 The Weekly Gold Perspective
Julian D.W. Phillips
Gold-Authentic Money
Nov 5, 2004
That was the week that was
Well this certainly is the
week for fireworks! To many the week made a mockery of
many of the Technicals. The Analysts were calling it both ways.
The Technicals appear now to have broken out of the corrective
phase, or has it? This question has cost the Technical Traders
dear, so far this week.
First, gold could not top the
$430 level again, despite a valiant effort.
- Then it fell back to the mid
$420s, as the Euro fell.
.
- Then with the Technicals prompting
Traders to short the market, gold fell in both $s and Euros,
taking it down to $417 at its worst.
.
- Then the Euro gold price bounced
off support at Euros 332.
.
- But then wholesale physical
buying, having patiently stood back, saw its opening, as the
funds, who had pushed the price up turned and sold the price
down. At $419+ in they came to buy solidly. With the control
back in physical hands, the market steadied. With eyes well away
from the Technicals and the Presidential election and firmly
on the festival of Diwali, they continued this year of record
volumes of gold buying. But the West was riveted to their T.V.
screens and largely off the gold market, watching and waiting
for the result of the election, unwilling to take any serious
positions, which in their eyes would have been too risky. It
appears that their perceptions were for more control and corrections
of the deficits and the $, under Kerry and more of the same and
some, we've had for the last four years under Bush. On the result,
gold found itself back at $426 and feeling good. Then as the
$ began to fall the "Bull" began to rut.
.
- Then at the time of writing
this, the gold price had punctured the $430 level and was sitting
looking at new territory above $430, on $432. But you've got
to ask yourself, has it really broken all resistance and is headed
higher, or will its hormone levels drop again, as the $ hits
support? Click on the banner below to find out or go to our website
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Global market prices:
Euro: Not a good week for gold. It tried
to push above the Euro 336 level but faltered and fell back to
support at Euros 332. Having broken all the way up to Euros
340 last week, it did not show nearly the strength we would have
liked to have seen, in a purely gold market, irrespective of
its currency role. In Euros presently it is at an anaemic Euros
334.26 at the time of writing. Where to now?
U.S. $: The funds thought that a pre-election
opportunity existed to push the market through Technical support
Levels. In their inimitable style, they rocked the boat and shocked
many Technical players, but only for a short while. After
the election when the players turned back to the market with
the result in hand, the $ dropped like a stone, letting gold
sweep aside all that resistance in the $420 - $430 level, to
sit atop the $430. Does it have more work to do still? Next week
should see this period of resolution completed, perhaps?
Rupees: The news from India continues
to be good for gold. With Diwali approaching fast, the retail
buyers appetite for gold remains unsatisfied. And why not, they
had a good season this year and are positive about this season's
crops. The wholesale buyers of physical gold are certain of their
selling potential and know that they won't be stuck with swollen
inventories. With the $8 discount on L/Cs and the Rupee edging
stronger, these prices have held much steadier than the $ price.
Rand: Ouch, the pain of a strong Rand continues
to erode the profits of the S.A. miners, who are already working
24/7. With the Rand down to R6.10 to the $ and looking to go
stronger still, the gold bull is being beaten back by the rampant
Rand. With no respite in view and the S.A. Reserve bank focussed
on the bank balance and not on the business, the future is dimming
there. Or will they come to their senses and cut interest rates?
The market players
- The Physical buyers proved
stronger than the funds in determining prices in the London and
New York markets, remaining buyers disregarding current affairs.
.
- Despite the 510 tonnes net
long speculative position, held last week, only 100 tonnes off
its peak, the funds were not as strong an influence as many feared.
They appear to be in three categories now. They are; the Arbitrageur,
the Investor and finally the capricious Speculators. The capricious
speculator number is difficult to gauge, but of late appears
to own around 100 tonnes for active trading with the other two
holding the rest.
.
- Investors [including those
holding futures positions] have a firmer footprint now, knowing
what lies ahead and who has been commissioned to handle the future.
These Investors and are being joined by new gold bullion Investors
in South Africa, adding to the new feature of the global gold
demand through gold Debentures and exchange traded funds. [see
below].
Technical Analysis versus
Fundamentals:
Again the confusion between
the strong fundamental picture and the seemingly negative Technical
picture on gold still in its corrective phase. Whish is the dominant
one? Can one ignore the fundamentals and only look at the Technicals?
Some Technical Analysts pointed to the quadruple top in the gold
price.
 We
point out that the Technical picture is based on the markets
of yesterday and do not take into account the new structural
influences over the gold price. These have broadened the market
substantially, making gold market history inadequate as a base
for future prices. Yes, the $ / Euro play remains the dictator
of the short term gold price, but not to the exclusion of these
other influences.
The price pattern of the last few months indicated a good fall
in the price, but this never came. Why not? To understand this
one has to assimilate the fundamental picture and the forces
at work there. These factors of themselves are not sufficient.
They have to be put in proportion, then synthesized to give meaning
to past, present and future gold price moves. Without this input,
one is "shooting in the dark", albeit with an educated
guess. But this is not enough surely, not when you are putting
your money on it?
In our
newsletter, "Gold - Authentic Money" we try to bring
some light into this darkness with a presentation of the fundamentals,
alongside the important Technical picture. We have seen
a rise in the demand for this service of late and understandably
so, so why not let some light shine on the subject for you? -
go to our website to subscribe online,
or to get details of where to send your checks.
