Forum: Edelmetalen » Goud en zilver Rockin & Rollin

[verwijderd] 12 juni 2005 20:58

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Approaching An Important Breakout

Although the bear market rally in the US dollar persists, gold has nevertheless managed to climb higher against the dollar, closing Friday at a 5-week high. It closed in New York at $427.40, and is now back above its 200-day moving average.

However, much of Friday’s strength occurred after London had closed for the week. In London gold ended the week at $423.35, more than $4 below the New York close. Given that London is far more important than New York (because prices in London more accurately reflect the demand for physical metal while New York is almost entirely a paper market), the technical picture for gold is not as strong as I would like it to be.

I like to see gold close the week at the same level in both markets, and in any case, I always put more weight on the London price. As it is, the late strength in New York may simply be a reflection of futures traders covering short positions, and not demand for physical metal.

Consequently, this coming week is likely to be important. Will London follow through on the upside? This question can be answered by the following chart.

This chart presents the price of gold in terms of German marks and euros. It is clearly a very bullish looking chart, but just as clearly, gold has not yet broken out from its base.

Gold closed Friday in London at Dm 683.04 (€349.23). This compares to Dm 689.31 (€352.44) achieved on the New York close. While this latter price was a record high for gold in terms of the euro (which is less than 5-years old), it was not of course a record high in terms of the mark. As we can see from the above chart, there was no breakout from the huge basing pattern being formed (the saucer formation on the chart).

To breakout from this pattern, gold needs to close above Dm 706.31, the price it reached on July 30, 1993. This price equals €361.13. We are almost at that level, but ‘almost’ is not enough. Gold needs to break above €361.13 to give a clear signal that it is in a new uptrend against the euro, and I expect this breakout will happen soon.

The foremost reason to expect a breakout is the untold ramifications of the French and Dutch votes rejecting the proposed European constitution. These are proving to be far-reaching. As I have recently written elsewhere:

As the problems with the dollar became increasingly obvious over the past few years, investors were faced with the question, if I sell my dollars, where do I put them? They chose to put their dollars in the euro and some of the other European currencies, all of which rose against the dollar.

However, that decision to buy the euro was a knee-jerk emotional reaction, not a logical one. There was no meaningful analysis of the euro, whether its current position or long-term potential. And the reality is that the euro is little better than the dollar.

There are of course some positives to the euro compared to the dollar. For example, Europe tends to have a higher savings rate than the US, and there is relatively little consumer debt being used to sustain excessive consumption, as is now occurring in the US. But at the end of the day, both the euro and the dollar suffer from the same flaw – they are managed by government bureaucrats and subject to the whims of politicians. They are both fiat currencies that can be created at will. Both currencies lack a rigid discipline, like that which used to be imposed on national currencies when countries followed the rules of the classical gold standard.

Consequently, the French and Dutch vote has finally caused investors to re-think their initial knee-jerk, emotional reaction to sell dollars and buy euros. It is now becoming increasingly clear to them that they don’t want dollars or euros. So what do they do now?

Some national currencies may benefit from a flight from the dollar and the euro. The commodity-based countries like Canada and Australia may see their currencies strengthen against both the US dollar and the euro. And the Chinese yuan is surely going to rise against the dollar and the euro eventually. But these currencies cannot possibly handle all the hot-money looking for a safe home. So where will this money go?

The answer is clear to me – first and most importantly, it will go to gold. Then it will flow to a lesser extent to silver, other commodities and other forms of tangible assets.

The French and Dutch vote has caused a serious and massive rethinking of where one should place their liquidity. In other words, it raised the question of what money should one hold?

Some buying is now filtering back into the dollar, lifting it further in its bear market rally. Some money is going into the currency of resource-based countries. For example, the Australian dollar and to a lesser extent, the Canadian dollar, were relatively strong against the euro this past week.

However, a more important trend is emerging. Money is now fleeing all national currencies, seeking the safe haven offered by gold. It is this trend that will continue to carry gold higher in its on-going bull market, which is a bull market not only against the US dollar, but all fiat currencies.

___________________________________________

Published by GoldMoney
Copyright © 2005. All rights reserved.
Edited by James Turk, alert@goldmoney.com

[verwijderd] 13 juni 2005 17:44

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UPDATE 1-Gold firm in euro terms, hits highest ever
Mon Jun 13, 2005 11:05 AM ET

(Updates with euro high, fresh trader and analyst comment)
By Clare Black

LONDON, June 13 (Reuters) - Gold priced in euros (XAUEUR=R: Quote, Profile, Research) hit its highest ever on Monday, rising above 356 euros an ounce, up 2.4 percent from Friday, on renewed fund buying.

Traders said gold also gained in other currencies as uncertainty in foreign exchange markets attracted buyers.

"It seems to be a continuation of Friday -- it is a resumption of that," a trader said.

Spot gold reached $428.00/428.70 an ounce on renewed fund buying by 1446 GMT, up from New York's late quote on Friday of $427.00/427.70.

Bullion prices have recently loosened a tight link with the dollar/euro, showing independent strength despite a stronger U.S. currency.

"I actually think that for the first time during this entire rally, you could argue that gold is genuinely benefiting from concerns people have about currencies," said Kamal Naqvi, precious metals analyst with Barclays Capital.

"The euro, which has benefited the most from the anti-dollar movement, has clearly got all sorts of major issues."

A firmer U.S. currency would normally put pressure on dollar-denominated gold as it becomes more expensive for overseas investors.

Although gold has seen a near 80 percent rally in dollar terms since 2001, prices in euros have been contained in a familiar range for the past four years.

Analysts say a true bull market is when a commodity rises in all currencies.

"Certainly there would appear to be room for further upside in the gold price if the tight relationship between gold and the euro/dollar rate has broken down," Alan Williamson of HSBC said.

"Any further advance is likely to start triggering renewed momentum and technically driven buying," he added.

Traders said gold needed to clear current resistance to maintain upward momentum.

"If it can get through here, then it should plough up to $432," the trader said.

NO BIG CURRENCY SHIFT YET

Naqvi said, however, that investors were not suddenly moving all their bearish dollar positions into the gold market.

"You have to put it into context. Volumes have picked up, but a little trickle from the currency market does have an effect on gold."

Stephen Briggs, economist with SG Corporate and Investment Banking (SGCIB), said gold in euros was a recent new currency play.

"Up until about a month ago, you could happily trade euro/dollar (gold) as a proxy for dollar weakness or strength. But because the euro is now independently weak, that relationship has broken down," he said.

Silver was at $7.23/7.26 an ounce from $7.24/7.27. Platinum rose to $871.00/876.00 from $867.00/871.00, while palladium held at $183.00/187.00.

(Additional reporting by Martin Hayes)

[verwijderd] 14 juni 2005 12:42

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Na al die tijd stijging op de goudmarkt is het tijd voor een herstel...
We zijn door de onderkant van het stijgende trenkanaal gezakt, dat voorspelt een minder snelle stijging...

