Wednesday, December 14, 2005


Japans Margin Limits "Smoked' Gold

Has the gold juggernaut run out of steam? "Gold in New York plunged 2.8 percent, the biggest drop in a year, on speculation demand will slow from Japanese investors after the Tokyo Commodity Exchange increased the cost of trading the metal."

"The Tokyo exchange, the world's second-largest metals and energy futures market, boosted minimum deposits for trades to curb speculation after gold surged to a 24-year high of $544.50 an ounce on Dec. 12. Gold sold in yen climbed 18 percent in the five weeks ended Dec. 9."

"Gold for February delivery fell $14.60 to $509.50 an ounce on the Comex division of the New York Mercantile Exchange, the biggest one-day decline since Dec. 8, 2004, and the lowest closing price since Dec. 2. The metal fell 1.4 percent yesterday. 'Gold is getting smoked largely because of Japan raising margin limits,' said John Licata, an independent analyst in New York who correctly predicted in 2002 gold would rise to $500 in 2005. 'You will start to see bottom fishers come back in the low $500s, especially pension funds and central banks looking at a $30 slide in prices as a great opportunity to increase positions.'"

"Hedge funds and other large speculators have more than tripled their net-long positions, or bets prices will increase, in New York gold futures since the end of July, government figures show."

"Simon Weeks said gold was potentially heading for $498-500 an ounce over the next 10 days, with lots of Japanese investors still caught long above the market. Frenzied buying of Japan's TOCOM futures this week, itself partially triggered by weak currency concerns, was a major driver in taking gold to new highs."

"In other precious metals, platinum tumbled to $962/966 an ounce from $991/995 late in New York. One trader noted a big increase in volumes traded on the Shanghai exchange, with 247 kg daily turnover versus a daily average so far this month of just 42 kg. Sister metal palladium fell less sharply to $260/264 an ounce from $269/273."

"Silver dropped to $8.38/8.41 in the U.S. market from $8.49/8.52 previously in New York."

Looks like with the dollar and gold up, it was puttin' the hurt on the Japanese central bank. That's probably ther reason for the margin move.

I am skeptical about central bank buying as a bullish indicator for precious metals. They beat me up for years with warnings of selling. The CB's are no friend of gold, IMO.
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