Steve Quayle News Alerts

June 11, 2003

In the world's broad field of battle,
In the bivouac of Life,
Be not like dumb, driven cattle!
Be a hero in the strife.
- Longfellow -

GO GATA!!!

The gold fundamentals continue to improve almost on a daily basis. Two factors that tend to affect the price of gold in a major way are the prices of oil and the dollar. Oil surged to $32.36, up 63 cents, while the dollar sank to 93.02, down .60. It couldn’t even close once above 94. The euro rose .64 to 117.41 and the pound gained .016 to 1.66. Meanwhile, the Freddy Mac scandal has leaped into the criminal arena.

Then, you have significant producer short-covering, surging physical buying out of India (see JB), dropping interest rates and rising negative interest rates. Pile mounting problems in Afghanistan, Iraq and the Middle East on top of that.

All in all, the gold fundamentals don’t get much better. If gold were freely traded, it would easily be $400 bid by now. Instead, it is only $30 higher than it was a year ago.

Contrast the trending bond, dollar and DOW with gold:

Treasury bonds
http://futures.tradingcharts.com/chart/US/63
The dollar
http://futures.tradingcharts.com/chart/TR/63

The DOW
http://futures.tradingcharts.com/chart/DJ/63

Only gold was jolted out of its trend. There is only one explanation. The Gold Cartel was not about to let gold move through $370 to the upside, so they mobilized enough gold to bash it down and turn the funds sellers. That is evidenced by the 7965 contraction in open interest yesterday, which now stands a little more than 201,000.

Gold needs to take out $360 and close above that level to put the bullish fire back in the market. Normally, it takes weeks to months for gold to regroup and head back up after breaking down like this. However, the fundamentals are SO bullish, it is hard for me to imagine that being the case. We shall see.

Silver plunged all the way down to $4.40 before reversing. Funds sold and the goon squad, led by JP Morgan Chase and Morgan Stanley, were buyers. Silver seems very sold out to me and should start a significant move higher. FINALLY!

The John Brimelow Report

Wednesday, June 11, 2003

Indian ex-duty premiums: AM $7.15, PM $8.25, with world gold at $354 and $353.80. Far above legal import point. Unless some very sustained new factor has entered the market, the world price of gold is too low.

TOCOM had an extraordinary and very interesting day. On enormous volume, equal to 102,949 Comex contracts, up 81% from yesterday, $US gold rose $2.40 from the NY close (which still involved a 24 yen decline from Tuesday’s close) but open interest actually fell the equivalent of 3,614 Comex lots. This effectively reverses the sudden, large, open interest increase of yesterday, and increases the suspicion that the price decline/volume and open interest jump yesterday was short selling by offshore operators.(NY yesterday traded 78,280 lots: open interest fell a huge 7,965 lots.)

Commentaries on yesterday’s action are unusually explicit in asserting that at least some of the action was dealer short selling. Dow Jones refers to

"…heavy dealer short selling…"

UBS attributes the weak close to:

"…futher selling from the same speculative name…".

However, the large open interest fall does suggest that a considerable quantity of spec longs were in fact liquidated. MarketVane’s Bullish Consensus for gold collapsed an unusually large amount, 7 points to 68% (lowest since May 13, at which point gold was $2 lower, but the Dollar Index 3% higher). Considering these factors and the Indian premium, it would be surprising if the Bear raid were not close to exhaustion.

http://www.lemetropolecafe.com/