Thursday, February 09, 2006


Precious Metals Roar Back

So how did precious metals end the day? "Gold futures closed higher Thursday, chalking up a gain of more than $14 an ounce, with strong investment and physical demand for the precious metals revived after prices drop to a three-week low in the previous session."

"'This market is not close to being finished for higher prices,' said John Person. 'The targets of $600 to $625 are more and more a reality and mostly justified as concerns on inflation, geopolitical pressures in the Middle East and now with rates at comfortable levels, central bankers are stuck in a rock and a hard place,' said Person."

"Central bankers 'risk choking off economic growth by raising rates too much, but on the other hand inflation is a genuine threat,' he said. Meanwhile, 'energy prices are vacillating in violent swings [and] consumers don't seem to mind what they are paying at the pumps,' he said, coming to the conclusion that energy prices will continue to rise and thus make gold 'more of a staple in investors' portfolios.'"

"'The market cannot and will not have a constructive foundation and framework if we do not have corrections along the way,' Jon Nadler, an investment products analyst at bullion dealers said. 'People have not bailed out of gold completely and ... there are many who await a fresh opportunity to buy.' Looking ahead, a move to about $533 to $535 an ounce 'is not to be ruled out,' said Nadler. But, at the same time, there a 'staggering amount of liquidity sitting on the sidelines waiting for precisely such a pullback,' he said."

One central banker is concerned. "Overnight interest rates have crossed into neutral territory but may need to be tweaked some more to keep inflation expectations from rising, Chicago Federal Reserve President Michael Moskow said Thursday. 'My view is that inflation will likely remain contained. But..there are risks to the inflation outlook, namely, the potential for energy cost pass-through, pressures from increases in resource utilization, or rising inflationary expectations,' Moskow said."

"'And with inflation near the upper end of my comfort zone, an unexpected increase in inflation would be a serious concern, while a decline in inflation would be beneficial,' he said."

"March silver futures closed up 22 cents at $9.66 an ounce. April platinum finished up $18.50 at $1,073.90 an ounce, while sister metal palladium saw its March contract climb $11.70 to close at $304.45 an ounce."

As one reader said in the earlier post, the fact that metals advanced after the nerve gas scare was put down probably means the media had this mornings action all wrong. It looks like many people are looking for entry points; corrections should be viewed as opportunities to accumulate.
"there's a 'staggering amount of liquidity sitting on the sidelines waiting for precisely such a pullback,'"

Add me to that list, although I made a nice chunk of money on the pullback.
Speaking of volatility, the Kitco chart as of late is in $5 increments, and that's if you can even get on their site. Note to Kitco: upgrade your servers....not too long ago the chart was in $1 increments.

"The world is drowning in Fiat currency and the only thing that can preserve your wealth is if the world’s central bankers return to a gold standard. Until they do, you better own some gold."
Silver options.
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