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November 7, 2006
Twiggs uncertain re gold, Tues., Nov. 7, 2006, 8:08 AM
Even the best technical analysts, like the Aussie Colin Twiggs (www.incrediblecharts.com), are having a difficult time assessing whether gold can break out to 650-675-700 here.
Many of them have their eye on the Euro, and whether or not the ECB actually does raise their overnight bank lending rate in December after warning this past week. That would help power the Euro through technical resistance because it's very unlikely that the Fed will raise. In fact, the issue is when the Fed starts dropping rates.
The excellent work of the BMO precious metals research team delves into the South African goldminers this week. Here is the full BMO report. Download BMO Nov 6 Gold Monitor.
The picture is not that pretty: in spite of a higher rand gold price this past month, the Big Four producers are struggling with declining production and reserve ozs/share, higher wage and other costs, plus lower grades among other issues.
Outside of South Africa, BMO points us to "attractive" drill results of Eldorado (AMEX: EGO, TSX: ELD) in Turkey, and to a downgrade of Lihir (NDQ: LIHRY) based on higher costs and lower production.
The COMEX non-commercial positions have been falling, but I suspect that de-hedging of several large producers will soon cause this chart trend to reverse and the public tends to buy on the price upswing, which will give more power to the move.
Posted by Posted by Bill Cara on November 7, 2006 08:08:53 AM | Category: Goldminer Producers
Discourse
ALOHA !!
The Frank Venoroso and Paul van Eeden take on the base metal effect on gold. Direct from their tour of Europe:
READ ON:
Gold may feel the pain if base metals turn sour
Mon Nov 6, 2006 10:44 AM ET
ZURICH (Reuters) - An anticipated slump in the overheated base metals market may weigh on gold prices as investors fail to differentiate between gold and metals like zinc and nickel, gold experts said on Monday.
Strong demand from pensions, endowments and hedge funds has pushed prices for base metals to multi-year highs in recent months but some analysts and traders fear that base metals are overbought and prices could collapse.
"Metals is where the speculation is. They are being squeezed and this is an unsustainable situation," said Frank Veneroso, at Veneroso Associates at a gold conference in Zurich.
"This game is going to come apart. If this happens we (gold traders) are not going to escape this carnage," he said.
Nickel and zinc have hit all-time highs of $32,625 per tonne and $4,400 a tonne respectively this year. Zinc has risen by nearly 40 percent in the past month alone.
Gold prices, on the other hand, largely have been stuck in a range since mid-July, after an attempt to recapture May's 26-year high of $730 stalled just below $680.
But despite that more modest rise, gold might also be hit if momentum in the base metals market starts turning.
Pensions often invest in so-called commodity baskets and experts fear that once the base metal bubble bursts they will simply sell their gold positions along with the rest.
"The risk for us in the gold market is a decline in the gold price in sympathy with the base metals," industry expert Paul van Eeden told the conference.
His comments were echoed by Veneroso who said: "In the near-term we have a problem and that is the company that gold keeps. There is a bubble in other metals created by hedge funds behavior almost to the point of madness," Veneroso said.
"There is a contagion risk because of the communality in some portfolios," he added.
Nobody knows if and when a base metals crash will play out, but some expect it within months.
"It could start now and it might go on for a long time," Veneroso said.
Gold prices recently have tracked oil, with weaker oil dragging gold down from multi-year highs this spring.
Currently gold is hovering just below two-month highs.
-END-
Posted by: kaimu ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
November 7, 2006 8:37 AM [link]
kaimu,
You need to stick to your own gold analysis, or mine.
Since Veneroso published his report Oct 3, he's out $55 on gold. Ouch! He can nuke his own winter!
And I attended the same Aurelian AGM as van Eeden who then went out and advised traders to sell in the teens -- right before it doubled.
These people have the patter down neat, but other than using insider knowledge they pick up at shows like they constantly attend, can they trade prices? Isn't that the issue?
Marketing people do what they do (travel, talk, and sell their services); traders trade prices.
It's a different business. The professional research staffs at the BMO,s, UBS's, CS's, are superior -- by a long way.
Careful when you read that marketing stuff.
Posted by: Bill Cara at
November 7, 2006 9:19 AM [link]
Bill,
Just an anecdotal observation on copper. I have always associated the demand for copper to be tied significantly to demand for new housing in N.A. and pictured the amount of copper used in plumbing the new home as a price driver. However, my son just moved into a new custom-built home and to my amazement the plumbing was done with clear, flexible plastic tubes with fittings that were glued to make the connection. I am told that this is cheaper and faster to install and does not require the services of a journeyman plumber who would use the necessary skills of soldering joints where copper is used. If this is a trend, then the petrochemical industry stands to gain at the expense of the metal producer. I can't imagine that in India and China there is a surplus of tradesmen who work with copper that can do at comparable cost what an abundant unskilled labour force can do by gluing plastic pieces together.
