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Pastimes : All Clowns Must Be Destroyed -- Ignore unavailable to you. Want to Upgrade?

To: pater tenebrarum who wrote (24199)	4/7/2000 10:27:00 PM
From: Joan Osland Graffius	Read Replies (4) \| Respond to of 42523

heinz, James Smiths discussion on Gold nd Oil tonight. Gold rallied last Tuesday but has since given back much of its gains...and the XAU (gold/silver index) seems to be in trouble. It clearly closed below key support at 56.44 today, which leaves it vulnerable to a selloff down to 48.67 or lower. If investors are seriously interested in gold as a hedge against stock market volatility, why the heck are they selling their gold stocks and why can't gold hold onto its gains? In the January BOE auction, gold went for $298.50 with a "Bid to Sale" of 4.3 to 1. In the March 21st BOE auction, gold sold for $285.25 with a "bid to sale" of 3.0 to 1. In the March auction Gold sold for less than it did in the January auction, and yet, interest was also less as expressed by the bid to sale. By contrast, in the September auction gold sold for 255.75 with bid to sale of 8.0 to 1. It would appear that true interest in gold only materializes at much lower levels. Not a sign of an emerging bull market to say the least. Given the volatility in the stock markets of late, you might expect there to be more interest in the May 16th auction, but the proof is in the pudding...or rather in the "bid to sale" figures. If gold begins to plunge around the same time as the stock market, will there really be a pick-up in demand for gold? Or will margin calls cause investors to liquidate gold stocks as well as tech stocks? In the panic selling of August 1998, gold, gold stocks, and the S&P all went down together. BOE auctions have been only 25 tons every 8 weeks and even this small amount has not met with eager buyers. There is still a lot of risk to owning gold. Only a monthly close above 334.7 will confirm that the secular low is in. This year's 8 year cycle could very well produce New Lows for Gold below $252...possibly as low as 195-215 area. Are the Swiss really committed to selling 1300 tons? The Swiss National Bank is supposed to begin selling gold in April.....that's right, this month! Granted they aren't going to sell it all in one go, but no matter how much they sell, it could easily depress the market. Remember the first two BOE auctions in July and Sept last year. The market may treat Swiss selling as a shock even though people know its coming. Its one thing to talk about selling 1300 tons, its another thing entirely to start doing it. Perhaps this might explain why the Gold/Silver index is breaking below key support. Smart money may be getting out of gold stocks before the deluge. THE US ECONOMY REFUSES TO SLOW DOWN AND HOW THIS RELATES TO GOLD The FED will continue to raise rates 1/4 pt each time until the economy slows......which is nowhere in sight. The ECB cannot afford to continue raising rates in lock-step with the FED. The European economy has a much higher percentage of old economy stocks (that are more vulnerable to higher rates) than the US economy has. How convenient if the Swiss were to unload enough gold to depress the price of gold, painting a picture of "deflation,"& lessoning need for all Central Banks to raise rates. "Painting a picture" of "deflation" may become even more important once OIL starts its next leg up. For now oil is likely to continue down, but a bottom for oil may very well come here in April. Moving closer to the Summer Driving Season, Inventories are still very close to Record Lows. What happens when you give a loaded gun to a monkey? You have what the financial markets call "Event Risk." Maintaining record low inventories going into the summer driving season is a bit like giving a loaded gun to a monkey. Hey...maybe nothing will happen. With oil prices recently above $30, most oil companies were not willing to replenish their stocks because, like most of the public in general, they felt that oil could not stay above $30....so why stock up while prices are high. They may now try to make up for lost time, but the question remains whether they will be able to stock enough oil to meet the needs of the summer driving season and the potential for "event risk" (e.g. refineries suddenly shutting down for repairs, Saddam doing his normal thing, or quite simply demand for oil being stronger than projected). Joan