Friday, February 17, 2006

 

Markets Turn To Gold For Safe-Haven

Political events have given a new boost to gold. "Gold futures closed higher Friday on safe-haven buying amid a fresh threat of violence in Nigeria and Iran's continued defiance of calls to stop its uranium-enrichment program. The metal also found support from data showing a bigger-than-expected rise in wholesale inflation in January."

"Gold for April delivery closed up $5.80 at $554.60 an ounce, its highest level since Feb. 9. After a volatile week, the contract managed to eke out a 0.2% gain from last Friday. A Nigerian group has threatened 'total war' against foreign oil companies operating in that country, according to the BBC."

"Meanwhile, tensions surrounding Iran's nuclear research program are growing ahead of a meeting with Russia scheduled for Monday. The talks will focus on a Russian offer to allow Iran to enrich uranium within Russia. 'The gold market has been looking for more uncertainty and we are seeing it this morning,' said Kevin Kerr. Investors are looking at gold as more of a buying opportunity after its steep decline than a commodity preparing to crash, 'and this is prudent,' he said."

"'After all nothing has fundamentally changed for gold and now technically we have had the correction we needed to see and new buying can pour back in.'"

"Peter Grandich agreed that the bull market is intact. 'Hard as it would be to take it, gold could fall to the high 400s and still not have violated the bull run. But have no fear; I don't think we'll get even close to that.'"

"Other metals were also on the rise Friday. March silver futures ended up 5 cents at $9.42 an ounce. Platinum was up $3.40 at $1,011 an ounce and sister metal palladium rose $11.55 to $288.75 an ounce."

And a platinum miner had a good day. "U.K.-based platinum miner Lonmin PLC soared as much as 34% on Friday after the company said it's had talks on a prospective buyout. Lonmin (UK:LMI), the world's third-largest platinum miner, didn't identify the bidder and stressed that talks were 'very preliminary.'"

"But Lonmin, a component of the FTSE 250 mid-cap index, soared as investors bet that the talks would succeed. The shares ended up nearly 25% higher, and the bid lifted other mining stocks in London as well. Speculation over which companies might be in talks to buy Lonmin included Xstrata (UK:XTA). Anglo American (AAUK) and Goldfields (GFI) also are possible bidders for the company, analysts said."

Comments:
I knew an engineer that had to be air-rescued from a mob in Nigeria. He said the entire region is a powder-keg. They have lots of oil, but the locals feel like the multinationals are stealing it.
 
FSJG Index Weekly Review predicts more correction coming:

http://www.financialsense.com/metals/fsjg.html
 
Treasury Department overdrawn by $64 billion. Media too busy with VP Cheney to notice. Mainstream media don't like to cover dull stories involving federal bookkeeping. Hence, the overdrawn condition of the U.S. Treasury still simmers on the back burner. However, on Thursday the federal debt had climbed to $8.248 trillion, $64 billion over the official limit. Congress can't dodge the problem much longer.
 
Found this on the Hecla Mining message board...

---

Thought I'd pass this along, in case you haven't heard - there is a
new silver market in the making, in solder of all things. Effective
7/1/06, Europe has mandated that all solder used in products sold
there be lead-free. From what I have read, practically speaking, this
lead ban has a world-wide scope - manufacturers will simply use lead-
free solder for all products, not use lead-free solder for Europe and
lead-containing solder for the rest of the world.

The lead-free solder contains between 3.5% and 4.5% silver. It
contains mostly tin, with some copper.

Here is a link from Ames Lab (add http):
www.external.ameslab.gov/final/News/2006rel/Leadfree.htm

Now, where things get interesting is in the calculation of how much
silver will be consumed in this new solder. I found a report on
Google that states that the world solder market is currently $6
billion a year. If this figure is valid, and if the new solder costs
the same as the old solder (unlikely), with silver representing 60%
of the cost of the new solder (based on prevailing spot prices times
solder formula percent make-up)... I calculate that 400 million
ounces of silver will be consumed each year in the new lead-free solder.

If you have time, I would be interested to hear your take on this,
and what amount of silver you calculate will be consumed in the new
solder. This one has the potential to fundamentally re-define the
silver market.
 
Militants take hostages. Does not take much of this type of happening to cause oil price spikes. I would not work in the part of the world for any amount of money!

http://www.bloomberg.com/apps/news?pid=10000103&sid=atWnVDdGCQ.8&refer=us
 
wmbz,

Great stuff! Have to research that solder usage...

You know, as Morgan pointed out in that recent presentation, this typifies the common industrial uses of silver. Tiny amounts individually that add up to huge amounts overall, none of it realistically recoverable.

BTW, here's a cut from a promo piece at DailyReckoning...

