Thursday, April 20, 2006

 

Commodities 'Not A One-Way Bet'

A report on what happened today in the metals arena. "Gold and silver were batted away from earlier 25-year and 23-year peaks on Thursday, triggering a widespread sell-off across the commodities arena. 'Fund profit-taking caused the rally to stall, triggering further long liquidation, with the resulting sell-off in a largely one-way market causing metals to drop like a stone,' said James Moore."

"Spot gold touched $645.75 an ounce, the highest since November 1980, but subsequently fell to as low as $608.50. It steadied at $619.20/620.00 in late New York trade, against a quote of $633.70/4.50 late on Wednesday."

"Spot silver shot to a new 23-year peak of $14.68 an ounce, but later traded at $12.43/12.46, down sharply from the previous $14.60/14.63."

"'Has it done any damage, or is it just a correction in an upward trend? That‘s a tough call,' Stephen Briggs, metals economist said. 'It certainly reminds people that even commodities, with the euphoria surrounding them, are not a one-way bet the whole time. Up until today, we were getting into bubble-like territory,' he added."

"Silver futures in New York dropped by as much as 19 percent in the frenetic sell-off in metals Thursday, with a limit-down move prompting trading to be briefly halted. May delivery silver at the New York Mercantile Exchange‘s COMEX division plunged $1.9970, or 13.8 percent, to settle at $12.5250 per ounce."

"But, with oil prices not far from fresh record highs around $74 a barrel and tensions between Iran and the West over nuclear issues, gold was likely to remain in demand as a safe haven, analysts said. Expectations of further dollar weakness ahead was also cited as a price-supportive factor. 'My gut feeling is that it is not the end of the story for gold. Iran hasn‘t gone away, there is probable dollar weakness,' Briggs said."

"Platinum dropped to $1,097/1,102 an ounce in New York from $1,117/1,121, and well off a new record of $1,130. Palladium was down at $346/351 from $367/371."

Comments:
I had a weird feeling yesterday when I read that silver was up 77 cents. In the 80's one particular 77 cent move up in silver was followed by a 90 cent drop the next day. Then several wide swings occurred over the next week or two.

Volatility often marks a cycle peak or trough, and the greater the degree of the cycle should see greater volatility. Like the analyst said, the fundamentals didn't change today.
 
I sure didn't read anything about the dollar suddenly looking healthy today... This was just profit taking.
 
A snippet from Richard Russell...

"In bull markets the corrections are sharp and violent. Bull market
corrections are meant to scare you. In bear markets the declines tend
to be slow and plodding. Bear market declines are meant to keep you
calm and hoping."

And one to add perspective.

"In this business, everyone has his turn. It's the bears' turn, so
let's see what they can do."

Russell has been writing for almost 50 years so I give him quite a
bit of credence.
 
Desperate Act?

I heard from a very reliable source yesterday (April 19th) that the
COMEX was meeting in emergency session. Knowing the reputation of
this organization, I imagined that it certainly had to do with the
current goings on in the precious metals market…especially silver.

It was obvious to just about everyone who knows about the massive
short positions in gold and silver that a short squeeze of biblical
proportions was underway. Bill Murphy over at LeMetropole Café had
been shouting it from the rooftops for some time as the open interest
numbers were indicating just that. Then Ted Butler’s latest
commentary "A Cornered Rat?" put the icing on the cake.

The COMEX had been raising the margin requirements for silver at a
pretty steady clip, with another one just announced for May…so I was
wondering, as I sat at my computer terminal last night, what
nefarious act they could come up with to put the kibosh on this
parabolic rise in the gold and silver price. Well, I found out when I
turned on the computer this morning…the dealers (commercials) had
pulled their bids in the COMEX silver and gold pits.

Since Ted Butler won’t be writing for at least another week, I
thought I’d comment for him. I could just see the dealers in the pits
right now…standing there with their arms folded as the longs
(including the tech funds) sold into a vacuum. Since there were no
buyers…the price fell off a cliff immediately.

When the sellers did catch a bid, it was the desperate dealer shorts
standing there with buckets to collect the equally desperate long
positions that were being dumped. This is the engineered sell-off
that Ted Butler had been waiting for for so long. This is brazen
market manipulation at its worst…engineered by the very people are
supposed to be preventing this sort of thing.

Is this the last desperate act of desperate men? I think it is. This
is Cartel rearguard action at its finest. They are in a far better
position to see things than we are. With the Iranian situation coming
to a head within the next two weeks, the US is now in a position
where it (probably in conjunction with a client state) must act
against Iran or lose all credibility in the Middle East. The dealer
shorts know that too. They also know all about peak oil, fiat
currencies and the upcoming silver ETF…and want to be on the last
stagecoach out of Dodge before everything comes unglued.

Hold onto your precious metals positions, boys…as this too shall pass!

Ed Steer, Director
Gold Anti-Trust Action Committee
 
Yep, just what I thought was going to happen. I just didn't know when, but I knew it was going to be soon. I'm hoping that it will come down a bit more and and stay down while I build up my position some more. When that price came tumbling down this morning and around noon, I was like, "Keep going, keep going," then late this afternoon, I decided to pulled out my paper shotguns and blasted at a few ounces at the local coin shop. If it keeps going down, I'll get more!

Stephanie
 
Stephanie,
What did you buy and at what price/markup?
 
Oh boy, Ben. You just had to ask, didn't you? Let's put it this way. At the time, spot was $11.85, and I bought Old Silver Coins, junk grade, at $12.21. $0.31 absolute markup over spot per ounce. I sometimes get it BELOW spot. I usually get deals like this a lot. Other places will charge around 50-80 cents per ounce for commission in addition to something else you always pay when you buy something. That's all I'm going to say. ;-)

One other thing. I would like some help in understanding what lease rates indicate, especially for silver.
 
The immediate reaction of the precious metals markets to the dovish FOMC comments released earlier this week tells me everything I need to know about where prices are headed going forward. I believe they purposely included some dovish statements to gauge the market reaction to a rate pause. They couldn't have liked what they saw. The Fed is screwed, and they know it.
 
silver zooms back up to $12.87 and some of the stocks go back up too.

what a crazy world.
 
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