[verwijderd] 16 juni 2005 16:09

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Is the gold price de-coupling from the US dollar? Paul Walker (GFMS), Nick Goodwin (T-Sec), Wayne McCurrie and Stephen Mildenhall by Alec Hogg
'16-JUN-05 06:00' www.mineweb.net/sections/gold_weekly/...

MONEYWEB: Well, Barry Sergeant is probably a lot better at telling us the background to this next gold story. Barry?

BARRY SERGEANT: Yes, Alec, the story goes back really to 1995. Since then, the dollar gold price and the US dollar have shown an inverse relationship. Just imagine a graph – there’s no way you can plot the dollar against itself, so what people do is they take the dollar index, which is published by the Federal Reserve, the US Central Bank, and that’s a trade-weighted value of the dollar. You put those two in a graph and you look at it and you get a mirror image. And if you measure the relationship, there’s a 90%-plus inverse correlation. And, simply put, if the dollar rises, the gold price is going to fall, and vice versa. Now it’s become particularly important since early 2002 …

MONEYWEB: Sorry, Barry, so it’s almost acting like another currency. If you want to sell the dollar, you buy gold, or if you want to sell gold, you buy the dollar?

BARRY SERGEANT: Alec, exactly. Gold is seen as an anti-currency to the printed currencies like the dollar and the euro and so on. Now this relationship became particularly important early in 2002, which is when the US dollar went into a protracted bear market, which it’s been kind of kicking out of the last couple of months, maybe. What happened there was gold started rising very strongly in that inverse correlation to the US dollar, and in late 2003 when gold went through $400 an ounce, you look at the dollar and the euro and the gold price, and gold established a very close relationship with the euro, but a positive relationship. And that’s what gold bugs have been watching for the past while. Now this whole story became kind of mixed up last Friday, June the 10th. Gold opened at $423 an ounce, the dollar started rising, the euro started falling – and guess what? The gold price in dollars started rising and …

MONEYWEB: So it went completely against what it had done for the previous two years?

BARRY SERGEANT: Exactly. And go to the next trading day, Monday this week, gold was up at $430 an ounce, and the dollar/euro was at a nine-month low. In other words,, the euro was weak …

MONEYWEB: Was falling while the gold price was rising.

BARRY SERGEANT: Exactly, and the dollar was rising.

MONEYWEB: Let’s bring Paul Walker in now. He’s a gent who helps us through these difficult dilemmas from time to time, and he’s also the chief executive of GFMS, talking to us from London. Paul, Barry has given us some good background – but perhaps just to go back a little. The gold and dollar – why was there such a close inverse correlation? In other words, gold going up, dollar going down over the past two years?

PAUL WALKER: Well, I think you hit on the right thing when you talk about it being traded to some extent to the currency, and I think gold has shifted around in terms of how people view it. It’s gone from a commoditised period, which were pre-1995, even about to when we saw the Central Bank gold agreement put in place, and more recently it has definitely been – it’s called a quasi currency play. But I think, you know, an interesting point that’s made about the correlations that exist, and call me a somewhat sceptical observer of the gold market at times, but firstly I think we have to be careful that correlation is not causality, and that one shouldn’t construe one necessarily causing the other.

And I think the other thing that’s important to bear in mind when you’re looking at this relationship, and this apparent breakdown of the relationship now, is that there’ve been periods over the last five or six years where they decoupled – well, not necessarily the euro, but people used to say “look at the Deutsch mark”. And there have been extended periods of decoupling, which suggests to me that the causal mechanisms, the transmission mechanisms that exist in this market, are slightly more complex than just a rule of thumb that one is traded off as a hedge against, say, dollar risk. It’s a much more complex relationship, and I think what we are seeing now is exactly that case. One last point before you come back on this – have a look at the relationship between, for instance, the yen and dollar gold recently. They have been incredibly closely related, and we talked about this in the Gold Survey that was published in April. Well, what’s the explanation behind that? There’s obviously currency dimensions here, but I think the transmission mechanism is much more complex.

MONEYWEB: But in Europe we’ve got political turmoil, we’ve got a sluggish economic growth there, also concerns about the long-term structural problems that they have in Euroland. Is that not maybe suggesting to some people, well, let’s sell our euros and buy gold instead?

PAUL WALKER: Well, I think, to come back to the point, I’m not dismissing that there is an important relationship here – I think people’s portfolio decisions are not just premised on the absolute return, say, for instance, in dollar or euro terms, but in terms of their local currency returns on an investment. And I think those portfolio shifts will have an important role to play with gold. Although gold is still a relatively minor player in the investment universe, it still occupies an important role and I think the point you’ve just made is undoubtedly true. People took a slightly bearish view on the euro, the prospects for the euro area, returns on equities, and so on and so forth. They took a more negative view on the strength of the euro relative to other currencies. The dollar, by all accounts, is still a basket case. I don’t see how anybody can make a compelling case for a bull run in the dollar. And I think you are right, you have seen the yen having strengthened, you have seen other currencies strengthen, and there is a reflection there of the still currency role that gold plays.

MONEYWEB: Let’s bring Nick Goodwin in now. He’s the resident gold guru on this programme, and he’s also the analyst at T-sec. Nick, this decoupling of gold from the US dollar – what’s you reading on it?

NICK GOODWIN: Yes, look, I am always very concerned about any of these relationships, because you never really know when they break down, and you only know a month later that it actually has broken down. And what people tend to do, they tend to do fishing – they fish for results. So they try and fish for a relationship between the dollar and the gold price or the euro or the yen or whatever, and then they think now they’ve got it. And it’s really much like trying to catch an eel – just when you think you’ve got it, you know, he slips out of your hand. So you can’t really trust any of these things long term, and if you can’t trust something consistently, then you mustn’t use it. Basically I don’t think it’s possible to predict the gold price. You can work out supply and demand and things like that, and it’s all very interesting theory, but you cannot actually predict the price. The only relationship I found over the years that really works consistently, is the relationship between the price of shares, the gold price and the rand, and that’s been quite a strong relationship, whereas all these others are really quite spurious. I don’t like bu

[verwijderd] 17 juni 2005 09:25

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Dear Friend of GATA and Gold:

Reginald H. Howe, proprietor of the Golden Sextant
Internet site and consultant to GATA, has studied
the latest report from the Bank for International
Settlements on over-the-counter derivatives in gold.

Among his conclusions:

* Gold short exposure seems to be shifting
gradually away from bullion banks to central
banks.

* The World Gold Council's exchange-traded fund
seems to be used by bullion banks to obtain
gold for shorting.

* Because of the surreptitious manipulation of
the price of gold, a collapse of the fiat money
system is really not so improbable.

Howe's study, "Gold Derivatives: Skewing the
World," isn't the easiest reading. But it's what
you read to have documentation and confidence that
the bad guys can't rig everything against reality
forever. You can find Howe's study at Golden
Sextant here:

www.goldensextant.com/

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

[verwijderd] 17 juni 2005 21:08

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Repudiation or Inflation Only Option on U.S. Unfunded Liabilities?
By Tim Wood www.resourceinvestor.com/pebble.asp?r...

