Again this week we have seen the strong support of physical Gold. As an example, here's what happened yesterday; in new York the day started with Commission houses entering the market, buying for their clients, probably executing orders placed during the night, until they were satisfied. Gold then drifted down on dealers response to few orders until it reached $341.10, in the middle. Strong physical orders appeared [possibly contingent orders] and took up all the slack. With the mood swinging back to the positive and buyers believing prices were cheap, the price was shoved back up, followed by the funds picking up the baton taking the price up to $343 and scaring locals out of their shorts!
Most observers are saying this should not be happening and are hunting round for reason, usually alighting on currencies, with the Euro starting to clamber back up, slowly but surely. Others report, accurately, that Indian buyers are building up their positions, preparing themselves for around a 24% increase in demand, in line with the healthy rains, from the gold-loving farmers in India. The resilience of the demand seems so persistent and price related, that we are inclined to think that there are other strong forces in the shadows too. De-Hedgers, it could well be, or even a Central Bank or two, we cannot know for sure.
With a look back to the gold price climb before the Iraq war, we can observe one clear change in the market. Then, the physical buyers just did not want to know and the Speculators ruled the roost. Physical buyers did not buy into a rising, volatile market, which could and did, pull back to where it came from. Right now its the Speculators who are shy and showing a tendency to slowly unwind their exposures, because they cannot discern a clear "red rag to the Bull". It is the physical buyers who are obviously, quite satisfied they are buying at prices unlikely to be beaten. After all, they can afford to wait, while their retail buyers are busy with other things. No, they are going out and building positions, because they feel these are low prices, which may not be there later. Are they right?
And all this strong holding up of the price is happening in the face of a concerted media push, to have us believe that all is well in the U.S. economy and its equity markets and the future looks good. With Alan Greenspan leading this, 'confidence building effort', the gold price should be hanging its head in shame, at having even suggested that there may be uncertainty in the future. But it is not, instead it is standing proud!
Perhaps, in the absence of convincing facts on the economy and equity markets, it is hard to be so positive, as the Dow is now telling us - and we are listening!
At the time of writing, the Gold Price was $344.50, in the middle and the Euro $1.1258 in the middle.
Speculative Net Long Positions
Net long positions on Comex declined again falling to 214 tonnes from the previous week of 224 tonnes. Relatively resilient still. The current position holders have a more professional appetite for gold than seen before and after the Iraq war, albeit a steady one. We would imagine they will hold their positions for a few weeks in the absence of a good cause to unload.
Central Gold Trust
We report on another gold bullion fund issuing shares against gold bullion [Gold for the small and efficient Investors] which is leading to new demand reaching the gold bullion market. Central Gold-Trust, not only succeeded in the initial offering of its units, but also in placing an additional 300,000 Units for C$6,000,000. They had previously placed 2,000,000 Units for C$40,000,000. Central Gold-Trust purpose is to invest and hold its assets in unencumbered physical gold bullion, in 400-troy-ounce international bar form. Central Gold-Trust provides investors an exchange-tradable, convenient, low-cost and secure investment alternative for gold bullion that is physically stored in allocated, segregated and insured safekeeping in a Canadian chartered bank treasury vault. The Units of Central Gold-Trust are listed on the Toronto Stock Exchange with symbol GTU.UN and may now be traded on the TSX by American and world-wide investors.
The more the merrier!
Mild Propaganda in the U.S.?
The attempts to convince the public that all is now well in the U.S. economy, by the larger media, appear to be part of a concerted effort on their part. It is clear that the U.S., led by Alan Greenspan in this campaign, has to follow this path. Without it the vortex of diminishing confidence could set off. But in the face of such a campaign, it is the duty of Investors to act responsibly towards their investments. So, beware the reality of "A true Patriot is one who commits you, to his cause".
By eliminating adjectives in press reports, by relying on relevant fact, correct analysis can be achieved and the fog of emotion can be blown away from the true picture. The markets will be perspicacious, they will discern the realities and they will adjust prices accordingly!
The U.S. Economy
We wrote an article, for Subscribers, in the latest issue of "Gold-Authentic Money" in which we reported Greenspan's own criticism of deficit financing, but we applied it on a global basis. It is a stinging criticism by him and important reading, particularly in the light of the recent words from him, reassuring Congress and the Senate, on the 15th of July 2003 that, "Rising stock prices, low interest rates and a $330 billion tax cut package "should bolster economic activity over coming quarters.''
The current and possibly near term performance of the Dow, shows it to be underwhelmed by the encouragement he gave. No new fundamental factors have appeared to change the picture of late, but we are hearing, most quoted, the 'soft' intentional type of encouragement [polls etc.] which give little footing for growth. We wait, still, to be convinced.
Short Term Prospects for Gold
- The market continues to find strong physical support in the lower $340's. The market is slowly being convinced of its continuation. In itself, it seems a compelling reason to look up instead of down. We are watching for a convincing break either way.
- The Euro fell to the 1.11 level and stabilised before showing signs of wanting to climb. The dealers and the speculators believe that this is sufficient in itself to take gold higher and are well focussed on the currency aspects.
- We remain in the uncertain month for gold.
- Through "Changing Tack- Gold & Precious Metal Shares" and "Changing Tack" services, we alerted Subscribers to take the most advantageous position in the market. We make a point of alerting them by e-mail, the moment a market signal is given to take action, so assisting them to benefit from rises and falls in the market place. They seem to think we are doing better than our peers, and tell us we give them an excellent service. It's all about maximising profits, isn't it? Our subscription details are above.
Prospects for the Canadian $ and Gold Shares
The gold price has looked seriously weak, when viewed through the Canadian $. This is how many Canadians look at the price of their shares. Others simply follow the U.S. $ prices and translate, when they close positions. We have highlighted techniques where the Investor can maximise his currency advantage and use currencies to his benefit and maximise profits. We highlight this today with a Technical view of the Canadian currency viewpoint. As a consequence, the shares look expensive, relative to the price of the metal, and if gold does not rise soon and dramatically, the price of Canadian $ priced gold shares could collapse. Hence, it is vital for Canadians to keep a close eye on their own currency, the currency where they may enjoy their profits. They can manage this currency exposure to minimise their currency risk, if they know how and act on the right signals.
The attached chart shows the spectacular advance against the USD, now in the resistance zone which extends to 75. The 34-month indicator is not yet overbought and the monthly Mesa is forecasting a high this month, a low in November and then an ultimate high in May 2004.
It appears that the currency has not yet completed a five wave rise and although there may be a short term setback, should move higher before peaking in the longer term.
Gold Priced in CAD$
The chart shows that the price was turned back by resistance and then violated the upward trend. This has opened the way to lower levels. This is especially so since the 34-month indicator is overbought at 100 and the Mesa declines until October 2004.
The gold price is vulnerable and has the potential to go lower.
Toronto Gold & Silver Index
The 34-month indicator is overbought at 99.8. The Mesa has a low in November. The chart shows that the upward trend has been violated which allows lower levels.
The Toronto G&S index could go lower in the long term.
At G-AM and Changing Tack - Gold & Precious Metal Shares" and "Changing Tack" itself, we are keen to help you do benefit from your currency exposure. We have been successfully helping major corporations with currency exposure [Importers, Exporters as well as Investors] for many years and would invite you to come to us for that same assistance. - Contact us at the above addresses.
Gold Fix 17th July p.m. $342.50
Gold Fix 18th July a.m. $344.20