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

MineWeb analyzes mining company valuations as share prices soar

By cpowell
Created 2003-08-28 07:00

9:45p ET Wednesday, August 27, 2003

Dear Friend of GATA and Gold:

GATA Chairman Bill Murphy's "Midas" commentaries at
www.LeMetropoleCafe.com [1] have been shouting for weeks
that the physical gold market is overcoming the paper
market. Below is an unusually detailed dispatch tonight
from OsterDowJones that gets a bullion bank official to
acknowledge as much.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

By Gavin Maguire
http://www.futuresource.com/news/news.asp?story=i4385249205226897472 [2]

NEW YORK, Aug. 27 (OsterDowJones) -- Gold futures on
the Comex division of the New York Mercantile Exchange
jumped $7.30, or 2%, Wednesday to their highest level in
three months on bullion bank and speculative buying sparked
by the surpassing of recent resistance levels that brightened
gold's technical picture.

The most-active December contract settled $7.30 higher at
$374.10 per ounce.

Trading got off to a brisk start as a number of major bullion
banks sought to bulldoze prices through layers of overhead
resistance in place around $368-$370. This marked the
location of a downtrend line that has capped prices on
numerous occasions since the 2003 high in prices around
$387.50 basis the December contract, scaled in February.

The $370 area capped prices on a run higher in July, and
prices have remained below that level since.

However, in recent days speculative and bullion bank buying
have persisted in keeping gold within touching distance of
that region -- despite a fairly robust performance of late by
the U.S. dollar.

Dollar-denominated gold traditionally comes under pressure
during times of U.S. dollar strength. But in recent weeks
buyers of gold have ignored the currency markets in favor
of focusing on the overhead targets as geopolitical tensions
heightened and gold's allure as a safe-haven asset was
augmented.

The early bullion bank buying was designed to poke prices
through the nearby resistance and activate pre-placed resting
buy orders lurking just beyond that would spark a flurry of
automatic buying.

The ploy worked within the first 15 minutes of trading.
December futures burst from the $368.50 level to $373 within
two minutes just after 0830 ET (1230 GMT) on a frenzy of
fresh buying and short covering (the buying of positions
previously sold).

The break above the established trendline resistance then
drew chart-following funds attracted by the bullish implications
of the breakout as well as by the positive momentum in prices.

Ian MacDonald, manager of precious metals at Commerzbank
in New York, noted that along with the breach of resistance a
flurry of options-related buying was also evident to ensure the
buy orders emerged from all corners of the market.

He expected more buying to emerge in the coming days
following the strong technical close. Immediate upside targets
include $377, $380 and $382.

But MacDonald also allowed for some profit taking to hit the
market ahead of the forthcoming long weekend for Labor Day.

"It's safe to assume this market won't go up in a straight line,
so some profit taking is very possible."

However, he added that as physical and speculative buying
have been so sturdy of late, the upside remains gold's
longer-term path of least resistance.

"We're seeing more and more interest in gold from all over.
We're getting good physical demand out of India and the
Middle and Far East, as well as from U.S. investment funds,
so we're in a bull market," MacDonald said.

"I see $400 on the radar over the next few months, but as
I said, we're not going up in a straight line so it might take
a few attempts."

Other sources said any nearer-term retreats would likely
find support around $370 initially and then around $367-$368.

The same outlook applies to spot metal, which also hit
three-month highs of $374.20. Nearby upside targets include
$375-$376, $380 and $382, dealers said. Support is expected
around $370, $367-$368 and $365 initially.

December silver was buoyed by gold's strong showing and
gained 13 cents on the day to settle at $5.156. As with gold,
some further upside progress is deemed possible, but
resistance is touted around $5.17, $5.20 and $5.22 over the
near
term.

Nymex October platinum also saw speculative buying
spurred by the strength seen elsewhere. October settled
$19 higher at $713.70, a contract high.

With prices on the spot market scaling highs not seen in
more than 20 years, dealers were reluctant to pick a top.
But they predicted that at least some profit taking could be
expected around $720, $725 and $730 should any further
buying be seen.

September palladium, meanwhile, was largely ignored
during the excitement elsewhere and wilted $1 on the day
to settle at $205.50.

Dealers said the bullish noises emitted elsewhere in the
complex will likely limit selling pressure over the short
term. But the upside is also viewed as fairly limited by
profit takers deemed lurking ahead of the $210 level.


Source URL:
http://gata.org/node/1948