Friday, December 02, 2005


Bullish Precious Metals Sentiment At Decade High

The MarketWatch site has this look at whci metals will perform best. "Prices for most precious and industrial metals have climbed to levels they hadn't seen in years, forcing investors to consider whether the rally in the metals will soon come to an end."

"Gold and silver are trading at their highest levels since 1987, while palladium's price is at a 20-month high, platinum recently reached its loftiest level in more than 25 years and copper has scaled to never-before-seen heights."

"December gold climbed to a high of $503 an ounce Thursday, the highest price the futures market has seen since December 1987. Demand for the yellow metal stems from an investment perspective, with investors betting that inflation will continue to increase in 2006 and others expecting gold to protect them from a 'currency crunch.'"

"It's the most likely of the metals to keep moving higher, said Brick Capital's Batt. And while he wouldn't necessarily by a buyer at current levels, he said he would look to buy gold on a dip in prices."

"Ned Schmidt, editor of the Value View Gold Report said gold is in an 'overbought condition.' 'A correction is in the process of developing, with a potential downside below $460,' he said. 'Investors should be watching gold, rather than buying.' Ben Johnson also sees a decline in gold prices by the end of the year, he said. 'When all advisers get very bullish, contrarily there are fewer investors then left to buy, and prices often go down,' he said."

"Silver has 'the greatest potential for gain,' said Paul Mladjenovic. Silver can easily go down 50 to 75 cents in a few days since a 'handful of large firms have performed egregious shorting through paper trading that has artificially depressed the price of silver,' he said. But 'due to the very acute physical supply situation, silver can easily have an explosive upside, especially due to increased industrial demand" from China and India.'"

"Platinum, another industrial and precious metal, 'is bound to continue higher as pent-up demand for the metal is coming from everywhere, catalytic converters and jewelry demand to name a couple,' said commodities trader Kevin Kerr. January platinum peaked at $1,004 an ounce Monday, nearing the record for a front-month contract of $1,085 set in March 1980."

"The mixed prospects for the all the metals certainly make for a confusing market. So what's the best way to approach it? 'You don't make money from Page 1 news. And metals are Page 1 news right now,' said Brian Batt."

"Batt recommends that traders be 'cautious on all the metals in the short term. Sentiment is extremely bullish, just about as bullish as it has been in the last decade.'"

"'When all advisers get very bullish, contrarily there are fewer investors then left to buy, and prices often go down,' he said."

This statement is somewhat misleading. Unlike real estate, the same investors can keep buying gold, and usually do buy more gold. Unlike real estate, it's not a matter of bringing more buyers into the market. It's a matter of getting current buyers to buy still more. That's much easier to do, especially if prices continue rising.

With productive business investment opportunities dwindling, there will be even more movement of money into gold and precious metals.

Unlike real estate, the "supply" of gold cannot be rapidly increased. As such, any demand increase raises gold prices more rapidly.

At least part of the increased value of gold is due to global currency devaluation. There is simply too much money globally chasing too few goods. The rapid rise in all precious metal prices is consistent with this.
Given the psychology issues backing gold and the supply issues backing silver, I've been interested in both equally. Anyone out there actively investing in platinum & palladium? Those are intriguing, but I still just don't yet have enough info on them to consider a move.
Is this true? "Gold rose to as high as $505 an ounce in Asia on Friday, its highest level since February 1983, and looked likely to rise further as fund buying resurfaced despite fears of year-end liquidation." It is true the spot price of gold reached $505.00 a troy ounce in Asia today, but it's totally misleading to say it's "the highest level since February, 1983." To match the Feb. '83 level gold, in today's dollars, the price would have to be $986.98! Any journalist who is comparing prices over time without calculating inflation is dishonest. Beware!

Just like reporting median home sale prices adjusted for inflation, right? ;)
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