At the time
of writing, gold stood at $432.05 or $5 higher then this time
last week and at Euros 334.26 or 0.560 Euros higher than last
week. The Euro is worth $1.2867 up $0.110 on last week. This
highlights just how gold is acting as a currency now.
The 'new' President Bush
Just made it again, but a bit
more convincingly this time. What does this mean for gold? That's
a big story, so we shall try to give you a taste of what lies
ahead. Certainly we can expect "more of the same, but in
larger doses, because the U.S. voter has, after all, endorsed
his policies by electing him? This time round, his last, he will
seek a place in history. His precipitous nature will certainly
see more aggression added to his policies, which will, inevitably
be good for gold. But irrespective of the man, we are sure that
what he has to face will of itself place him in the history books.
The last four years will pale into insignificance when weighed
against the potential global dramas and shifts in the world's
"Balance of Power" that lie in wait for him.
- The twin deficits will continue
to grow, unchecked, justifying the collapse, if only partial,
of the U.S. $ [Our last issue of "Gold - Authentic Money"
covered this, painting a different, but validated, picture to
the one most commentators paint. This collapse will rupture global
foreign exchange stability, with heavy consequences for many
currencies and trade relationships. The world will not be able
to accept a simple reduction in value of the $ without these
consequences! - excellent for gold but a difficult problem for
Bush.
.
- China will push irresistibly
onto the world scene, demanding a major portion of the world's
resources resulting in resource prices following oil prices to
levels many times more than at present, unless political forces
step in to head these off, inevitably in the interests of a few
nations and to the detriment of the others - excellent for gold
but a major problem for Bush.
.
- The resulting rise in world
tensions will threaten world stability, as wars have started
in the past with less cause - excellent for gold and a major
problem for Bush.
.
- China will continue its headlong
rush to a the largest manufacturer in the world and the largest
economic power on the globe. The present price competitive position
it enjoys, will prove to be a thorn in the side of the rest of
the developed world - excellent for gold, but a major problem
for Bush.
.
- Terrorism will not be defeated,
but will grow, hideously. With the IRA still virulent in Northern
Ireland after 36 year of its present run [the problem started
in 1690], the terror infecting the Middle East could last much
longer! - a dreadful problem for Bush and the rest of us!
.
- These problems have been steadily
growing over the last four years. In the next four years they
are likely to ripen to the full - excellent for gold, but major
problems for Bush.
.
- We expect President Bush to
handle each problem in a distinctly definitive manner - excellent
for gold... !
Chinese interest rates up
The Chinese interest rate rise
turned out to be a storm in a teacup. With the Chinese financial
system so different from the West the move was seen as insignificant
in terms of any market.
The South African Rand's strength
Presently the Rand is just
above R6.00 on the weak side. Most observers expect a strengthening
to R5 something or around another 10% stronger. That 10% does
not seem so much does it. But remember Mr Macawber in David Copperfield?
He wisely told us that "Happiness is earning twenty pounds
a year and spending nineteen pounds and sixpence. Misery is earning
twenty pounds a year and spending twenty pounds and sixpence."
That's how South African exporters feel as the R6.00 level is
crossed.
NEW GOLD - Paper gold spreads further
across the globe
This is worth another mention
because of the potentially greater impact it will have in South
Africa, compared to similar 'paper gold' instruments in London
and Australia. Previously, serious South African gold investors
were limited to the mining shares, being blocked from investing
overseas or in gold itself, with the exception of Krugerrands,
by twenty years of Exchange Controls, still in place.
Just as gold Investors like
to get away from the risks inherent in gold shares, so the same
may be true in South Africa. With this opportunity to ride the
gold price, even though it is still in Rands, those who own gold
shares may favour a switch into 'paper gold, through New Gold,
the debenture where each share is worth R26 [$4.10], around the
cost of a hamburger and chips. Add to this the low dealing costs,
the flexibility and the speed of dealing, without the burdens
of owning gold itself. Trade the benefits against the pitfalls
and we expect to see a steadily rising level of interest in this
gold animal.
Please note that the tonnage
of gold held by Gold Bullion Securities, in Australia and Britain
in HSBC's vaults rose by 25% to 58 tonnes in the last two months.
This is attributed to the market getting used to this type of
share. We are still awaiting the listing of the gold ETF in the
U.S.A., which, if rumour is to be believed is imminent!. The
equivalent demand in the U.S.A. would be several hundred tonnes
demand, not tens of tonnes. Bear in mind this would be new
Investors into gold, so enlarging the base of gold Investors
and swelling demand accordingly.
Silver $7.40 - As with gold, they price moves have
been entirely $ value driven. Perhaps the values put on precious
metals across the board are deeming them a value measure in themselves?
We do expect this pattern to continue next week too.
Platinum $850 - Likewise with Platinum, its price
is currency driven and likely to remain so next week. Even with
the huge demand for Platinum in China for Jewellery waning, the
industrial demand for the metal is expected to continue to grow.
| The
London Gold Fix |
| Gold fix |
4th November |
a.m. $426.30 |
E 332.009 |
| |
4th November |
p.m. $430.50 |
E 334.60 |
November 2004
Julian W. D. Phillips
Gold-Authentic Money --> Services | Disclaimer
Email: gold-authenticmoney@iafrica.com
Website: Gold-Authentic
Money
Copyright ©2004
Julian D. W. Phillips, Gold-Authentic Money
_____________
321gold
Inc
|
