ALOHA!!

It seems to be a POG(Price Of Gold) conundrum ... No meaningful corrections are visible on weekly chart. This one has so far been just a blip on the radar. I suggest you consider the likes of Goldman Sachs and JP Morgan of the COMEX and the Mitsubishis of the TOCOM(Goldman Sachs also shorts on the TOCOM) as to their short positions and the extreme size of these short positions. Add in the new found desire for the miners to de-hedge and the lack of supply due to a 20 year decline in exploration since 1981(mining of leftovers). These corrections have been shorter and shorter in terms of duration. Seems to me large bullion banks are covering ...

I like the logic of GATA, Gold Anti Trust Association, since no other explanation seems to hold water. Of course the Federal Reserve and all the other central banks would love for us all to believe the POG(gold market)is a bubble. Compared to the DOW and US real estate gold isn't even a "bub" much less a "bubble"!!

From the Miami Metals Conference held last week by Merril Lynch these were the comments by the gold industries top CEOs:

“The fundamentals for gold demand and supply have never been better. Certainly this is my personal conviction - from the thirty years I've been associated with the gold industry - that in every possible way – from central bank selling to new mine production and also from gold's competitive character as a store of value to fiat currencies - it looks really good.�

-Bobby Godsell CEO AngloGold Ashanti

L. Patrick Hassey, CEO of Allegheny Technologies, has the same sentiment:

“I have never seen a metals market as robust, big and long-cycled as this one.�

Secondly, mining bosses are frustrated that their stock prices are not keeping up with the metals' prices. I heard this sentiment repeated several times.

Here's how Wayne Murdy of Newmont Mining (NEM) put it:

“We have expanded our margins substantially. Either the street hasn't caught on or they don't believe it. This isn't a forecast. The money is pouring in and it's as real as a cigar box full of cash sitting on my desk... Here's a stock tip for you: NEM. Buy it! Otherwise, I don't know why you're here or why I'm here.�

Those short gold would love for the investing public to not buy gold or silver and sell off their pm shares. It is now a war between real money(gold) and paper IOUs ...

Bill, you know what is interesting is that at current metals prices if you melt the coins and sell the metals extracted from the coins, you probably can make a profit.The reminds me an incident happened in China in seventeenth century.The coin in circulation by then was made 60% from copper and 40% from lead. To take the advantage of strong copper price, speculators collected coins and had them melted, then sold the metal to make good money.Even the punishment of being beheaded could not stop the speculation.Eventually, the emperor took the advice from a knowledgable minster to change the ratio from 60% copper and 40% lead to 40% COPPER and 60% lead. The mania faded.
What do you think the divergence between the current "metal value" and the currency value of the coins, assuming the divergence does exist? Do you think it is the indication of high speculation in the metals prices? Does it have anything to do with the depreication of currency? Will this phenomenon last for long given the momentum we have seen on metals?
Thank you very much for your and any other's comments.

Let's see. We talk, talk ,talk about about China re-setting its exchange rates and China makes no noise at all except of "diversifying" their reserves. China's Premiere visits and there are all sorts off unofficial snubs going on. On the day he meets with Bush we have the Great Gold Sell-off Show.We "adopt" a weak dollar policy following that and the $USD goes from 88 and change to 83 and change in short order. China then announces second exchange rate adjustment in 12 months (light speed for them!)and the dollar pops big time. Gold tanks. Everyone cheers. But, yesterday's data brings further selling in $USD. So when HK opens last night, BOOM!, somebody steps in with a very big buy, gold takes off like a rocket and the $USD tanks once again. Message to U.S: Support your dollar or this continues.

The Great Poker Game resumes in my opinion. Who likes sitting at the table in this one?

And the TIC data everyone was wanting to see? Yeah, we covered debt service but JPN was a NET SELLER and there was said to be a new big buyer out of the Caribbean (hedge fund?), that stepped up to the plate. CARIBBEAN HEDGE FUNDS? Yeah right.

"Foreign Purchases of U.S. Securities Slow" - but only a little"

http://tickersense.typepad.com/ticker_sense/2006/05/foreign_purchas.html

I haven't agreed with Birinyi's stuff for a while now and this one seems "massaged" as well to present the better headline. This is a dollar story. Look at the UST data in the last graph. Foreign purchases falling off a cliff since beginning of year. Who cares if foreigners are buying US stocks and bonds? How is that an offset of consequence?

From Sentimentrader-

"A mere three days after the Dow Jones Industrial Average - the mother-ship of all indexes - hit a new yearly high (and almost a new all-time high, as the headlines were screaming), we saw the number of stocks on the NYSE that were at a new yearly high drop off a cliff, and new lows expand greatly.

While each vendor is different, my data shows that on Monday only 28 stocks closed at a fresh 52-week high, while 180 of them dove to a new low. With 3,421 stocks traded that day, it means that less than 1% of stocks hit a new high while more than 5% hit a new low. And that's just three days after CNBC, the Drudge Report, Yahoo! Finance and an exhaustive number of other outlets had "NEW ALL-TIME HIGHS!" somewhere front-and-center."

"It's also difficult to read too much into one sole precedent, so let's relax the parameters a bit and only look at new lows - we'll forget about the paucity of new highs for the moment - and also push back the amount of time within which the Dow had to have hit a new high.

So what we're going to see now is the performance in the Dow any time it scored a new high, then within five days at least 5% of all stocks on the NYSE were trading at new yearly lows."

"The performance the given number of days later was pretty pathetic, and for the most part we saw weakness right from the get-go.

One month later, each of the six instances showed a negative return, and even three months later only one of them managed to claw its way back to positive territory.

The most slap-in-the-face stat of them all is the lopsided risk/reward after these "signals". If we look out over the next quarter, the average maximum gain across the six instances was +1.9%. In comparison, the average maximum loss was -11.8%. In other words, the risk was six times greater than the reward."

I'll try to post table but not sure it will work:

Danger in Dow Divergence

Dow Performance After New High, Followed by Jump in NYSE

New Lows to 5% of Total within Five Days
10 Days 1 Month 3 Months 6 Months 9 Months 12 Months

04/19/72 -3.2% -1.4% -5.0% -4.0% 6.4% -1.0%

02/15/80 -3.5% -9.4% -6.6% 9.2% 11.5% 6.2%

10/16/89 -2.0% -1.8% +1.3% +4.1% +12.9% -9.1%

07/23/90 -6.5% -10.4% -13.2% -9.5% +0.8% +3.7%

07/23/98 -4.0% -4.5% -4.6% +2.1% +19.7% +22.1%

12/23/99 1.0% -3.3% -2.6% -8.8% -4.9% -8.1%

Avg Ret -3.0% -5.1% -5.1% -1.1% +7.7% +2.3%
% Pos 17%

0%
17% 50% 83% 50%