Gold, Silver, Metal Prices Commentary – May 24, 2010


Bullion update ... Strippers Strut Their Stuff While Diggers Dig In

Good Morning,

Bullion prices snapped back from a five-session losing streak as the opening of Monday’s overseas markets brought with it a weaker euro and renewed worries about the fate of the same.

Albeit parts (Germany, Switzerland) of the Old World (and the Canadian part of the New One) was on holiday today and there was little in the way of economic data to pin trading speculation upon, Spain’s weekend seizure and bailout of a domestic lender (Caja Sur) helped dent the emerging recovery in the euro and gave the US dollar (and gold, with it) a further boost. Thus, the yellow metal rebounded from last week’s $1166 lows and climbed back towards the mid-$1180 as the new trading week go underway.

Some fresh albeit modest physical buying was noted over the weekend in India as dealers indicated that locals were trying to step ahead of an expected recovery this week but would likely buy more should prices revisit the $1150-$1175 value zone. At least one technical market observer finds that a break through the $1207-$1210 zone is required of gold –and this week to boot-lest the metal heads towards the low $1120s-$1140s.

Fresh, crystal-ball-inspired predictions (from the usual suspects in the managed fund universe) were also issued as the new week got underway and the rise in metals reawakened the hyper-bulls. A wide fan of future prices was on offer, ranging from $2K to $10K. "Fundamentals? We don’t need no stinkin’ fundamentals. We have something better: Predictions!" If that all feels/sounds/looks like a replay of the oil market circa 2008, you’ve seen that movie too. As for now, oil is in the driver’s seat of things pointing to…deflation.

New York spot markets opened with across-the-board price gains in the precious metals complex. Gold’s bounce extended to the noble metals complex as well, where last week punishing of prices appeared to finally elicit some bargain hunting amid perceived-to-be oversold conditions. Spot gold gained $6.40 at the start of the session, opening at $1183.40 as against a slip in the euro to 1.236 and a robust 0.87 gain in the US dollar index (to 86.29).

Bulls would like to quickly recapture the $1200+ range and gun for the $1250 high once again, and are hoping to put the mini-liquidation wave that hit the markets last week into the ‘closed’ file. Crude oil showed little in the way of change, losing only pennies and hovering just under the $70 per barrel mark.

Silver rose 14 cents to open at $17.78 per ounce. A gain of $19 was on tap for platinum and it climbed to the $1524 level following a ten-day period of intense volatility and losses on the order of $200+ per ounce. Similar buoyancy was noted in palladium; it added $10 to rise to the $444 level after having shed $120+ during the aforementioned period. Players will focus on equity market performance (or lack thereof) as the week gets underway. Also on the radar, options expiry.

Notably, the World Gold Council announced a new Head for the marketing of gold jewellery, one Mr. David Lamb. We wish him the best of success and do hope he acts more like …a lion amid what appears to be a singular-focus effort to market nothing but gold…ETFs in an industry that has seen its primary driver of demand (jewellery fabrication) slump to a 21-year low in 2009.

Ironically, it was in large part the same ETFs that contributed a hefty percentage to the recent gains in gold’s price; gains that have decimated the gold jewellery industry’s fabrication and sales levels on a global scale.

Meanwhile, back at the (US) ranch, recent surveys reveal that respondents (of the economist variety) polled by the NABE feel that the American economy will grow at better than 3.2% this year as well as next. The same survey indicated that fewer than half of those queried believe that Greece will go belly-up within the same period. The NABE poll also found that consensus is that the process of coming back from the abyss (one that harked back all the way to the 1930s in depth) commenced one in June of last year.

Such ‘heretical’ projections are not sitting well with the Armageddon camp, and to make matters worse, it now appears that inflation- having fallen to a 40-year low- is also not the threat it is made out to be in the same gloomy niche. If the performance of so-called Strips within the US debt market is any indication, the idea that we can apply the ‘dead’ label to inflation, is quite a logical one.

Bloomberg reports that "Strips are outperforming the rest of the $7.9 trillion market for Treasuries, the benchmark for everything from corporate bonds to mortgage rates. Government securities have returned 4.4 percent since December, including reinvested interest, the most at this point in a year since gaining 8.6 percent in 1995, according to Bank of America Merrill Lynch indexes. They’re beating the Standard & Poor’s 500 Index, down 2.46 percent in 2010, and the Reuters/CRB Index 19 commodities, which has fallen 11.3 percent."

Finally, back at another (Aussie) ranch, the government is calling the bluff by mining companies fretting about the so-called "Henry Tax" a…bluff. The diggers, on the other side, are…digging in, and planning a …panning campaign –against the government. Marketwatch relays that: "Australian Treasurer Wayne Swan said Monday mining companies are acting “hysterically” by exaggerating the amount they would pay under the government’s proposed new resource tax, saying they would be able to access substantial tax offsets.

The mining sector will Monday begin a nationwide media campaign attacking the government’s proposed 40% “resource super profits tax”. Miners have access to a range of generous deductions, which means that they are paying well below the official (corporate tax rate) of 30 cents in the dollar. So those companies are not telling the truth,” Swan told the Australian Broadcasting Corp. radio."

The ‘super profits’ tax on mining companies was recently announced in the Aussie government’s budget for the coming fiscal year. The revenue’s intended use? Paying down debt, boosting compulsory retirement savings for workers. Let’s argue with that.

Nothing much to argue over in the Dow this morning. A near 90-point decline was on the plate within the first 20 minutes of trading. Hope no fresh wave of margin calls follows.

Happy Trading.

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America 

Websites: and

In addition to bullion American Silver Eagles that are already available, the United States Mint this year will also issue 5 oz. bullion America the Beautiful Silver Coins that are duplicates of the America the Beautiful Quarters. The first of five coins will be released this summer, with the remaining four to follow in short intervals. Check the above link to visit a sister site to CoinNews for more information on the series.

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