NEW YORK (ResourceInvestor.com) -- It is common cause that the United States has no choice but to repudiate its debts and unfunded liabilities, or inflate its way through them. It doesn’t have to be that way, but there is a high probability that it will be. And the coming inter-generational political battle over gap funds could multiply hard asset prices and produce a merger of the Democrat and Republican Parties as the Baby Boomer “war party” to defend against an emerging youth bloc.

The stakes in the debate were highlighted for us recently by a comment on radio by New York Congressman Charles Rangel (D). He admitted that Congress had spent Social Security and Medicare “trust funds” as part of general expenditures. Asked how the missing funds would be recovered, he gave the most astonishing answer – that it would come from reclaiming debt sold by the Treasury!

No-one expects politicians to have a clue, but the ignorance is inconceivable.

Tera dollars

The unfunded liability projections are staggering. Over the next 75 years, America has estimated unfunded entitlement liabilities of around $86 trillion – yes, eighty six thousand billion dollars, or $8612. According to Social Security Trustees, it comprises a $10.4 trillion shortfall for Social Security, $61.6 trillion for Medicare ($16.6 trillion of which is from President Bush’s new prescription drug programme alone) and about $14 trillion in national debt.

When you pile on state, local and private debt, plus possible private sector pension bail-outs, the actual hole is closer to $115 trillion. Factor in emerging stealth entitlements such as Federal transfers for illegal immigrant health and social welfare, and it rises even further.

What has gold got to do with it?

Well, there is reasonably strong link between gold prices and total US federal and state government outlays as a percentage of Gross Domestic Product. As you can see from the chart, gold will generally rise in price when government’s take is rising and vice versa. Gold is sensitive to the value destroyed by every additional dollar that is trapped in bureaucratic hands.

When the chart is tracked back to the turn of the previous century there is a case to be made that gold was lagging the explosion in government greed. Before the New Deal the government needed less than 5% of GDP to do whatever it did. Just 23 years later, in 1953, the figure had rocketed to 27% and the budget deficit had risen from 0.8% to 1.7%.

There is also a notable overlay in periods of prosperity and declining government encroachment on private activity. Conversely, periods of accelerating taxation coincide with recession. Simply look at the 1990s decline in government’s share of the economy to understand where the money came from for the tech bubble.

Entitlement mentality

Entitlement expenditure and interest payments are consuming ever increasing proportions of government’s take.

For Fiscal Year 2006, the Congressional Budget Office expects almost half of the $3.3 trillion budget to be allocated to mandatory spending. Of that, more than two fifths will have to be spent on just three programs - Social Security, Medicare and Medicaid.

At the turn of the decade those three programmes alone will consume about 8.5% of GDP. By 2050 that percentage almost doubles meaning that there will be virtually nothing left in the government kitty to pay for infrastructure and defense, never mind pork projects.

It’s not that America does not have the ability to pick up $115 trillion in costs over the next 75 years; it does. The question is whether the electorate will agree to turn over most of its stock of savings just so that old people can have the right to spend 20-30 years fishing and playing golf.

The budget pressure would literally boil down to cancelling a school field trip for Johnny so that his grandparents can take another bus trip to Atlantic City on a Social Security dime.

Who owns the savings?

The US economy has grown at an average of 2.9% a year from 1913 until 2004. The effective national savings rate in 2004 was probably 15% (ignore the headline savings rate which inflates consumption but excludes assets and capital gains etc). At that rate of growth and savings, and ignoring the existing national savings stock that is appreciating, but accounting for government dissaving, the US could generate more than $500 trillion by 2080.

Obviously it is tenuous because that whole amount would not be liquid and entitlement funding is very much about near-call cash.

Nevertheless, it notionally takes care of the unfunded liabilities, except that we’re talking about savings. If government is going to stake a claim to more than a fifth of the best case savings accumulated from here on, we’re going to experience massive social upheaval. And remember that even less will be saved if there is a risk that tax rates will rise to pay for entitlements. Savings are avoided or deferred if they are going to be filched.

So it would be prudent to factor in slower economic growth. Additionally, we have just about reached “termination” on the value of each new dollar of debt to the economy. Half a century ago a dollar of debt bought about 50 cents of new national income. It is less than half that today and it takes about $10 of new debt to create a dollar of income.

That is unsustainable given the existing debt load and concomitant servicing burden.

Similarly, there should be an adjustment for less favourable terms to fund deficit spending and the trade deficit as the risk of repudiation on US debt securities rises.

Dropping the projected growth rate by one third to 1.9% a year and moving the effective savings rate down to 10% would still cover the projected bill, but only half the savings would be available for their intended purpose – the rest would be earmarked for redistribution. At a growth rate of 1% and savings rate of 7% there is no surplus left.

It illustrates how little room for error there is.

No room for error

With much of the effective savings rate tied to asset price gains any monetary accident would derail even the most optimistic estimate. Likewise the incentive to save is jeopardized the longer resolution is delayed. Unfortunately there is no incentive for politicians to address the issue. Their interests are ill-served by reducing government participation in the economy.

They do not necessarily have to be bold. Abolishing just capital gains tax might solve the problem. That pernicious tax amounts to stealing the seed corn that creates new employment and wealth. However, the short-term loss of revenue would not be tolerated by Washington's parasites.

Consequently the case for a rising gold price as well as other hard asset prices over the longest term remains good. There is every indication that Congress instinctually attempt to inflate its way out of the dilemma it created.

The last option would be repudiation though not of entitlements. Those would go very last because they have bought votes - votes that will take and keep at any cost. After all, retirement is in the Bill of Rights, isn't it?

[verwijderd] 20 juni 2005 09:12

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Gold Is Gaining Momentum

Gold’s performance last week was impressive. It ended the week in London at a new 11-year high against the Swiss franc and a 14-year high against the Japanese yen. Gold also climbed against other major currencies, and is near to breaking above a 25-year downtrend line against the British pound.

What’s more, gold is now above its 40-week moving average against all the major world currencies, which is an important development. The flight from debased national currencies into the safety and security of gold is gaining momentum. However, a couple of hurdles remain.

First, as we can see from the following chart, gold has not yet ended the week above the Dm 706.31 (€361.13 per ounce, €11.61 per goldgram) price I identified in my June 12th alert.

Second, gold still remains below the $456 ($14.66) level it reached in early December against the US dollar. Nevertheless, the following chart is impressive.

We can see that gold has cleared a number of hurdles. It continues to pull away from important support around $420 ($13.50), which it successfully tested. It remains above its 200-day moving average, and it climbed back above resistance around $432 ($13.89). Each of these achievements is a sign of strength, and together they bode well for further upside progress in gold.

Commodity prices are moving higher pretty much across the board. Oil is near $60 per barrel. Copper is also at new all-time highs. Gold is lagging and is still well below its all-time high – but we know why. Central banks are trying to keep a lid on gold.

