April 11th, 2001
For markets of April 12
kitco.com
CLOSES
JUNE GOLD
259.20
MAY SILVER
4.363
JULY PLAT
573.40
INDICATIVE LEASE RATES (based on 30
day maturities)
GOLD
2.70% / 3.00%
SILVER
1.20% / 1.70%
PLATINUM
13.00% /
19.00%
General Comments:
It is has a fairly boring two days in the gold and silver markets, but
platinum and palladium have shown their volatile and unpredictable natures.
The last two days has seen the gold market rally a bit with prices, today,
attempting and failing, to surpass the $260.00 support level. Lease rates
in gold remain very firm with today's quote seeing gold offered at 3% for a
30-day maturity. Silver remains quagmired between superb support and
massive resistance and is about as boring a market as can be imagined.
Silver lease rates have moderated but, frankly, this seems to have very
little or no significance at present.
Platinum has rocketed higher on the buying of one N.Y. Bullion Bank who
continues to "goose" the market higher. Such increases in price are, of
course, greatly aided by the strong lease rates and the considerable
backwardation on the exchange. And, these increases in price have been
accomplished while palladium continues to make new 9-month lows day after
day. And, these increases in price have been accomplished even thought the
economic picture worsens as automobile sales continue to decline. Well, I
guess that the platinum market is just very thin and such machinations
should be considered fairly normal. Over the longer term, I cannot help but
think that prices should go lower. I do find it somewhat amusing that just
as the funds began to establish short positions, one major dealer pushes
the prices higher. Perhaps, just to get them to cover. Well, should we see
a spot price exceeding $600.00, the funds will cover. Just to let you know
that I am not the only one, to quote Deutsche Bank, "In light of a rapidly
slowing global economy and falling auto sales, we believe the platinum
group metals will be exposed to further downward pressure in the near
term". As they say, misery loves company.
In gold news. The Swiss National Bank continues to sell about * ton per
day, perhaps emulating the sales procedure of the Bank of International
Settlements, with whom they previously worked to sell their gold. It is
really unknown at this point whether they are selling more on rallies and
less on dips, but this information should be available after a study of
their sales over the longer term.
In news that some of the less experienced in the gold market took as a
remarkably bullish sign, Comex inventories of gold have now dropped about
50% over the last year. With a 4-ton withdrawal the day before last, we now
have only 1.02 million ounces available for delivery. As Comex has
traditionally been a bit cheaper than London gold, the withdrawals are of
no surprise. All that needs to happen is for Comex to develop a 30 to 40
cent premium to London Gold, and the stocks will be replenished. Pool
accounts at the major refineries continue to be offered at London spot or
just slightly higher.
In an extremely interesting article, Standard Bank looks for world gold
production to fall 35% over the next 7 years as low metal prices deter the
biggest producers from opening new mines. They are looking for a 900-ton
decline from current levels. If the current supply/demand deficit is about
800 tons, that would forecast a 1700 ton deficit, about 50% of world
production. Yes, I know that the current deficit is being made up from
Central Bank sales and leasing, but is it at all possible that 1700 tons
can be made up in this manner? I think not. As I said before, there is an
old saying in the commodity business that there is no better cure for low
prices than low prices.
Please note that production of gold has been very strong these past years
for two very good reasons. One is the strength of the dollar, which makes
foreign producers, who sell in dollars and pay their costs in local
currencies, still very profitable. And Two, the large hedge books of the
producers who show very large mark-to-market gains on their forward sales.
As the market stops declining and time passes, such large gains will no
longer appear.
And. Lastly, GFMS has revised its forecast for gold in 2001. For the first
half, gold is forecast to stay within a $260-$290 range with an average of
$274.00. They see little prospect of prices exceeding the top number above.
These gentlemen have quite a good record and they have an excellent grasp
of what it would take to move the market higher. To quote, "in the short
run this leaves investment demand as gold's only saviour, however, as yet,
there is no sign that either the dollar or crashing stock markets have
prompted any move into gold by investors. The hoped for flight-to-quality
has not materialized". Amen.
GOLD
This market looks good, very good. But, after all, my expectations are
rather low. Perhaps we will soon test the $265 level. A lot depends on the
Dollar and the lease rates. Traders who follow our recommendations are
currently long the futures with a close stop and some bull call spreads in
case prices really go crazy, which is getting less likely all the time.
(positions and recommendations are available to clients and subscribers
only)
SILVER
It is getting harder and harder to find anything to talk about that has not
been said previously. We remain firmly caught in a distinct trading range.
On the positive side, we did hold the $4.28 support level in the May
contract and it does appear that we will continue to hold sideways to
higher. What concerns me is that I am beginning to not being able to even
imagine prices in the $4.50's or $4.60's. At least for now, the upside, and
the downside appears limited. (positions and recommendations are available
to clients and subscribers only)
PLATINUM
It would appear to me that this market needs to be sold. All technical and
fundamentals factors scream for sale. But yet, we recently rallied $20 in
just a few days with lease rates rising quickly. Watch palladium for
guidance. (positions and recommendations are available to clients and
subscribers only) |
