Friday, April 21, 2006


Gold Up 6% For The Week

Gold and silver end a wild week. "Gold futures climbed 2% Friday to recoup almost all of the previous session's loss; silver recovered from a two-week low. 'Although gold remains vulnerable to at least another bout of selling as we head into next week, the fact that it erased Thursday's losses demonstrates (for the time being) the fact that this bull is alive and kicking,' said Jon Nadler, at bullion dealers"

"Gold for June delivery rose $12.40 to close at $635.50 an ounce on the New York Mercantile Exchange, rebounding from a $12.90 pullback on Thursday. It closed up 5.9% from last Thursday's close, which was the final trading day for last week."

"'Iran's continuing stubborn stance, Russia's back-pedal posture against Iranian retributions, $75 per barrel oil, and continued worries about the day of reckoning for the dollar outweighed the nice feelings that most profit-takers experienced on Thursday,' said Nadler."

"Market strategist Emanuel Balarie said a pullback below the $600 level could be triggered by 'some heavy profit selling.' However, 'pullbacks and consolidations along the way are good for the long-term movement of this gold bull market,' he said, adding that these serve 'the purpose of shaking loose speculators and short-term traders that do not believe in the longevity of this bull market.'

"'In either case, I still expect gold prices to now break $700 before the end of the year,' Balarie said."

"Silver prices bounced higher following Thursday's nearly 14% drop. May silver closed up 44 cents, or 3.5%, at $12.965 an ounce, but not before touching a two-week low of $12.15 during the session. Futures prices reached a 23-year high of $14.575 on Wednesday. They're up 0.9% for the week. 'Silver has good interest around $12, but $10 remains in the cards,' said's Peter Spina."

"'Follow-through selling in the current volatile market could see silver dip to $11.25-$11.50, but with ETF speculation still rife funds/speculators will still be keen to buy dips,' said's James Moore."

"July platinum moved up $30.40, or 2.7%, to $1,139.20 an ounce after a record of $1,140.90. The contract gained 4.6% for the week. June palladium closed at $359.80, up $9.90 for the day and up 3% for the week. The Amex Gold Bugs Index tacked on 4% to close at 373.68, just shy of a record set at 385.37 on Wednesday. The benchmark dropped 6.7% on Thursday, but still gained 7.2% for the week."

"'The gold market held its ground,' said Daniel Vaught, an analyst at A.G. Edwards. 'That it stayed well above $600 in the face of the silver sell-off convinced investors that it's still involved in a bull market.'"

"Some investors recommended selling gold and buying silver after silver dropped more than gold, narrowing the ratio between the metals. 'Buying silver and selling gold this morning might well be the way to go,' said Dennis Gartman, editor of the Gartman Letter. Yesterday, it took about 44 ounces of silver to buy an ounce of gold. Today, it takes about 50 ounces, he said."

Math is hard. Let's go shopping!

(for bullion that is).
I don't think I could say it any better than Doug Noland:

"Has the Fed About Wrapped Things Up? This apparently is the message being telegraphed to the markets. Tuesday, San Francisco Federal Reserve Bank President (and voting FOMC member) Janet Yellen caught the markets’ and media’s fancy, declaring that she was ‘highly alert’ to the Fed’s tightening policy “going too far.” And with Wednesday’s release of the March FOMC meeting minutes came this zinger of capricious dovishness: “Most members thought that the end of the tightening process was likely to be near, and some expressed concerns about the dangers of tightening too much.” On the back of this revelation, the Dow Jones Industrial Average gained almost 200 points and the broader market surged to new record highs. Definitely not to be outdone, the CRB and Goldman Sachs Commodities indices surged to new all-time highs; crude oil jumped to a record high, while Gold surpassed $640 and silver $14 an ounce.

Ms. Yellen was interviewed Wednesday on CNBC. In response to a question on the degree of Fed concern with rising commodities prices, Ms. Yellen downplayed the risk, stating that it was a reflection of the strong global economy. She immediately noted that the Fed was carefully monitoring “inflation expectations” and, in this regard, was comforted by the narrow TIPS (Treasury Inflation Protected Securities) bond spread. With the Fed blithely fixated on the TIPS market, investors and speculators across the globe are in a frantic stampede to acquire assets for protection against and to profit from what they must expect will be the most powerful ongoing inflationary forces in many years. At this point not all too surprising, the Fed is content to focus on one of the very few indicators not signaling a problematic monetary backdrop.

It is crucial for the Fed and investors to recognize that TIPS spreads are today an especially poor barometer of the predominant global inflationary pressures (explaining why they are losing significant relative value to commodities and global asset markets). The principal of a TIPS investment is protected only against the loss of monetary value associated with a decline in a narrow facet of inflation – the government’s measurement of an aggregate of consumer prices. Irrespective of the myriad problems with the methodology of the government’s calculations, this period’s gross inflation (loss of purchasing power) is manifesting in surging energy, commodities, and global asset prices generally – largely outside of CPI. To be sure, TIPS spreads are today an especially deceiving indictor of general monetary conditions, and it is unbecoming of the Fed to give it significant weight in policy analysis."

In short: With this blundering Fed, we're not anywhere near the end of the commodity bull market.

His commentary also illustrates exactly why I have long thought that I-bonds (and TIPS) are a sucker's bet (unless one was lucky enough to purchase these securites about 5 or 6 years ago). The future purchasing power of your money will be ultimately linked to the ridiculously manipulated and hedonically-adjusted index that our government uses to calculate entitlement payments to an aging U.S. population...and an index that our dovish Fed bases it's monetary policy on. Does anyone seriously believe the CPI numbers anymore? If not, why in the world would you purchase a low-yielding security based upon it?

BTW, has anyone seen the latest inflation-indexed rate on I-bonds? A laughable 1.01 percent. (and I'll be surprised if the fixed component is much above 1%). So for the next 6 months, your money is better off sitting in a muni MM fund.
any advise for a newbie about investment in metals? what to buy? how to buy? And most important when to buy..if right now is not a good time?
Homeless BB,

Everybody seems to have different preferences over here, but for "paper" metals, I use CEF and GG. For physical metal, I've used (Krugerrands).

If you're a long term investor, now is the best time to buy. Analysts were calling for a correction when I got in at $450. Fortunately I didn't take their advice.
thanks for the leads LV_CPA. Whatas the opinion on stones?
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