That's what former CIA Director Robert Gates said about the imminent nightmare economy his team of analysts foresaw at this recent series of oil strategy exercises, caused by just three minor disturbances in the already overtaxed world oil flow...

What are these "disturbances," you're asking? A trio of very likely events plotted by a team of former oil industry executives and government officials - including Rand Beers, the White House counterterrorism expert who resigned in 2003 to protest the Iraq war. They are:

1) Ethnic unrest in Nigeria (12th in world oil production, 11th in reserves) causes a slowdown in that African nation's petroleum industry.
2) Al Qaeda attacks an oil terminal in Valdez, Alaska, and a natural gas facility in the Middle East. (Think this can't happen? It already has - see below)
3) The stepped-up aggression from terrorists spurs a mass exodus of skilled Western petroleum industry workers from Saudi Arabia.

 
Ben!
It's OT.
I am at the beginning of accumulation of PM's. I that I can easily find dealers to buy from.
But, what about selling the bullion?
Who I sell it to?
What, if I will be waiting years to reach a top and then miss the top (easy to do, if you to greedy) and I find myself with significant amount of bullion, which nobody wants.
What is the most efficient way to do this?
Can you enlighten me on that?
 
Mike C.
I did a post on that a while back. IMO, a person should find a sell source before they buy. Start with the yellow pages and call about 5 dealers. Ask the price they are willing to pay that day and compare. Most will give you a number related to spot.

Don't assume the outfit that sells to you will buy. Many will not.

Also, don't limit your inquiries to one area. The best price may be in the next town. Just figure out drive times and see if it's worth it.

Maybe some readers who have sold recently can add to this.
 
Mike,

I only buy from volume dealers that post buy & sell prices daily. These places will also trade, too. We have several around L.A.; a little legwork should find you one in Chicago.

PMs will always have value, so even if you missed the top you'll still get something for them. As it is, we're just transitioning into stage 2 now, so we're not even close to thinking about a top.
 
Mike,

Just found this with a quick Google search:

http://www.chicagocoin.com/bullion.htm

I'm sure you can easily find more.
 
Just to expand on this (off)topic: I've found here in Sacramento that the best prices to buy or sell gold are from the coin dealers. There are about 3 volume places in town and they are all VERY nice people.

In the past I've only dealt with gold coins, and the spead here varies from $15 to $6. Obviously I do my business with the $6 guy. Not sure what the spreads are with bullion, but I'm curious to find out.
 
OT some more:

Far be it from me to offer investment advice, but the more I read about Canadian Royal Energy Trusts or Canroys, the more they are for me.

As many know I'm very bullish on oil, and the recent slide has created a fantastic entry point. It was brutal, but we were poised for a pullback, and pullbacks are neccessary for an upward continuance. I'm pretty sure we've bottomed.

Out at the peak has mentioned Canroys on here a few times so I won't go into how they work. Here's a pretty good link to a Motley Fool article.

http://tinyurl.com/qb93f

I think it's imperitive to have some oil in ones portfolio. Some argue that it's in a bubble, but honestly what isn't right now.

The main draw of these trust is that they pay a dividend from 10%-15%. One could even go into a US trust like BPT (BP Prudhoe Bay Trust) that pays 12% if you don't want the tax hassle or risk with Canada (not that there really is any)
 
This comment has been removed by a blog administrator.
 
Forgot to mention with the Canroys:

These are basically a pure play on the price of oil (as are all oil co stocks)

The difference is the dividdend yield is 5 times higher.
 
thejdog,

I'm a "Peak Oil" believer.

Way back in high school I wrote a paper for the topic "The New International Economic Order". I chose Middle Eastern oil as my theme. Everything happening now rings true to my early research. Scary deja vu, you know?
 
On still another topic:

What is the greatest threat to the dollar (and does it even matter what it is)?

Is it foreign-owned US debt? A global shift to the Euro? Energy costs? Inflation from the Fed? If the American economy tanks, will China need to sell off any of its American debt to make up lost revenue?
 
Silver fund...

http://www.resourceinvestor.com/pebble.asp?relid=17161
 
goose_egg:

What is the greatest threat to the dollar...

IMHO, the severing of the dollar/oil link.
 
What is the greatest threat to the dollar...
I'd have to agree with tj... once the dollar/petro link is severed, the need to hold dollars would seem to evaporate. Oil makes the world go round, and if you don't need dollars to buy it, why hold dollars? There are lots of good reasons not to hold dollars, including our enormous trade/fiscal deficits.

It will be interesting to see how far the Iranian oil bourse gets. I suspect it will be undermined in one way or another, as it's too much of a threat to the dollar.
 
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