Brimelow the Tael premiums in Hong Kong do not confirm this Bloomberg story, but we thought you should be aware of it. The Hong Kong Tael premium was flat today.
The gold lease rates are still soft: .64 for one month and 1.02 for the six month.
The Indian gold and silver premiums remain very firm. Gold-10.3% Silver-10.4%. These high rates bode will for the importing of both these precious metals into India.
To give you some idea of how gold demand was affected the Asian economic crisis, here is a tidbit: 30% of the goldsmith shops in Thailand shut down last year. 6,000 closed down out of a total of 20,000. 1999 should be a turnaround time as demand is supposed to be very strong so far this year. The Chinese New Year buying was especially strong.
Theatre of the Absurd- from Daniel McConvey and Christy S. Ahn, both of Goldman Sachs, who do the precious metals research for that firm. We reported in the last Midas that the referendum to approve Swiss gold sales had been delayed from April 18 until next year by the Swiss Finance Ministry. We also said that we knew of great resistance of this proposal by the Swiss people in the countryside cantons. Yet, the news media ( always negative about gold ) has been insinuating the gold sale was a fait accompli.
Goldman Sachs has been running around the world telling their clients how bearish the gold market is for some time now. They have been encouraging forward sales by producers and I would love to take a look at their own gold borrowing book. Any one want to guess on how many gold loans they took out at .7% to 1.5% for themselves or for clients? Until very recently, they had been big sellers for many, many months.
Then yesterday they came out with a PRESS RELEASE saying that the delay of the Swiss gold sale announcement was a big deal. A PRESS RELEASE:
"It could be very bullish news because the Swiss gold sales are such a big overhang in the market". Only Goldman made such a big deal out of this. In the same breath they say: "If this is true, we would view it as bullish for the gold market because our understanding is that the 2000 referendum could be significantly more contentious both in timing and in content". Followed by: "Maintain market weight rating in gold sector and gold price forecasts of $290 gold in 1999 ( what was that recent resistance price that our heroes took out ) and $300 in 2000 ( real bullish forecasts for their clients ). The situation is far from clear and raises further questions".
Give me a break. If this is not a cover for some other hidden agenda, I do not know what one is. Looks to me like this is some sort of reason they are going to come up with why they are going to change their price forecasts down the road. DOLLARS TO DOUGHTNUTS, they will change their forecasts. They are in a bind. They have everyone short. They want out of the rest of their own shorts. They know the gold market is explosive now. So what to do? Put out this putrid pablem in a public forum so that they can use it as an excuse to change their mind. How many of the CAFÉ think that Goldman Sachs will tell their clients that they are changing their price forecasts BEFORE THEY COVER THEIR OWN SHORTS. Nice honorable crowd we have here. It is very good news for us and shows how desperate the shorts have become.
Potpourri and the Gold Shares
There's really life in them there gold stocks. Some juniors have gone up 50% and more the past few days and the XAU has rallied too. Today, it closed flat at 64.93. However, the big cap gold stocks are suffering from negative gold commentary from most all of the prestigious gold analysts ( Goldman, etc ). The reports about the price prospects for gold are so negative, or neutral, that the big money managers have shied away from buying the big caps to any great degree on this recent price run up. That means there is enormous pent up demand for these shares that should be unleashed in the near future when gold surprises mainstream Wall Street on a serious upside move.
The highly regarded technician, Martin Pring declared a big picture breakout for gold based on today's London fixes. For more on Martin Pring commentary- pring.com.
The dollar index traded 99 today and has moved up sharply. The price of gold has been moving up with the dollar. Thus, the gold price in foreign currency terms is on a roll. In the last Midas we suggested to you that a move up in the price of gold in foreign currency terms often precludes a move up in dollar based gold. That has been the case so far again.
While Ted Arnold, famed gold bear analyst, was at Merrill Lynch he used to suggest that Warren Buffet had surely sold out his silver position. Now ( at Prudential-Bache ) he says Pru believes Buffet still has his position. Different firm, different commentary from T.A. "We would be amazed if he has managed to extricate himself without anyone if the market seeing it being done," he said ( Reuters)
He goes on. "Much of Buffett's silver sat in British warehouses, away from the more public glare of U. S. venues, which, helped build the impression of metal shortage". A major factor would be Indian demand, which Arnold said tailed off above $5.00 and disappeared come $5.50.
Whither come Ted Arnold? Buffets sells, then Buffet has not sold anything. He says "Indian demand disappeared, yet John Brimelow has tracked Indian silver demand every day these past months and NOT ONCE did the Indian premiums dip below a point that was not ample to encourage imports. We have the documentation on that. Of course, sticker shock pricing affects demand on quick price run ups, but to say it disappeared is just dead wrong.
In conclusion, Arnold doubts that any prices above $6.00 can be sustained. We will be all over him when the price of silver goes $7 bid.
Midas cannot get ONE mainstream press person to give him the time of day about our reasons for a bullish silver price forecast. NOT ONE. Yet, just when gold starts to rear its head up who manages to subtly get Bloomberg's attention ( Mar. 9 )- Good old crybaby, Martin Armstrong, who is the biggest silver trader and most notorious short on Comex. This mega silver bear puts out his bearish spiel to the press and they eat it up.
"Somebody tried to squeeze the market again in February. There were rumors from London that Warren Buffet bought more silver and pushed it up for March. He would be nuts if he did ( yeah, Warren Buffet is nuts, right ) but it took the price up to a recent high of $5.81 an ounce. Somebody was involved. Lease rates went up dramatically". ( Martin take a look. They are still way up. )
"Quite frankly, unfortunately, there has been a kind of manipulation, professional trading in the silver markets. A lot of normal trading activity is not just there anymore…They're still in a deflationary mode, and despite the shananigans of a few players who keep trying to talk up the market into a bull market again, there has been no interest from the street".
Martin- take out a Café membership. There is big interest in silver here and we live on streets. Midas thinks the price of silver is going to $9.78 in 1999. Your propaganda is getting old and so is your whining about "nobody is interested in commodities". Midas might be a nobody, but this "nobody" is interested. And Martin, while your at it, please give me your technical take on the rising CRB Index and the surge in the price of oil. Maybe Martin is right. Maybe Midas is right. Stay tuned.
Midas would like all the GATA contributors to know that your contributions are going towards a cause that is history making already. I can say that because we are being fed fundamental information by some of the most informed people in the gold world as a result of the GATA visibility. These people want to help us and want GATA to succeed. As a result of that information, we put out our "major gold rally imminent" bulletin last Wednesday. Since that bulletin, gold has closed higher every day. The shorts know that we are coming and all our efforts is already having some effect in their thinking. For future reference, remember this Reuters-March 8- notation-"One of the American houses has been buying substantial amounts. It looks to me like a mine buyback," said one.
Midas
Bill Murphy ( Midas )
After graduating from Cornell University, Bill was a starting wide receiver with the Patriots of the old American Football League and has been around the financial and commodities markets ever since. He owned a futures firm in N. Y. that specialized in precious metals and was a contributor to Veneroso Associates, a global strategic investment firm and producer of the 1998 Gold Book Annual.
Disclaimer notice: Midas du Metropole does not look like an investment advisor, nor is he one. Any comments about any gold and silver shares by Midas or any of the Cafe members are for your information and entertainment only. They should not be regarded as advice and should be treated like comments passed on at any other Cafe. We are only relating as to what we like for our own accounts |
