Gold, Silver, Metal Prices Commentary – November 5, 2010

by Jon Nadler, Kitco Metals Inc. on November 5, 2010 · 0 comments

Bullion Bars

On the day after the Fed offered a $600 billion ‘freebie’ and eight more months of party time to the world’s carry dollar-carry trade, the who’s who of the world of commodities gathered at the NY Stock Exchange to discuss the present conditions and future prospects for the world’s markets in "stuff."

While watching metals prices gyrate has not been doable today, thus, we bring you a compendium of nuggets of wisdom from yesterday’s commodities event in the Big Apple. Hopefully, they will make for thought-provoking reading.

SPECIAL CONFERENCE EDITION: Insights, Excerpts, and Sound Bites from the Inside Commodities Conference — at the NYSE, NYC; PART TWO (Read PART ONE)

Dennis Gartman — The Gartman Letter

"There is no question that gold is catching on in the mainstream. Gold is also catching on in the sophisticated stream. We have institutional buyers of gold that five years ago would have never touched gold. And they are.

It’s just amazing to me how many junior gold miners are dens of thievery. They’re just one hype after another. Does one out of 100 work? Probably. But it’s not worth the [other] 99. The large group, the Barricks and the Newmonts, I don’t mind owning them as much. They’re leveraged to the price of gold. If you have to own equities, own them.

Markets are fundamentally driven, technically driven, and psychologically driven. At times, one of those three becomes the dominant factor. And when psychology becomes the dominant factor, you’re usually getting close to the time when a correction of some magnitude is not only warranted, it’s bloody necessary.

I will reiterate: I’m long gold. I’m still bullish on the gold market. I’m just demonstrably less bullish than I was, which, of course, will make me a disdainful, hated bear on gold. Hard to imagine that you can be bearish on something of which you are long."

Arthur Cashin — UBS Financial Services

"QE2 is pushing on the law of diminishing returns. Bernanke offered the economy the Fed’s QE2 not because he wants (or cares about) the price of gold going up. QE2 –and I hope I am wrong- is trying to build up the stock market values. QE I was like pushing on a string. QE II is like pushing on a string with two fingers.

So, now, with the Fed’s efforts to push various asset prices higher and gold rising as a result of that, you have some people in government saying: "Why don’t we reap some benefits from all that gold in Fort, Knox?" I think that Mr. Bernanke must be ready to have the [interest rate] ‘fire extinguisher’ right next to him, since "cooking with fire" is always fraught with risks. That said, we are still facing more deflationary pressures than the opposite thereof, at this time."

Dodd Kitsley — iShares / BlackRock

"ETFs have made gold accessible to a much larger audience. Strategic asset allocation models almost all include gold at this time. Gold has a valuable place within a well thought-out portfolio. Gold as safe-haven, gold as a portfolio diversifier, gold as an inflation hedge — these are all valid reasons to include a small allocation in bullion within a basket of assets."

Fritz Folts — Windward Investment Management

"We have always looked at gold more in terms of an alternative currency than as a commodity and have thus looked at it as a strategic asset, and have been over-weighted in it (at the 9% strategic allocation level) since about 2003."

Jason Tousssaint — World Gold Council

"Is the marginal buyer of the GLD ETF "setting" the global gold price? Probably not. Is this a gold bubble? Not when we look at past bubbles (housing, etc.). As a matter of policy, we as an organization don’t predict the gold price. But we do look at the fundamentals supporting both today’s gold price and where it may go in the future. So we can absolutely talk about trajectory.

Shayne McGuire — Teacher Retirement System of Texas

"Central bank selling pushed gold out of the financial picture and brought it down to the 0.6% level of total global wealth, where it is today. [Recently] gold stopped behaving like a commodity, yet financial many managers at pension funds still have very little exposure to it."

Jeff Kahn —

"The gold-to-silver ratio has lost much of its value as an analytic tool since the financial meltdown of 2008. The problem with all these ratios is that they can be useful at times, and the correlations hold for certain periods. But all correlations are based on regression to the mean theories, and regression to the mean theories have proven to be essentially worthless in the last three years."

  • Friday AM opening summary. Gold fluctuated in a fairly broad range of from $1,377 to $1,391 after having touched $1,395 on the hours following the New York close on Thursday. A 0.47 rebound in the US dollar (back up to 76.30 on he index) was largely responsible for the pullback in values, as were mini-waves of profit-taking oriented selling overnight. Irish debt-related apprehension and a 4% drop in German industrial output helped push the euro lower and the greenback higher in early trading.
  • Gold bullion spot dealings opened with a $12.70 per ounce loss and a bid quoted at $1,380.20 as against the aforementioned rising US dollar. Silver started Friday’s session with a 27-cent decline, quoted at $26.10 per ounce. In the noble metals complex, platinum prices shed $30 on the open, with an opening bid at $1,751.00 while palladium pulled back by $8 per ounce and was last bid at $673.00 per troy ounce. Friday morning’s main focus among traders quickly turned to the US nonfarm payroll figures.
  • October’s payroll gains were much larger than anticipated. While expectations were for some 70,000 positions to have been added to the US labor force, the nonfarm payroll number came in way ahead of that figure, at the rather robust 151,000 jobs-added level. The US unemployment rate remained steady at 9.6% even as some economists had expected a 0.10% gain in the figure. The US dollar spiked to near 76.50 on the index in the immediate aftermath of the statistical release by the US Labor Department and gold prices sank by more than $18 to touch levels under $1,375.00 per ounce, at last check. Book-squaring and volatility will dominate the action later today. Also at last check, platinum was down by $43 erasing most of Thursday’s gain. Not for the faint of heart, these markets, at this juncture.

We will return on Monday with our regularly scheduled ‘programming.’

Have a pleasant weekend.

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America and

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