Posted by: TerryC at
November 7, 2006 11:48 AM [link]
Terry C...re copper in homes. Plastic is cheaper and lasts longer as it is not subject to the corrosive tendencies of hard water. Do not forget that copper in homes is in the wiring. And many contractors who did not have clauses in their commercial/residential contracts accounting for the fluctuation in prices ended up with thinner profit margins.
Posted by: Leisa at
November 7, 2006 12:54 PM [link]
Re Kaimu and Bill - So, there are always folks talking both sides of a pricing issue. I guess it all comes back to judging who's talking and on what basis.
The professional talkers always sound good; the traders (hopefully)perform in the market. Yet, when traders talk, they may just be pumping their own positions.
Thus, my futures broker (AGEdwards) issues trading recs. but doesn't allow their traders to actually take positions. They just "paper trade" and get bonuses based on how they do on paper.
No easy answers. It all comes back to experience, and knowing who's for real. Thanks, Bill for sharing your well-honed intuition on whom to listen to!
Gold and Elections
data from www.ronsen.blogspot.com
maybe the relentless global moneyprinting has something here?
Jock and others,
For all the moaning I do about the sell-side, I hope you understand that it's a good industry with some incredibly bright people in it. It's too corporate for me -- but that's me. I don't care for the industry structure that permits client order flow to be traded against, but otherwise, it's a darn fine industry, in my eyes.
They are so many people in it like Coxe, Rosenberg, Berman, Saut, McManus, and so many terrific research departments who we should be listening closely to. They don't deliberately mislead, and they have lots of resources at hand to do an effective job for clients and the public.
There are also people in the newsletter business who do an excellent job -- in percentage terms, just not as many. I don't follow Veneroso, but I happen to like Paul van Eeden. I merely pointed out he blew it with Aurelian, as I have done repeatedly myself with too many to acknowledge in this comment.
I also have pointed out that ROBTV's Kevin M., who I like, blew it with his short on Research In Motion, but I'd never go on his show or he'd point out how many more I've blown.
There is a simple reason why I take shots; it's to push readers to do their own homework. Of course, I like to pat myself on the back, but is there a writer who doesn't?
The one thing though that does bother me is the discrepancy that I see in the presentation of the market by three different networks -- BloombergTV, CNBC and ROBTV. Two of the three seem to be in my world, while the other seems to be out there in a world of their own, at times.
I get at least one letter a week from well-intentioned readers asking me to put a lid on it, and after today is over, I'll probably have no reason not to.
Posted by: Bill Cara at
November 7, 2006 1:41 PM [link]
TO BIIL CARA,
I HAVE BEEN IN THE DENTAL LAB INDUSTRY FOR 27 YRS. IN THAT TIME SPAN OUR INDUSTRY HAS ALWAYS BEEN THE FIRST TO GO INTO OR FEEL THE EFFECTS OF A RECESSION & INFLATION. WE ARE STARTING TO FEEL THE EFFECTS NOW. AT THE END OF 2005 PRICES INCREASED BY MANUFACTURERS BY 31%. FIRST 1/2 OF 2006 WAS 11%.I DON'T KNOW WHERE EVERYONE GETS THEIR FIGURES FROM, BUT I CAN TELL YOU THIS IS FOR REAL.
P.S. YOUR SITE IS VERY INFORMATIVE AND GREAT.
THANK YOU FOR YOUR TIME AND EFFORT.
SCIDEN04
Bill
There are a lot of novices who really appreciate the fact that you point out the differences between the good and not so good in regards to the media and research, i would hope that you continue to both applaud and dismiss as you have done many times, it helps in the learning curve if we follow good reports.
Posted by: tgifbipo at
November 7, 2006 4:03 PM [link]
Sold my Gold holdings. It was a great move from 585 - 630. There was a nice breakout from the trend channel with the help of the USD. The USD is now @ the bottom of the trend channel so the Swing move is over.
Technically, I am watching the USD, but the S&P and DJIA are trying a break out. If that fails and the USD stalls then drops, I will be back in Gold.
Who knows? Everything seems to be @ inflection.
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ALOHA !!
The Frank Venoroso take on base metals and their effect on gold prices ... one word "downdraft" ... Perhaps, but I'm still a gold buyer even on a sympathy price drop! Perhaps Frank can calculate the gold price(and silver, two monetary metals)based on a plunging US dollar and other currencies in a global economic collapse ... World population has a say in demand and last I heard populations have been rising steadily without any signs of faltering, especially populations of the "Chindia" region. I will also bet that US baby boomers who tend to have the lions share of "savings" in the form of disposable income will spend briskly before death. Some 70 million starting in 2008. Ah, hedge funds and those disturbing "unregulated" derivatives ... For sure another Amaranth is in the making as I type. You cannot forecast a plunge in demand and still have all these US bubbles everywhere and bubbles burst a lot faster than mines come onto production, especially lately with all the enviropolitical turmoil wordlwide!
PDF link to Venroso analysis of base metals:
http://www.kitco.com/ind/veneroso/nov062006.pdf
Posted by: kaimu![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
November 7, 2006 8:32 AM [link]