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Gold/Mining/Energy : Yamana Resources INC. T- YRI -- Ignore unavailable to you. Want to Upgrade?

To: whiskeyjack who wrote (1923)	1/6/1999 3:12:00 PM
From: Neil Irwin	Read Replies (2) \| Respond to of 2346

This commentary comes from the USAGold site (http://www.usagold.com/DailyQuotes.html) They are usually bullish on gold only, so it is good to see them pushing silver as well. The reference to silver is only in the first paragraph, but I have included the remainder of the commentary FYI Neil. ================== MARKET UPDATE (1/6/99 AM): Gold hitched its wagon to a silver star this morning as the white metal soared higher for the second straight day on world-wide short covering. The upmove came despite a strengthening dollar overseas. Bridge News reports that "UK stockbroker T Hoare and Co says gold and platinum are 2 exceptions in an otherwise bleak outlook for metals. 'Our 2 favorite metals are gold and platinum...The signs of a (gold) revival are early and small, but they are there. For example, during 1998 gold has led the Dow (Jones Industrial index) rather than running to it. This is a classic risk hedge performance and has not been seen in the US for over 20 years,' a T Hoare report said. Tracking the Asian contagion, the Russian ruble plunged 6% against the dollar today and the financial sector continued to focus on Brazil. A Reuters report on Brazil from yesterday sums up why we will be keeping an eye on all-important Brazil and passing what we find along to our readers: Financial turmoil in Asia and then Russia sparked a wave of capital flight from emerging markets last year that threatened to plunge Brazil into financial crisis. About $30 billion in reserves fled the country, putting pressure on the government to devalue its domestic currency, the real. ''Brazil is on the knife's edge,'' said Francisco de Assis Moura, a fund manager at Marka Nikko Asset Management in Rio de Janeiro. ''For the next six to 12 months it's going to have to walk that edge and Latin America is going to follow.'' A sweeping fiscal austerity plan aimed at cutting Brazil's bloated fiscal deficit by $23.5 billion in 1999 helped keep the real stable and paved the way for the government to secure a $41.5 billion loan headed by the International Monetary Fund. Now investors are waiting to see if Brazil will carry through with unpopular spending cuts and tax hikes and if the IMF package will be enough to fend off a devaluation. Financial Times reports that the first auction of euro bonds in Germany was a "spectacular success." The offer of 8 billion euro at a coupon of 3.75 "attracted a remarkable E25.6 billion. This obviously reveals strong underlying demand for the new currency. The ECB's task, it would seem, will be to keep the euro from exploding upward. As we mentioned here before, initially the euro was to be issued at parity and at launch it traded as high as $1.20 -- a 20% appreciation against the dollar for all intents and purposes. If you were to apply same appreciation rate to gold from its low, gold should be trading at $333.00. That it is not trading at least near that figure is one of the great mysteries of the financial markets over the past few months. Supply has dwindled from the mines, there has been little central bank selling and leasing (at least according to published reports) and demand for the physical metal has been very strong according to the World Gold Council worldwide, but particularly in the United States, East Asia, and the Mid-east. The fundamentals are therefore not to blame. So what is keeping gold down? We continue to believe that hedge fund selling has played a critical role as reported on several occasions by Reuters and other sources. The situation with John Ho Park and his derivatives gamble in London which led to the collapse of two other firms and the loss of jobs for hundreds of financial industry employees illustrates how derivatives gamblers have a tendency to defend their positions come hell or high water no matter what it means ultimately to their employers, counter-parties and fellow traders. There is only one time of reconciliation and squaring of the books -- at the moment of complete failure and breakdown. Then as we saw with Long Term Credit Management the only alternative is to bail out the offending party. Confronted with market reality, Ho Park did his best Nick Leeson imitation and left the country for parts unknown leaving in his wake a trail of financial disaster. In a microcosm what happened with John Ho Park in London once his gamble in the German bond market went belly-up could be the situation in the gold market, but the stakes are so high, the problem hasn't come to light. There may also be central bank activity that will come to light at some future date and we doubt that that activity is originating in Europe. We tend to go with the hedge funds and other traders playing the short side of the market as the principle cause but these activities are obviously closely guarded trade secrets, and the thesis cannot be proven until the situation becomes blazing headlines. Unfortunately we have no recourse but to be patient and see how this plays out. False markets though must always answer ultimately to the dictates of supply and demand. The paper trading has simply forestalled the gold markets natural inclination to go higher. At some point, gold will have its way. That's it for today. We will update if anything interesting surfaces.