Tuesday, March 07, 2006


Base Metals Sell-Off Pulls Gold Lower

Money Week has this overnight report on metals. "A plunge in metal prices overnight wrought havoc with London's top performing shares today erasing gains made in the last two sessions. Mining stocks are responsible for a big chunk of the decline with Antofagasta and Rio Tinto down on copper concerns and BHP Billiton suffering from sharply lower crude oil prices."

"Base metals fell sharply on the London Metal Exchange on Tuesday as a wave of speculative selling suggested the previously strong bull market in commodities was becoming shaky.'

"'Monday's across the board weakness looks like another wave of fund liquidation selling. If this turns out to be the case, then the recent lows on the base metals may well be extended,' analyst William Adams of BaseMetals.com said. 'With oil and gold down and the dollar heading higher, it looks like the selling may have come from further commodity-index selling,' he added."

("We do not have to look back very far to see the impact a significant amount of allocated silver would have on the market. It was 1998 when Warren Buffet purchased over 100m ounces of physical silver and the spot price rallied over $3," it said.)

sounds like a lot less than some are predicting.
This time it's different!!! ;-)
One day its "Gold will go to $1000", and the next day its "Gold will drop to $360".

One day its "There's plenty of oil", and the next day its "The Middle East is going to hell in a handbasket".

One day its "The Silver ETF is around the corner" the next day its "The Silver ETF cannot possibly be brought to fruition".

Ultimately all these speculations have less to do with traditional supply demand issues and more with geoindustrial politics.

I for one think the dollar is treading on very, very thin ice. Iraq is in the early stages of a meltdown, and the Iranian leadership is swooning at the thought of resurrecting the 12th imam through jihad. Never mind Russia's return to totalitarianism, the rise of China, the legitimization of Hamas, the coming revolution in Nigeria, Pakistan's coming bid for nuclear independence (think they won't want what India just got?), decreasing sovreign dollar-asset purchases, the Iranian euro-based oil bourse and of course, decreasing supply/ increased competition for oil.

We saw a similar sell off at the beginning of February.

A selloff in gold is a vote of confidence in the dollar. That's a brave vote.
The ride on the markets yesterday and today was wild. The money flow is off my radar -- many must have reverted to a cash position with little confidence in anything.

OPEC is promising full production in spite of high inventories. There is pressure to get oil below $60, but world relationships are very fragile currently. Any event could sway price.
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