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Richard Appel: Uncertainty and fear have great power but we''ll get over them
Gold recovers from six-month low;
Investors use price weakness as buying opportunity
By Myra P. Saefong
CBSMarketWatch.com
Thursday, April 29, 2004
http://cbs.marketwatch.com/news/story.asp?guid=C518A284-D3FE-43E9-
A9A1-6860AAB93AC6&siteid=mktw&dist=nbs
Gold futures closed back above $387 an ounce Thursday with
some investors lured back to the precious metal by a drop to
a six-month low.
Gold for June delivery climbed $1.20 to close at $387.10 an
ounce on the New York Mercantile Exchange. It traded as
low as $380.50 earlier, a level not seen since early November.
Futures prices lost more than $13 in the previous session
after China's State Council ordered companies in the cement,
steel, and real-estate sectors to use more of their own money
for new investments as a way of easing pressure on the
banking system. The move was also a way of cooling off
hyper-investment in those sectors.
"Most of the fundamentals that drove metal prices are still
intact," said Peter Grandich, editor of The Grandich Letter,
an investment publication. "The U.S. dollar is completing its
countertrend rally, debt continues to pile up in the
consumer and government sector, and China is a runaway
monster that no mere words can stop," he said.
So "the knock you hear is opportunity -- answer the door,"
he said.
China's tightening of lending, suggesting a possible
slowdown in metals demand from China, was the main
reason for Wednesday's price decline.
In a report to clients, analyst James Moore at
TheBullionDesk.com commented, "But with producer
dehedging programs beginning to slow and indications
that the U.S. economy is growing steadily, suggesting
a rate hike later in the year, we could well be in for
a longer period of consolidation."
Gold prices need to hold above the $365 level to
"maintain the bull market," he said. If they fail to
hold that level, the move would suggest a change in
market perception and a possible move back to sub-$300
prices, he said.
Some analysts were unfazed by the news from China.
"The fact is, world metals production is already
running woefully short of growing demand from China
and elsewhere, and the current and future actions by
Chinese authorities will not shut down the massive
demand from that country," said Brien Lundin, editor
of Gold Newsletter.
It's as if the "Chinese economy is already barreling
down the freeway at 90 mph, and the authorities are
trying to ease back on the gas pedal before it hits
120 mph and blows the engine," he said. "The world's
commodity producers, meanwhile, are chugging along
behind at 55 mph and trying desperately to catch up."
So it doesn't matter if the growth rate of the Chinese
economy slows, he said, because "it's still growing,
and the nation's current level of consumption and
demand remains far ahead of supplies."
Kevin Kerr, editor of the Kwest Market Edge newsletter
agreed. "Chinese demands for metals and energy
among other things isn't going to change long term,
although it may slow for a while."
The fall in gold prices is "an emotional one, and provides
key buying opportunities for prudent investors," he said.
Elsewhere on Nymex Thursday, July silver closed down
by 4.7 cents at $5.838 an ounce Thursday, even after
falling Wednesday by more than 3 percent to its lowest
level this year.
Looking ahead, however, the picture for the industrial
metals is bright. "The stage is being set for a
continuation of the silver bull market and new highs
will probably be seen as early as this summer, said
Paul Mladjenovic, president of PM Financial Services in
New Jersey.
"The diminishing market for silver in photography has
been reported since 1999 and yet if this market
demand disappeared tomorrow, silver would still have
supply problems since healthcare and military
technology and a myriad other uses are growing
demand," he said.
Copper prices strengthened a bit after Wednesday's
5 percent drop. July copper rose 1.6 cents to close
at $1.1925 per pound.
But June palladium ended the session at $246.05 an
ounce, down $7.55, while July platinum fell $16 to
close at $780.50 an ounce.
In supply news, copper supplies were down 2,444 short
tons at 175,807 short tons as of late Wednesday,
according to Nymex. Silver stocks were up 1,000 troy
ounces at 122.2 million troy ounces.
Gold inventories stood at 3.985 million troy ounces,
down 60,033 troy ounces.
After falling to nine-month lows on Wednesday, metals
mining shares climbed Thursday for the first time in three
sessions.
Gold Newsletter's Lundin believes the mining equities are
forecasting a rebound in the metals market.
"We didn't see stocks rebound after the other recent,
steep falls in precious metals prices," he said. "But
professionals in this market realize that Wednesday's
selloff was completely unjustified and created buying
levels that are irresistible," he said.
The Philadelphia Gold and Silver Index (XAU) closed at
82.06, up 1.1 percent. The CBOE Gold Index (GOX)
tacked on 1.7 percent to end the session at 70.23.
The Amex Gold Bugs Index (HUI) climbed, adding 1.2
percent to close at 178.79.
Among the index-components gaining ground, shares
of Bema Gold and Harmony Gold closed with gains of
4.6 percent, while Agnico-Eagle Mines climbed 3.6
percent.
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RECOMMENDED INTERNET SITES
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NEWS AND ANALYSIS
Free sites:
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http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kuik.com/KH/KH.html
(Korelin Business Report -- audio)
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Eagle Ranch discussion site:
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Ted Butler silver commentary archive:
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