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


Gold, Silver, Metal Prices Commentary - July 28, 2010Good Morning,

A potential fresh round Bank of Japan-originated yen intervention rattled overnight markets and while the US dollar initially gained on the rumor (rising to above 85 against the yen), it later sank on the index and was last seen off by 0.68% (at 79.71) near the seven o’clock hour this morning.

No comments were made by officials, unlike last week, but large dollar-buying (presumably in exchange for yen) orders were noted in the markets around 1PM Tokyo time.

In all, a good enough drop to spur the overnight gold trade to finally reach the much-hyped $1,300.00 mark. One dollar above that figure, actually (as per spot offer quotes obtained during the early morning). All of the near $8 net gain in the yellow metal was attributable to the weaker greenback and physical selling –to the extent it was manifest- was only subtracting about $2 from the overall $10 rise. Options expiry notwithstanding, the record was notched and leaves the ‘uncharted territory’ talk wide open to interpretation. Not to worry, plenty of punditry will be sure to follow.

Metals markets opened with across-the-board gains this morning. Gold was up $4.90 out of the starting gate, quoted at $1,297.40 per ounce. Silver added 22 cents to open at $21.36 per ounce. Platinum charged $8 higher, starting the week’s final session off at $1,645.00 while palladium climbed $11 to the $557.00 mark. Rhodium was unchanged at $2,240.00 the ounce. Consolidation? Profit-taking? Nah. The getting is too good. Just wait for more econ stats.

A couple of US economic numbers will likely set the stage for Friday’s trading; durable goods orders and new home sales. The former is widely expected to show a decline last month (which would make it the third time they fell in four months) as firms likely curtailed spending in the face of apparent stalling in global growth. Well, that explains why spec funds have been loading up on — largely industrial-white metals, doesn’t it? Silver reached a high of $21.45 during the wee hours, and platinum/palladium were not seen wasting the time of speculators, either.

On the other side of the Atlantic, a couple of news bits that might put the ‘contraction = further easing’ formula into debate. German business confidence rose to its highest mark in three years as the perception that local firms can manage the sluggish global economic comeback gained traction. Assorted sentiment gauged within the EU’s largest economy has been-at best-a mixed bag since this spring, running hot and cold almost every time a survey has been taken.

Over in the UK, former BOE policy person Kate Barker stated that the case for additional economic stimulus (QE1.5?) appears ‘less certain.’ This, in a situation where — unlike the US — the central bank’s 2% inflation target has been exceeded for the past two years.

Finally, from the IMF, comes word that Ireland is likely not to be the catalyst for another round of Euro-centric debt crisis, and that the international body sees the Irish government as not having to resort to what has been called a ‘special aid mechanism’ that was made available in May. What euphemisms will they think of, next?

No euphemisms on tap from Warren Buffett yesterday, as he told CNBC that –by his metrics- the US recession continues, despite what the NBER stated recently. In lieu of negative GDP and such, Mr. B uses what he calls a ‘commonsense’ standard (i.e. how people and businesses are doing compared to previous periods) to evaluate US economic health.

Note that Mr. Buffett’s vast holdings include companies in everything from furniture to railroads. One such ‘metric’ literally is the yardage of carpet sold by Shaw Carpet (part of the Berkshire empire). The retailer will not likely start to hire folks until it reaches the magic mark of 10 million yards of carpet sold per week (it currently unrolls nine million yards of same weekly).

While Mr. Buffett worries about a continuing recession, Mr. Volcker (yes, that Mr. Volcker) does not worry about that which Mr. Bernanke appears to be so worried about. The former Fed Chairman, who is now an adviser to President Obama, said he doesn’t expect a "broad-based decline in prices" to materialize. "I’m not worried about deflation," Mr. Volcker was heard to say in Chicago in Thursday.

"I do not think we should be worried about and consumed by the problem of a potential deflation that doesn’t exist."

Meanwhile, in DC, hearings over alleged shoddy bullion sales practices continued to spark heated words between businessmen, their lawyers, and politicians.

"The TV gold industry is lead by one company, Goldline, which focuses its energy on fear, lies -and rip-offs. Goldline gets people scared about the economy and their future, then they transition to a lie saying buying certain gold coins acts as a hedge against economic downturns and then the consumer is profoundly ripped off almost irrespective of how high the gold market is."

Pretty charged words by US Rep. Anthony Weiner. None quite as dramatic as those spoken by a New York neurologist who testified that he instantly lost some $55K on a purchase of certain coins that he says he was pressured into buying. Some very mad men, over there, on Capitol Hill.

Not much difference between that fear-stoking and certain newsletter urgings about what to buy and where to buy it, as allegations of imminent gold confiscation by Uncle Sam and grim visions of TEOTWAWKI are in ample supply in that niche as well. Not to mention stories of gold price suppression, collusion among the world’s elite to rob us all of our last nickel and the need to dig bunkers a la the Cold War period.

Fear sells very, very well — of that there is little doubt. Then again, so does greed and all you have to do is listen to any single book-talking, long-gold, hedge fund manager who is stoking that particular emotion and is leaving Gordon Gecko way down in the dust when it comes to oratorical skills of the profit-seeking/ profit-promising type.

The same folks who ascribed gold’s 2008/2009 gains to the fear of hyperinflation are presently explaining the latest such price rallies as being due to rising fears over deflation. "What do you want to bet that we will get neither?" — they ask, leaving you in a quivering pile of nerves. CNBC titled one of its reports yesterday: "What’s behind the new gold rush? Anxiety."

Sure, there is a dose of that present in the equation. However, do not leave out the ‘bigger’ component; the quest to make a buck with a cheap buck. That’s not what the man in the street traditionally bought a modest gold holding for. That is precisely what the men in the (Wall) street are buying it for. Of that, you should be scared (and less so, of their words).

Watch for US econ data. Durables were…almost as expected. Stock futures gained. Gold? Your guess is as good as anyone else’s right about now.

Until Monday,

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America and

Original article link: Mad Men

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gold headed to $1,350.00 per ounce. silver to $25.00. that is what we baby….