Gold is a barometer of growing inflationary pressures and other monetary problems, and central banks want to shoot the messenger. So they continue to intervene in the gold market and jawbone their anti-gold propaganda – for example, the incessant clamoring by British Exchequer Gordon Brown to sell the IMF’s gold.

These interventions have clearly had an effect, but by keeping gold’s price artificially low, central banks are doing us a favor. We can continue to accumulate gold at this artificially low price, getting more gold for our dollars, euros and pounds than would otherwise be the case if central banks were not creating this opportunity for us.

As I see it, history is repeating. The US government dishoarded 10,000 tonnes of gold in the 1960’s at the artificially low price of $35 per ounce ($1.13 per goldgram) in the vain and hopeless attempt to convince the market that the dollar was worthy of being the world’s reserve currency, when in fact it wasn’t. The same situation is recurring today.

Central banks are shorting gold through the derivatives market (see “Gold Derivatives: Skewing the World” and dishoarding countless tonnes of gold in a vain attempt to make us believe that national currencies are worth holding. But we know that they are not, because their purchasing power continues to be inflated away. The flight from national currencies into gold will therefore continue.

___________________________________________

Published by GoldMoney
Copyright © 2005. All rights reserved.
Edited by James Turk, alert@goldmoney.com

[verwijderd] 21 juni 2005 13:32

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First silver ETF filed;
Barclays trust would be based on gold ETF model
By John Spence CBSMarketWatch Monday, June 20, 2005

www.marketwatch.com/news/story.asp?gu...
9A56-75B69A7907BD%7D&siteid=mkwt

BOSTON -- Barclays Global Investors filed an initial prospectus for
the first exchange-traded fund to reflect the price of silver bullion.

If approved by the Securities and Exchange Commission, the ETF's
shares would trade on the American Stock Exchange under the symbol "SLV."

Each share of the ETF would be equivalent to 10 ounces of silver,
according to the filing made late Friday by Barclays.

The ETF is structured as a trust and not an investment company
registered under the Investment Company Act of 1940.

The silver held by the ETF would be valued on the basis of that
day's announced London Fix, the price per ounce set by three market-
making members of the London Bullion Market Association at
approximately noon, London time, each day.

On Friday, the London Fix for silver was $7.37 an ounce.

Bank of New York is named as the trustee for the silver ETF and the
London branch of J.P. Morgan Chase Bank is the custodian, according
to the Barclays filing.

The sponsor's fee is 0.5% of the adjusted net asset value of the trust, according to the filing. The trust may sell of some of its silver to cover expenses, meaning the amount of silver per share may vary over time.

The silver ETF appears structured similarly to two existing gold
ETFs -- StreetTracks Gold Trust (GLD) and iShares Comex Gold Trust
(IAU). Shares of the gold ETFs represent ownership in fractions of
ounces of gold bullion held in a vault.

In recent weeks, market observers have said anticipation of the
first silver ETF filing may have been pushing price of the metal higher.

"Gold has been strong the past few weeks, but quite often silver has
been leading the charge," said Ross Norman, a director at
TheBullionDesk.com in London. "The tail has been wagging the dog,
and the rationale is that there is some buying ahead of the silver ETF."

"Silver is such a small, tight, relatively illiquid market that a
successful innovation in the way for individuals and mutual funds to
own silver, without the hassles of storage costs and steep premiums to spot, could have a pronounced effect on the silver price," wrote Todd Stein and Steven McIntyre of the Texas Hedge Report in recent commentary.

The introduction of StreetTracks Gold Trust, the first gold ETF, in
November was one of the most successful mutual-fund launches of
2004, as the ETF gathered about $550 million in its first day of trading.

It now has roughly $2.5 billion assets, compared with $175 million
for the iShares Comex Gold Trust, which began trading in January.

Like the gold funds, the silver ETF launch could tap pent-up demand
from institutional investors that cannot hold silver directly.

"The real question is if there will be ongoing demand after the
launch," said Norman at TheBullionDesk.com. "The gold ETFs saw
phenomenal demand initially that petered out later."

Similar to investing in gold ETFs, silver is classified as
a "collectible" by the IRS -- if held for more than one year, gains
are taxed at a 28% rate, compared with the 15% rate applicable to
most other long-term capital gains.

[verwijderd] 22 juni 2005 12:34

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Gold to $850? Dorothy Kosich '22-JUN-05 07:42'

SAN FRANCISCO--(Mineweb.com) It would simply not be much of a gold conference without precious metals pundits pontificating.

Precious metals analyst Leanne Baker and newsletter publisher Bob Bishop unveiled their latest prognostications Tuesday as Baker predicting the price of gold will exceed $500 an ounce, while Bishop truly believes it could hit $850/oz over the next few years.

In her brief presentation to the San Francisco Gold Forum, Baker exclaimed "whoever thought that a bull market would be so difficult?" Times are challenging and difficult for equity investors, she noted. 'Shares, in some cases, have performed atrociously."

Meanwhile, (the advent of ) gold ETFs "have taken away some of the retail interest in equities," which has contribution to waning retail interest, according to Baker. Nevertheless, she predicted, "we'll see the return of the retail investor at some point."

Baker views gold's decoupling from the euro as a positive development. There will be continued upward pressure on the gold price, which Baker predicted, "will test and perhaps exceed $500/oz."

Due to the dearth of "very large, exciting exploration success stories," the "consolidation picture will get more active," she suggested. In the meantime, gold companies which are located outside of the United States will probably still experience rising steel and energy costs which will impact their profits. Permitting delays and political risks will also exacerbate gold project timeframes.

Gold Mining Stock Report Publisher Bob Bishop also believes "that this business is being obstructed at every turn." Meanwhile, permitting and personnel issues plague new mining projects.

Bishop urges people to keep "a very open mind" as to what the price of gold will do over the next few years. He cited the fact that gold went to $850 per ounce 25 years ago as evidence it could climb even higher. However, he cautioned, it will be a "long, slow, drawn-out process." Nevertheless, Bishop added, " I don't see significant abatement of demand."

Citing the analysis of Don Cox of BMO Nesbitt Burns--whom Bishop praised as performing "great, great work" in precious metals analysis,--Bishop predicted that "gold production is going to be falling off a cliff for the next few years." He asserts that the decline is already taking place in South Africa.

Meanwhile, Bishop said the lack of drilling companies and experienced drillers has resulted in the proliferation of "inept drill programs around the world," which are proving particularly frustrating in bringing new supplies of gold to the market. The current exploration scenario appears to be that "we will find no mine before its time," he joked.

Nevertheless, Bishop said investors should be reassured that there is not an oversupply of commodities at the present time.

[verwijderd] 24 juni 2005 10:44

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HOW TO INTRODUCE THE GOLD DINAR INTO CIRCULATION IN MALAYSIA June 23, 2005
By Hugo Salinas Price, President, Asociación Cívica Mexicana Pro Plata, A.C., Mexico City, Mexico

The Malaysian Royal Mint issued a gold dinar a few years ago, and ex-Prime Minister Dr. Mahathir Mohamad had plans to introduce widespread use of this coin in a block of South East Asian countries as a means of settlement of inter-block balances.

