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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Terry Whitman who wrote (3880)	5/21/2001 5:00:56 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Terry, that's an interesting article, GATA has had an interesting campaign that they have been engaged in. A number of factors appear to be driving gold prices higher among them being an interest on the part of investors in owning gold, speculative interest in the market from the long side, short covering, some hint of inflation in the recent economic data, lower interest rates and higher short term lease rates. There could be some opinion in the gold that the dollar will top out and move lower or at least not continue to increase as much as it has since the beginning of the year. The Australian dollar has been moving higher and that supports the gold to some extent. The CFTC COT report for May 15 showed that the long commercial position was 38,943 and the short commercial position was 52,858 for a net short commercial position of 13,915 while the long non commercial position was 28,829 lots and the short non commercial position was 27,298 for a net long position of 1,531. The South African Beatrix mine which has seen an accident was reopened. The silver is called to open 3-4 better. In Friday's session the July was 8.20 better at 457.70 with volume of 15,000 futures and 3,000 options. The silver has been tracking the gold and if the dollar can move lower on a sustained basis, the silver should move higher. The COT report on silver for May 15 showed the long commercial position was 16,877 and the short commercial position was 25,734 lots while the long non commercial position was 29,584 and the short non commercial position was 31,045. The platinum ended Friday's session 1.1 better in the July at 616.30. The COT report for platinum showed the long commercial position was 3,625 lots and the short commercial position was 6,100 lots with the long non commercial position 2,414 and the short non commercial position 513. There was no news in the platinum. The palladium was .75 lower in the June at 654.00. There was no news. Friday was a big day in the gold market as prices surged to their highest levels since September of last year for the June futures. Technical and fund related buying was the primary catalyst for today's advance. After the close today the CFTC reported that the non-commercial position was net long 1,531 contracts as of May 15, in sharp contrast to a net short position of nearly 26,000 contracts just a week ago. Speculators likely expanded this net long position today. Commercials were net short almost 14,000 contracts as of Tuesday against a net long position of 17,247 contracts a week ago. Background supportive fundamentals for the gold market are linked to the sharp decline in short-term interest rates, which have heightened inflation expectations and reduced the attractiveness for speculators and producers to sell especially with short-term lease rates higher than last year. The gold market had its most explosive weekly rally since early 2000, when gold prices were surging back above the $300 level. The June gold futures advanced nearly $20 this week, with the contract closing out the week with almost a $14 gain to $287.80, an eight-month high. However, there was little carryover support from the outside markets this week, as the U.S. dollar, equity indices and fixed-income markets were steady-to-higher. In addition, the one-month lease rate remained in the low 2.0% area, well below the nearly 6% rate that was reported in mid-March when the gold market last tested the $275 level. We continue to think that the weak global economic backdrop and still relatively large central bank gold sales should keep gold prices below $300, unless there is significantly stronger investor demand. The silver has been following the gold. Like gold, we believe that much stronger investor demand will be needed to sustain strength in silver prices. The World Silver Survey 2001 prepared by consultants Gold Fields Minerals Services (GFMS) for the Silver Institute was released yesterday. According to the report, increased mine production and supply from above ground stocks contributed to a 5% fall in silver prices in 2000. World silver mine output rose 7% over 1999 to 589.4 million ounces, due in large part to higher production from Mexico (the world's largest producer of silver), Australia and Peru. Scrap supply registered a 3% increase to 180.3 million ounces in 2000. In contrast, fabrication demand from industrial applications, photography, jewelry and silverware and coins/medals rose by 5.3% to a record high of almost 921 million ounces. Industrial silver consumption was put at 378 million ounces (up 11% over 1999), jewelry and silverware fabrication was almost 282 million (up 3%), while photography use of silver was 231 million ounces (off 1.2%). This supply shortfall was more than offset by net official sector sales of almost 75 million ounces (58 million ounces from China), down from 93 million ounces in 1999 and implied net disinvestment of more than 102 million ounces. Speaking at today's release a managing director of GFMS suggested silver demand from most sectors in 2001 would likely be unchanged or down from 2000, but flat global mine production and lower official sector sales could support a rebound in silver prices.