Monday, December 18, 2006

 

Silver Leads Metals Down

MarketWatch reports on the metals markets. "Gold futures closed lower Monday to tally a third consecutive losing session as silver prices dropped nearly 4% to register their weakest closing level in seven weeks. 'With dollar sentiment improving and fund players still positioned long ahead of year-end, and the market set to thin out over the next two weeks over the Christmas/New Year holiday period, the market remains at most risk to further long liquidation,' said James Moore, an analyst at TheBullionDesk.com, in a note to clients."

"Gold for February delivery closed down $1.20 at $617.90 an ounce on the New York Mercantile Exchange, its weakest closing level since Oct. 31. The contract has tallied a three-session loss of $14.50."

"Still, the contract managed to close off its earlier low of $615.10 Monday.
'Gold is incredibly oversold on [the] Street's fascination with exchanging paper assets,' said Ned Schmidt, editor of the Value View Gold Report. 'Each time gold has got this oversold it has rallied $50+,' he said. 'Doing that this time would be a major breakout to the upside.'"

"Meanwhile, March silver dropped 45.5 cents, or 3.5%, to end at $12.525 an ounce following a low of $12.40. The contract hasn't closed or traded at levels this low since the end of October. March palladium gained 70 cents to close at $324.95 an ounce but January platinum fell $2.40 to end at $1,102.10 an ounce."

"The dollar was little changed against the euro and yen Monday, reversing early gains after a report showed U.S. home builders were a bit more pessimistic about the housing market in December. The current account deficit widened to $225.6 billion in the third quarter, or 6.8% of gross domestic product, the Commerce Department reported."

From Reuters. "Spot gold was quoted at $613.10/613.85 an ounce by 1549 GMT from $615.00/616.50 late in New York on Friday, when it hit $614.20, the lowest since November 8. The metal has lost more than $35 since December 1. 'It's now dipped below Friday's low on follow-on selling in New York, there's liquidation of long positions there,' a London dealer said."

"At an intra-day bottom of $612.20, gold was at its lowest since November 1. Earlier on Monday, gold hit $618 in European dealing as bargain hunters returned to the bullion market, encouraged by a softer dollar. 'There was muted physical demand,' the trader said."

"Tawhid Addullah of the Gold and Jewellery Group in the Gulf Emirates said Dubai's gold sales in the fourth quarter are expected to soar by 15 to 17 percent."

"Data from the U.S. Commodities Futures Trading Commission showed net long gold futures positions on the New York Mercantile Exchange fell 2 percent to 81,829 lots in the week to December 12 from 83,639 lots in the previous week. However, speculative long silver positions jumped 5 percent to 43,604 contracts from 41,660 the previous week."

"Analysts think it may be a while before silver sees $13 again, even if volatility does push precious metals prices up. Should a recovering dollar set off an an avalanche of silver sales, the price in the worst case would be $12.40, a research note from Germany's Heraeus said."

"But calling a move down to $12.40 might be short sighted as investors were continuing to pile into the white precious metals, Heraeus said. The silver exchange traded commodity fund (ETF) is a good example of investor interest in silver. 'In the last 24 hours alone almost 50 tons of the metal were sold to to ETF buyers, resulting in a total off-take of nearly 3,500 tonnes,' Heraeus said."

From Euro News. "Iran is further rejecting the US dollar in favour of the euro. The Iranian government said it has ordered the central bank to transform the state's dollar-denominated assets held abroad into euros and to use the European currency for foreign transactions. Tehran has begun calculating its revenues in euros including income from oil sales."

"Government spokesman Gholam-Hossein Elham told reporters: 'Until now the budget and foreign currency revenues have been calculated in dollars and our reliance was on dollars. This way of calculating is being changed.' He added this is being done - 'to limit problems .. in commercial transactions.'"

Comments:
The good ol' silver rollercoaster. It has been that way most of my life.
 
GLD looks like it bottomed today. We will see. Silver is fun to trade, and looks like a buy here.
 
deficit is a record, nations moving out of dollar, silver and gold get hit...
 
Inflation? Deflation? Nuts?
Went to the grocery store. I like filberts and almonds in the shell during the holidays. Price this year? $6.00 for a one pound bag! Last I checked, you can't buy food on margin, or finance the purchase with a no-doc neg-am loan. I would call this inflation. Housing, on the other hand, has doubled in 4 years. We all know why and we know where it's going.... Down in flames.
Where am I going with this? I expect next year, food will generally cost more, along with everything else that can't be financed or leveraged. Inflation. Equities and real estate? Deflation. So, I'm buying gold/silver and filbert/almond futures.
Gofast, yes, GLD has a gap to fill between 60.26 and 61.50, then it's Happy New Year!

In case any of you missed this:
http://www.safehaven.com/article-6521.htm
 
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