However, when we saw the number of gold dinars minted for use in Malaysia, we were rather discouraged; the number minted was very small. The gold dinar continues to be, in our view, mainly a curiosity and a speculation on the further rise in the price of gold. What people all over the world desperately need, is not curiosities, nor medallions nor opportunities to speculate, but quality money.

Here are some thoughts on how this coin could be introduced into everyday use as money in Malaysia, in parallel with its current system of fiduciary ringgits.

The dinar, a coin weighing 4.25 grams and with a gold purity of .917, could be placed into circulation in parallel with the ringgit, by means of a daily official quote on the part of the Malaysian Central Bank ("MCB"). The quote, or ringgit equivalent, would be a floating value, determined daily. The process of determining the quote would be as follows: the international price of gold, presently quoted in dollars in London or New York, would be multiplied by the exchange rate of the ringgit for dollars. This operation would yield the international price of gold, in ringgits.

The gold dinar contains approximately one-eighth of a Troy ounce of pure gold. The price of gold in ringgits should thus be multiplied by .125 to produce the price of gold contained in one dinar. (Note: the fraction could be expressed more exactly, but for purposes of this essay, we will use the multiple .125)

The international price of gold, at this writing is approximately $440/oz. One-eighth of this price is $55.00 US Dollars. The exchange rate of the ringgit is 3.80 to the dollar, which gives us a value of the gold in the dinar of 209.00 Malaysian Ringgit.

The MCB could be granted the right to seignorage on the minting of gold dinars. Let us suppose that a seignorage of 7.5% is granted to the MCB. Thus, the gold dinar has a gold content of 209 ringgit, to which the MCB adds a seignorage or gross profit for itself, of 7.5%. This would produce a value for the gold dinar of 224.68 ringgit.

This is an unwieldy number for the population to bear in mind, so the number is rounded up to the nearest multiple of 5, which produces the quote which the MCB will use to endow the coin with a legal tender value: 225 ringgit.

Further, let us suppose that the MCB declares that in the future, the gold dinar will under no circumstances ever be worth less that 225 ringgit. It declares that future rises in the price of gold, or further deterioration in the ringgit rate of exchange, will be reflected in a higher equivalence in ringgit, of the dinar, according to the formula described above, which will include a premium of approximately 7.5%. And still further, it declares that any future quote or equivalence in ringgit which it accords to the gold dinar, will never be reduced.

The provision that any equivalence in ringgit quoted by the MCB will not be reduced under any circumstances, turns the dinar into money of the highest possible quality, which can circulate in parallel with the ringgit, with no difficulty. This provision is of critical importance.

If the dinar does not receive an equivalence in ringgit which cannot be reduced when the price of gold falls or when the ringgit appreciates against the dollar, but only an official equivalence which fluctuates strictly in step with the exchange rate and the international price of gold, the gold dinar will remain a commodity-coin. Owning it would be a speculation. The dinar would not become money, because its occasional fluctuations in value expressed in ringgit would represent a speculative risk for the general public. (The banks would be unwilling to receive remittances of gold dinars from the MCB, as money, because a reduction in value at any moment, would mean a loss to them. Thus, the distribution of the coin to the public, would be next to impossible.).

Just as the nominal value in ringgit of coins or of bills cannot be reduced, the equivalence in ringgit of the dinar, which has no nominal engraved value, should also not be subject to reduction. This is a concept which incorporates in the commodity-coin a characteristic of the fiduciary monetary system, and which turns the dinar into money.

The fact that the gold dinar, as presently designed, bears no engraved value, is an indispensable asset. It allows the coin to have a quoted value, instead of an engraved value, which is fixed. Fixed, engraved value coins of precious metals always go out of circulation when the price of the underlying metal surpasses the engraved value, which cannot be altered. The gold dinar, with no engraved value, will not have this problem. When the underlying metal value goes up, the quoted value is raised – and remains at that quote, even if the price of the underlying goes down. (If it does not, and the quote is reduced, the coin ceases to be money. It is once again, a commodity coin.)

Today, coins made of all sorts of base metals are in use as legal tender, and their legal tender value is totally unaffected by falls in the value of the metal of which they are made – but quite affected by rises; the copper penny of the U.S.A. for example, is soon going to disappear in the refineries.

Similarly, the gold dinar with a value which can rise with rises in the price of gold, but never fall below the most recent quote, will enjoy the fullest possible confidence of the population fortunate enough to have this coin in circulation.

By adhering to the foregoing stipulations, the MCB should have no trouble at all in placing the gold dinar into circulation, by the same means it presently uses to put bills and coins into the hands of the public: the banking system. The gold dinar becomes just another coin – but one of extraordinary importance – in use by the Malaysian public. In passing, let us note that the gold dinar endowed with a legal tender value in ringgits, can be deposited in the banking system, but not in "gold accounts", only as a ringgit deposit for its quoted value. The banking system would not be obligated to return gold dinars, once deposited.

An objection may be voiced: "These higher quality coins would never circulate. They would be hoarded." That is indeed true. However, let us reflect that there are two types of circulation, active and passive. The active circulation is of those bills and coins we are willing to spend first; the passive circulation is of coins such as the dinar, which we will only spend as a last resort. The gold coins, endowed with a full and clearly determined legal tender value, will be circulating passively, as savings, but fully useable by the holder at any time. This passive circulation is called "hoarding", but it is still circulating, legal tender money, held in reserve for emergency use. (Its "velocity of circulation" will be close to zero.)

If the price of gold rises sufficiently, the floating value of the coin will increase. Two buffers avoid a constant modification of the floating legal tender value: the first buffer, is the 7.5%

[verwijderd] 26 juni 2005 13:49

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Gold rush may mean inflation bust;The metal's recent jump worldwide and high oil prices signal serious inflation pressures ahead.

By Katie Benner CNN/Money Friday, June 24, 2005
money.cnn.com/2005/06/24/markets/gold...
section=money_topstories

NEW YORK -- Gold rising along with the dollar -- and with oil jumping to record highs near $60 a barrel -- may signal serious inflation woes ahead.

It's enough to give a gold bull deja vu.

A handful of precious metals insiders at the recent New York
Institutional Gold Conference predicted that the price of spot gold will hit $850 an ounce in the next few years from its current level near $440.

The last time it got anywhere near that high was in the late 1970s
when out-of-control inflation, unrest in the Middle East and an oil
crisis pushed the precious metal from $150 to $810 a troy ounce.

Gold is currently trading 30 percent above its 10-year moving
average on the New York Commodities Exchange, and gained five
percent this month to stand less than $10 away from March's peak at
$446.70, even while the greenback gained against the euro.

During the recent dollar rally, the American Stock Exchange's index
of gold-mining stocks, or BUGS, also moved toward three-month highs,
and individual gold and mining stocks including Placer Dome, Newmont
Mining, and Barrick Gold have moved in tandem with indexes.

