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Published on Gold Anti-Trust Action Committee (http://gata.org)

Two essays to enjoy the gold and silver breakout by

By cpowell
Created 2003-08-27 07:00

http://biz.yahoo.com/rf/030827/markets_precious_comex_2. [1]

NEW YORK, Aug. 27 (Reuters) -- New York gold surged
to a three-month high Wednesday, snapping a summer
downtrend and catapulting silver and platinum to new
peaks as buyers swarmed out of the woodwork.

Mining shares soared and commodity funds lined up to buy
gold futures at the COMEX division of the New York
Mercantile Exchange, where December gold topped at
$375.40 an ounce just before noon EDT, the highest since
May 27.

The active contact ended up $7.30, or 2 percent, at
$374.10 an ounce, moving up from a low of $364.40.
Estimated volume was a furious 85,000 contracts.

Investors continued to buy even though an historic long
position is hanging over the COMEX. Funds were net long
89,998 contracts last week, more than the position when
gold struck 6-1/2 year highs in February around $390 an
ounce.

"The currency correlation is having some impact. But
generally speaking it's just the flow of funds that are very
strong into the sector," said a gold trader.

"It's generally macro portfolio type of diversification," he
said. "Most of that gets expressed in gold equities, but
some of that, with the growth of hedge funds and risk
capital out there, can come into the underlying asset as
well."

The benchmark XAU Index of gold and silver mining shares
was up 3.8 percent at its highest in four years.

Spot bullion rose to $372.60/3.10 from $364.75/5.50 late
Tuesday. London bullion dealers fixed the afternoon spot
reference price at $371.25.

Position adjustments before the expiration of
over-the-counter options in London got the ball rolling early
Wednesday, with European buyers getting extra clout as
the euro rebounded from Tuesday's 4-1/2 month low against
the dollar.

Stop-loss buying above the July 28 peak at $369.70 fanned
the COMEX buying and broke the downtrend line coming off
the $377 high of May 27.

"Gold has broken a major downtrend line today at $378 on
the December contract. This was the reason for today's
jump," said Ian MacDonald, head of bullion trading at
Commerzbank.

"The option books were fairly light in comparison to
previous months. The resistance has been taken out,
making our next target $400," he said, adding it would
not be in a straight line.

Adding to the frenzy was speculation that the 1999
Washington Accord on government gold sales will be
renegotiated at next month's International Monetary Fund
meeting in Dubai, possibly with more countries and a higher
cap.

The five-year pact limited total gold sales from participating
European central banks to 400 tonnes per year.

"The funds have been monster buyers and you have got to
wonder what they are hearing," said another bullion trader.

Tuesday's sale of 20 tonnes of bullion by the Central Bank
of Greece raised hopes that Greece might be among
possible new signatories to the agreement, adding more
predictability to the flow of central bank gold to the market.

September silver soared 12.9 cents to $5.131 an ounce,
trading from $4.99 to $5.16, its highest since Aug 1.

By Friday December becomes the active silver contract,
completing rollovers for September first notice day.


Source URL:
http://gata.org/node/1946