Wednesday, September 13, 2006

 

Gold Now 'Severly Oversold'?

Bloomberg looks at the metals trading. "Gold in New York rebounded from a 10- week low as some investors bet the 8.1 percent drop in prices in the past five sessions was overdone. Gold's seven-day relative-strength index fell below 30 for a third straight day, a signal prices may rise. Before today, the metal was down 19 percent from a 26-year high of $732 an ounce in mid-May."

"'The market is now so severely oversold that a bounce is inevitable,' said Dennis Gartman, gold trader, economist and editor of the Gartman Letter."

"'The market has flushed out a lot of weak long positions,' said Stephen Platt, a commodities analyst at Archer Financial Services Inc. 'There's a lot of speculative buying interest back under $600.'"

"'There's still speculation that certain banks may come in and sell more gold,' said Carlos Perez-Santalla, gold trader and President of Hudson River Futures. 'They'll be looking to sell on rallies.'"

"The Bank of Portugal said on Sept. 11 it sold 20 tons in the past few months. The amount sold last week by the two unnamed banks was the most since two member banks sold gold worth 291 million euros in the week ended July 7. 'Any rally toward $595 to $605 will be met with considerable selling from central banks who've got tons of gold yet to sell and now feel as if they must do so, for they've missed the chance to sell $100 higher,' Gartman said."

"Gold for December delivery closed up $2 at $596.30 an ounce in New York Mercantile Exchange action, having earlier touched a high of $600.50. December silver closed up 6 cents at $11.20 an ounce, rebounding after ending the previous session at its lowest level since late July."

"Other metals also moved higher, with platinum the only exception. October platinum fell by $22.70 to close at $1,185.80 an ounce. On Tuesday, it was the lone gainer among the key metals futures, climbing nearly $8. December palladium climbed $6.25 to $318.35 an ounce."

"The dollar slipped slightly after US Treasury Secretary Henry Paulson issued a clear warning to China to allow the yuan to appreciate to better reflect its fundamentals."

"His stance suggests that the US will pursue a hard line at the upcoming G7 meetings this weekend. The last time the group of seven most industrialised nations jointly called for greater currency market flexibility, the dollar suffered hefty calls while Asian currencies edged higher. Exhorting greater flexibility is usually seen as code speak for China to allow the yuan to float freely."

"'Pulling no punches, Treasury Secretary Hank Paulson is recommending China swiftly enact economic reforms, with his emphasis on floating the yuan,' said Jeoff Hall, at Thomson IFR Markets said. 'Paulson has admonished that failure to quickly adopt a flexible exchange rate or to ratify other reforms could result in a 'backlash' from other industrialized economies,' added Hall."

"Paulson's comments sets the stage for this weekend's G7, IMF and World Bank meetings. Last week, a German official said the yen's weakness against the euro would be brought up at the meeting."

"The currencies of Thailand, Malaysia and Indonesia may rise faster than their North Asian counterparts as Southeast Asian central banks let them strengthen to control inflation, said Morgan Stanley chief Asia economist Andy Xie."

"A stronger baht, ringgit and rupiah may temper inflation by lowering the price of imported goods, reducing the need for higher borrowing costs that may also choke economic growth, Hong Kong-based Xie said. North Asian economies are not faced with the same inflation pressure, so are more likely to resist currency gains in order to help exporters, he said."

"'The central banks of Southeast Asian countries don't want to raise rates, while they also want to control inflation,' Xie, a former World Bank economist, said. 'The way to do that is to let their currencies appreciate.'"

"'Domestic demand is noticeably weak, especially in Indonesia and Thailand,' Xie wrote in the report. 'Hence, it makes sense to trade currency strength for rate hikes.'"

Comments:
Central bank selling? Maybe forward paper, but who will really sell the metal? Germany said no. Am I supposed to believe Portugal is going to sell enough to hammer the market, while China and the middle east and India buys?
 
Central banks have to sell. If the price of gold gets out of hand, the fiat currency game could go right down the toilet. When the masses start looking at gold as an alternative to currency, central bankers are out of a job.
 
Don't know if anyone caught this:


http://www.mineweb.net/gold_silver/168911.htm

(It's OT but interesting)

"The NYSE’s regulatory unit disclosed Wednesday that the largest U.S. bank lost $20 million buying and selling gold and silver in 2002 and 2003 after a rogue trader hid contracts and reported bogus prices.
...
NYSE Chief Hearing Officer Peggy Kuo imposed a censure penalty and a $500,000 fine on Citigroup Global Markets, for failing to reasonably supervise or control its precious metals trading desk.
...
The investigation determined that Edmonds concealed short forward transactions, mis-priced gold and silver physical positions, and caused put options to be incorrectly accounted for. The exchange also claimed that Edmonds “caused the firm to create and maintain inaccurate books and records by providing the firm with inaccurate values for gold and silver physical positions..."
 
If there was any doubt that Central Banking was a shady business (or at least directly affected by shady business): http://www.bloomberg.com/apps/news?pid=20601087&sid=acXHIayehuLU&refer=home
 
Re. Russian head banker wacked....Just another weird unraveling in the current markets. PM's are really tanking due to. CB's selling, Hedgies unraveling ,crooked traders etc...My thought it a huge manipulation on the short ,and then all in on the slingshot foward....Hard to know, but i bought a bunch of my favorite spec. on the assumption of a resume up after this oversold pullback...Who can really say ,but I think it's more a risk in the US$ at this point...all is in flux....
 
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