This, some economists contend, points to a troubling inflation
problem, greater than currently perceived.

"Despite all the rate hikes, the (Federal Reserve's) overnight lending rate is still less than inflation," said James Turk, co-author of the book "The Coming Collapse of the Dollar and How to Profit From It."

It is oil prices that are really making the gold market look like
1970s redux, with crude prices hovering near $60 a barrel.

While economists debate whether high oil prices will spark inflation
or will slow economic growth by acting as a tax on consumers and businesses, the gold and bond markets have come down on the side of
inflation.

"The recent run in gold has moved in conjunction with rising crude
prices," David Meger, senior metals analyst at Alaron Trading, said
in a recent note.

Gold prices began to jump higher in the third quarter of last year,
concurrent with the latest oil price surge.

"Middle East nations are getting more petrol dollars as (oil) prices rise, and they're not putting it back into paper assets," said Charles de Vaulx, manager of the First Eagle Gold Fund. "They're trying to protect the value of their profits -- just like in the 1970s -- so they're buying gold," he said.

With oil prices so high, some traders believe there's still a
considerable upside to gold, despite the fact that some market
analysts, like MKM Partners' chief market technician Katie
Townshend, say the metal has become overbought in the short term.

"Based on historic ratios between gold and oil, gold should now be
over $500 an ounce," said Frank Holmes, chairman and chief
investment officer as U.S. Global Funds. "Or the price of oil needs
to come down to $40 to $42 a barrel."

When inflation grips a market, the value of dollar-denominated
assets is eroded. So a shift to gold represents, among other things,
a broader shunning of financial assets in favor of hard assets as a
hedge against perceived currency risks.

"Even Warren Buffett is buying gold because he sees the dollar as
weak," claimed Turk.

At the moment, however, gold and the dollar are both rising. But metals traders argue that the price of gold is still an accurate indicator of inflation risks, because the dollar's rise doesn't reflect true strength, only relative value compared to an equally troubled currency.

"Confidence in the euro as an alternative to the dollar has fallen apart," said Frank Holmes, chairman and chief investment officer as U.S. Global Funds.

Michael Darda, chief economist at MKM Partners, said that currency
weakness across the board has helped to keep the dollar from falling
as gold rises.

"Gold prices are rising against almost every major currency," said
Darda, noting that it's unusual for gold and the dollar to be rising
at the same time. "So the run up in gold prices here has not
affected the dollar to the benefit of other currencies."

Darda said spot gold would have to hit over $1,000 an ounce to signal a currency market collapse like the one that hit at the end of the 1970s.

Few analysts believe the metal will trade between $600 and $800 over
the next few years, mostly because they assume rising oil prices
will slow demand for fuel and eventually bring crude prices down.

But consulting firms like Alaron Trading are still bullish on gold,
particularly because they see weakness in a variety of paper assets.

"Four to five years ago when the equity bubble burst we were hopeful
that gold demand would surface. But people went to other asset
classes like real estate or hedge funds," said de Vaulx.

"We're seeing both real estate and hedge fund become more uncertain
now, and if it's going to happen, we'll see the investment demand
for gold," de Vaulx said.

[verwijderd] 28 juni 2005 08:18

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Oil-Gold Ratio Hits All-Time High By Tim Wood 27 Jun 2005 at 08:41 PM
www.resourceinvestor.com/pebble.asp?r...

NEW YORK (ResourceInvestor.com) -- Back in 1976 many countries will still mired in gas rationing after the first OPEC crisis, Arab terrorism was an issue – the Entebbe Raid occurred in July that year, and fears of a new global ice age were prevalent, as were concerns about the imminent depletion of mineral resources. It was also the year the ratio of oil to gold prices (monthly) hit an all-time high of 0.128, or one ounce of gold purchasing a mere 7.8 barrels of oil.

Roll forward three decades and the only thing that has changed is that we’re now paranoid about a global barbecue and you don’t have to wait on line overnight to fill your tank with petrol.

With gold prices rather listless in US dollars, but oil prices racing back to their highest real prices since 1983, the ratio between oil and gold has reached an all-time monthly high of 0.131, or 7.63bbl/oz. The daily ratio also hit a record high of 0.1378 (7.26bbl/oz) today with crude oil closing above $60 a barrel and gold fixed below $440 an ounce.

The 35-year average is 0.065 ounces of gold per barrel of oil, or 15.3 barrels of oil per ounce of gold, so we’re now almost two standard deviations off the mean. That doesn’t guarantee anything in terms of more expensive gold and cheaper oil. After all, the run to historically high ratios through 2004 elicited a good many predictions of a resolution to the mean, but to little effect.

It is, nevertheless, worth watching history’s unusual moments and today was one of them, and this month looks on track to be definitive.

Notably the gold price bottomed in September 1976 at a monthly average of $106/oz before scorching 539% higher in just three and half years to a February 1980 monthly average of $678/oz and almost repeating it in October of that year.

© Copyright 2005, Resource Investor.

[verwijderd] 29 juni 2005 11:33

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Gold, walking tall and alone Barry Sergeant '28-JUN-05 15:00'
www.mineweb.net/columns/curve_ball/45...

JOHANNESBURG (Mineweb.com) -- There is ample evidence that the minority smart money in resources markets exits well before the over-educated majority burns fingers, toes, legs and ears. Conversely, minority smart money tends to find its way into a theme as it gains subscribers, but long before it becomes generally known.

The month of June has apparently set new benchmarks for the price of gold bullion. Despite multi-year bull markets for bullion in dollar, euro and yen terms, the precious metal may be on the brink of a major new uptrend. In the background, influential commentators point increasingly to brittle market prices, not least in house price bubbles apparent in dozens of countries around the world.

In the immediate short-term, investors are focusing unblinkingly on Thursday’s interest rate meeting at the Federal Open Market Committee (FOMC), a unit of the Federal Reserve, the US central bank.

Stephen Roach, Morgan Stanley’s forthright chief economist, has called for the core US rate to be more aggressively hiked to around 5%. At the other end of the scale are the likes of Bill Gross, at Pimco, the world’s biggest bond fund. Gross reckons the rate should be halted at 3.5%, and even possibly cut later this year. The actual rate has tripled in the past 12 months, in eight equal instalments, from 1% to 3%.

The month of June has seen the dollar gold bullion price rise around 6% - despite a stronger dollar (which, for years, has exhibited an inverse correlation with the dollar gold bullion price), and the virtual certainty that the FOMC will hike to 3.25% on Thursday.

Despite dollar gold’s counter-intuitive rise against the dollar in June, as the Bank Credit Analyst has noted, the metal’s recent rally has been more pronounced in euros or yen, where prices are at new multi-year highs. For BCA Research, the bottom line is that further signs of reflationary policy support from global central banks could send gold prices higher in the near term.

The hints to this possible outcome were seen in the past week, when the Swedish Riksbank cut its core interest rate. There are fresh signs that – under the weight of an ongoing stream of appalling economic and political news – the European Central Bank could cut its rate later this year. There are equally fresh signs that the Bank of England could cut its core rate in the foreseeable future.

On Thursday the Federal Reserve may signal that its bout of tightening is over for the meantime. The net message (should all this materialize) would be that central banks are more concerned with stimulating economic growth, than with controlling inflation. This reflationary message would be bullish for gold (in any currency).

In his latest analysis of the US interest rates environment, Gross argues: “it’s primarily real interest rates that drive asset prices,” rather than nominal rates. Gross argues further that TIPS have limited room on the downside “no matter how large the Fed’s future fleet of helicopters.” The “TIPS” Gross refers to are, of course, special-type US Treasury bonds which offer protection from inflation.

To Gross, the downward path of a 5-year TIPS represents “an appropriate proxy for the main driver of housing prices and stock P/Es, and therefore the primary pump that the Fed has utilized to keep our asset-based recovery underway.”

Gross argues that not only has the TIPS yield declined by over 200 basis points in the last several years (“with only 135 between here and 0, therefore exhausting much of the Fed’s fuel”) but there is “logic to believe that they can be driven at best back to the 60-70 basis point level experienced in March of 2004 during the winter of America’s deflationary fears.”

It was only in mid-2004 that core US interest rates were first gently hiked (from lows not seen in generations), after it had become clear that deflation was most unlikely to materialize in the US economy.

In his essay “Original Sin,” written earlier this year, Roach complained that never before had he seen a central bank attempt to spin the debate as has the Federal Reserve over the past six or seven years. “From the New Paradigm mantra of the late 1990s,” wrote Roach, “to today’s new theories of the current-account adjustment, the US central bank has led the charge in attempting to rewrite conventional macroeconomics and in making an effort to convince market participants of the wisdom of its revisionist theories.”

The problem, bellowed Roach, “is that this recasting of macro is very self-serving.” For Roach it was a “concentrated effort on the part of the Fed to exonerate itself from the Original Sin of failing to address asset bubbles.” For Roach, the result is an ever-deepening moral hazard dilemma that poses grave threats to financial markets.

Housing is only a modest slice of the US economy, but is now punching way, way above its weight. US real estate lending is now more than 50% of bank loans (a record), housing accounts for some 30% of total household assets (a record), and investment in residential real estate is 35% of private investment (the highest in 30 years).

There will be lots of trauma and tears when house price bubbles start bursting. In the meantime, bonds are in strong demand right around the world, and equity markets are grinding sideways. When the dust settles, it will almost certainly be found that the smart money had moved into gold bullion.

[verwijderd] 30 juni 2005 15:14

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Mysterieuze Gold Strike $ 450?

Gartman report

www.cfsfutures.com/images/E0067301/06...

&

www.aireview.com/index.php?act=view&c...

[verwijderd] 30 juni 2005 20:26

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www.usmarkets.nl over goud en anglogold:

Goudindex:
De goudindex staat op punt uit te breken boven de 95 pnt waar er zich nu een 3-dubbele weerstand bevind. De index maakt al sinds mei hogere bodems en hogere toppen met een mooie ondersteuning van de indicatoren die zich ook van hun positieve kant laten zien. De weerstand rond die 95 pnt wordt gevormd door de lijn over de toppen vanaf begin dit jaan samen met het 200-daags gemiddelde dat ook rond de 95 pnt staat nu. Naast deze 2 lijnen zien we ook de toppen van augustus en begin deze maand rond die 95 pnt zodat dit een zware weerstand is. Door de kracht die deze index laat zien gedurende de afgelopen maanden wordt de kans zeer groot dat die 95 wordt doorbroken, een uitbraak boven deze toch zeer zware weerstand brengt meteen een sterk koopsignaal op gang zodat er ruimt ontstaat om op vrij korte termijn door te stoten tot eerst de 102~104 pnt en later tot de 106 pnt waar de top van eind maart te zien is. Ook is het mogelijk dat de index wat later de top van eind 2003 en begin dit jaar gaat opzoeken. Dan krijgen we een rally tot rond de 112~115 pnt. Goud staat nu dus op de kooplijst.

Anglogold:
Een leuk fonds om op een stijging van het goud te anticiperen is Anglogold, ook dit fonds laat een zelfde ontwikkeling zie zoals net bij de index besproken. De weerstand rond de 36 dollar moet doorbroken worden om een beweging omhoog op gang te brengen. Wel zien we hier een horizontale lijn over de toppen van mei, juni en augustus als zware weerstand. Het 200-daags gemiddelde ligt wat verder bij dit fonds, deze belangrijke lijn komt nu rond de 38 dollar uit. Zodra de uitbraak een feit is wordt dit het eerste koersdoel op korte termijn. Later zien we de 40 dollar als target. Eind vorig jaar lag de top net onder de 50 dollar zodat er bij een uitbraak ruimte genoeg omhoog ligt. Boven de 40 dollar kunnen we zelfs een versnelling omhoog krijgen.

[verwijderd] 1 juli 2005 07:53

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Gold price - big rally to come Colin Abrams Posted: Fri, 01 July 2005
www.miningmx.com/gold_silver/456751.htm (voor de grafiek)
miningmx.com -- We present an exciting-looking chart of the dollar gold price. It is pointing in one clear direction for the weeks ahead.

GOLD PRICE ($) – Big rally to come

Broad Recommendation: BUY
Trend: Medium-term technically sideways. Short-term up.
Strategy: Buy the gold price itself on a pullback, for the medium-term.

Chart Setup: The dollar gold price has recently broken out of a large symmetrical triangle (lines 1 and 2). This is a very bullish event, and its recent strength is set to continue.
The daily Stochastic Oscillator (on top) is pulling back towards the oversold level, thereby giving an opportunity to buy

Strategy Details: Buy the gold price directly. Short-term traders wanting to optimise their entry, should get in on a pullback to $435/$434. Medium-term players however can buy it at current levels.

Target: The minimum upside target is $470 i.e. the height of the triangle projected up. Take profit there on medium-term positions (approx. 3-months).

Stop-loss: A close below $430, after entering on a pullback. But tighten the stop as a trailing stop as the price keeps moving higher, depending on your time frame (i.e.. short-term traders keep a tight trailing stop e.g. a break of the low of the prior two days. Medium-term players keep a wider stop).

Conclusion: The gold price is set to rise. While one can capitalise on this move by buying the gold price itself, it also good news for overseas gold stocks. South African gold shares however are also dependent on the dollar/rand exchange rate. Assuming the $/ZAR remains steady (or even weakens slightly), we’ll see a large rally in SA gold stocks as well.

For more recommendations by the author on SA and overseas stocks, indices, and currencies please go to www.themarket.co.za.

Willempie3 1 juli 2005 17:27

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Gung Ho;

Volgens mij hebben ze bij de FED de strategie om juist voor de lange weekenden, zoals nu met 4 juli independence-day, de goudprijs eens flink onderuit te halen. Dan krijgen ze namelijk het meeste waar voor hun geld: 3 dagen geen handel waarin het grote publiek tegen een flink gedaalde goudprijs aankijkt. En dus meer reclame voor het beleid van de FED dat alles O.K. is met de Dollar en dat er geen inflatie is. Jammer voor de FED dat ze dit spelletje niet met olie kunnen spelen. Die markt is een maatje te groot voor ze. Als de olieprijs naar 80 of 100 Dollar stijgt, misschien al voor het eind van het jaar, zullen er toch wel flink wat mensen zich gaan afvragen of de inflatie werkelijk onder controle is.

W3.

[verwijderd] 2 juli 2005 17:57

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Is mij ook wel eens opgevallen, ook van die dunne halve handelsdagjes of typische vrije dagen zijn populair.
Kan zichzelf ook in de hand werken. Veel goudbugs denken dat de zaak gemanpuleerd wordt, dus dan wordt je wel wat onzeker op zo'n dagje.
-pcrs

[verwijderd] 4 juli 2005 14:47

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Silver's Breakdown, or Bear Trap? By Gene Arensberg 03 Jul 2005 at 09:26 PM

SUGARLAND, Texas (ResourceInvestor.com) -- It’s summer again. And I have to admit it, I don’t like summer very much. Mainly because I happen to live in a tropical wannabe area of the Texas gulf coast and in July and August it gives places like Libreville, Gabon and Borneo a run for their high heat and humidity money. Growing up here as a kid I seemed not to notice the heat as much as I do now about to enter my fifth decade of exas climate torture. Was it always this hot? (Yes, statistics say it was).

There is another reason I don’t really care for summer all that much. That’s because the summer is usually considered the weakest part of the year for the segment of the market I am most interested in - the gold and silver markets.

Cyclic dominance

There are all kinds of cycles in the market. Some last for mere days, some last a few months, then there is the annual cycle, and of course there are longer cycles lasting years and even decades in some cases. Cycles can run parallel, they can overlap and they can even run contradictory to other cycles. People who study these cyclic events write articles about them. They build entire sciences around them and some people listen to them. Over time some repetitive cycles become self fulfilling because enough people believe them.

Whether they realize it or not, belief in a cycle affects how people trade. When enough people believe in something, believe that something is going to happen, it is only natural that the markets will reflect that belief, sometimes more, sometimes less in any given cycle, but the “pressure” of the cyclic belief is there.

The effect of a widely believed cycle by itself, versus outside forces to that cycle, is a science unto itself. The basic idea is that within a cycle there will be predictable movement, predictable change purely because of the knowledge or the “power” of the “cyclic force.” Scientists call this effect “cyclic dominance” as postulated by Dewey in 1967.

A long time ago now I wrote a paper which argued in favor of cyclic dominance at a time when the “randomists” were belching their random chaos models. Looking back at that yellowing paper today, I will admit that while passionate, it was pretty lamely written. But the premise I thought then, some 30-something years ago, has proved itself time and time again. That premise was simply, “Cycles Mean Things.” … Okay, I admit now it was maybe not the best of titles. Better would have been, “Ignore Cycles at Your Peril.”

I seem to have gone the long way around a short horse here, but in case it isn’t clear, I believe that cyclic dominance plays a part in the financial markets, and we see the effects of it all the time. This article is supposed to be about silver, but I wanted to get it started by tying in the annual trading cycle. Of the four seasons, summer is considered the weakest of the lot for the metals markets. Therefore, whatever outside forces (to the cycle itself) may be at play, the fact that a bunch of people think that the summer is weaker for the metals is enough to influence the metals to some degree. It is partly that cyclic dominance which longer term swing traders seek to exploit by taking advantage of the weaker points in the cycle to deploy capital. (Whether they realize it or not.) The theory for silver being that as the stronger fall and winter periods come, the higher expectations for the metals alone will have an opposite (more positive) influence on the markets. So the time to stock up is during the weaker summer months.

Is cyclic dominance “powerful” enough to rely on exclusively? Definitely not. However, I don’t think it hurts to consider it in concert with the other market forces at play. And that brings me to the current situation on the second most popular precious metal. Silver.

Silver technical challenge

As we are now entering the weakest part of the year for silver, things like a technical breakdown can be enhanced or even caused by the annual cyclic dominance provided the other market “stars” are so aligned to allow it. In other words, it’s somewhat easier for a technical breakdown to occur and to be sustained when we are in the weak part of the annual cycle. But just as some will try to exploit that cyclic pressure by trying to buy it, others are on the other side of that idea trying to exploit it by selling it. Add into the mix some light holiday liquidity and, …well, cycles mean things!

On Friday, July 1, silver was hammered in the same weak pre-Independence Day holiday liquidity as gold. As a goodly number of COMEX traders got an early start on their holiday, those who stayed at their posts selling in the last hour of the metal trading day managed some “fireworks” of their own. The near active September contract declined 18 US cents to close at $6.895 the ounce. The final trade on the cash market crossed the tape at $6.866. While 18-cent moves in the silver market are nothing unusual, this particular move took out a key uptrend line and linear support which has held for nearly 24 months.

Silver, 3-year, Weekly

Technically minded traders all over the globe will note that a breakdown attempt is underway … when they get back to a computer terminal that is. Of course, that’s what the Friday big sellers are counting on.

The wide triangular consolidation of silver’s early ’04 definition move to $8.50 is seeing it’s first breakdown attempt thanks to Friday’s sell-stop triggering “raid.” Yes, I am calling it a raid. Most of the selling action came in the last hour of the holiday shortened metals trading day when all of the other financial markets were closed and most in Asia were sound asleep.

The usual suspects

The Large Commercials (LC’s) have been net short silver for a long time. Years. While it is not unusual for the LC’s to be net short silver because they largely represent, or rather fade the hedges by producers and take the opposite side of the speculators, for quite some time now they have been various degrees of way net short silver. (The large commercial net positions are the ones at the bottom of this next graph).

Commitments of Traders, Silver, Current

What better time to attempt to get out of that way-net-short position noose than when people are expecting weaker markets for silver? Like right now during the annual cycle weak period. And what better time for a “raid” on sell stops than when fewer “longs” are at their computer terminals? Like just before a 3-day (read 4-day for many) holiday weekend when all the other markets are closed.

Annnnnnnnd, it just so happened that this particular light-liquidity raid opportunity happened to coincide with silver resting just above its long-term uptrend line. The opportunity had to have been irresistible for the big sellers on Friday afternoon, and it sure looks like they took it. Bam! Into the sell stops went the late-day price. The sellers got a “cheap” breakdown started.

Was that enough to send the markets into a panic on Tuesday when the COMEX is back in business?

Well, initially on Friday the shares of many of the mainly silver producers got hammered right along with the apparent breakdown in the metal. But a strange thing happened after the metals market closed and the paper market silver sellers were savoring their “cheap” techni

[verwijderd] 4 juli 2005 18:08

[verwijderd]

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en dan ook nog een maandagje independance day, waarin de euro nog een stukje wegzakt. Het metaal wil alleen niet erg vandaag.
-pcrs

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