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Peter Brimelow: Some gold bugs worried by Friday's market flop
By Peter Brimelow
MarketWatch.com
Monday, September 20, 2010
http://www.marketwatch.com/story/some-gold-bugs-worried-by-fridays-flop-...
NEW YORK -- Gold just closed a fine week with a poor Friday. Some gold bugs are getting worried -- but by no means all of them.
During the week gold got into all-time high territory. The New York spot close on Thursday was $1,275.50. The free long term point-and-figure chart kept by Australia's The Privateer looks magnificent:
http://www.the-privateer.com/chart/gold-pf.html
But after a strong start, gold spent most of Friday going down. The New York close was $1,274.70.
The gold shares hated the action, being weak all day. The Arca Gold Bugs Index (NYSE:HUI) ended near its low, down 1.15% on the day. In fact, overall it was up distinctly less than gold for the week.
... Dispatch continues below ...
Prophecy to Become Coal Producer This Year
with 1.5 Billion Tonnes of Resource
Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen.
For Prophecy's complete press release about its production plans, please visit:
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This is very disconcerting for the many gold watchers who respect the short-term forecasting ability of the shares.
Ed Steer, who writes a wide-ranging daily commentary for Casey Research, was particularly upset and spelled out the bad news: "I believe that the chart patterns in both gold and silver yesterday were what technicians call a key reversal to the downside. ... There were new highs set in both gold and silver on Friday, but I must admit that I take cold comfort from that at the moment. ... Every long contract placed will have a bullion bank on the short side of it. And unless they get overrun at his particular juncture, this rally will probably end up the same as the rest of them."
But by no means everyone shares these concerns -- partly because some are distracted by the recent powerful performance of silver. Martin Pring's Weekly InfoMovie said on Thursday: "This week we focus on silver because it has broken out from a very long-term consolidation formation. ... I am expecting it not only to be a valid move but a very worthwhile advance."
James Turk at Free Gold Money Report on Saturday felt the same: "Silver has nearly completed a huge accumulation pattern highlighted by the 'head-and-shoulders' pattern formed over three years. ... The important breakout that we have been waiting for months is at hand. When silver finally hurdles above $21, expect the momentum from new buying that will come into the market to take silver much higher in the months ahead."
Of course, such silver strength would be very likely to influence gold.
Generally those who take a fundamentalist or macro view of gold are not much concerned. The Privateer sees great importance in the current disruption of foreign exchange markets.
"Japan has signaled the possible beginning of competitive currency devaluations among the major nations with their unilateral intervention of September 15. This is the act which pushed US dollar-denominated gold to new highs."
In a sense, currency gyrations underpin the confidence at Bill Murphy's LeMetropolecafe too. There the recent strength of the rupee is deemed to have supported gold by sheltering Indian demand despite higher US dollar prices.
The Website also notes confirmation at the end of the week that Thailand's central bank bought gold in July: another fruit for gold from exchange-rate stress.
Sellers/bears in New York; buyers/bulls in the East. Same old story. And the East keeps winning.
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Sona Resources Expects Positive Cash Flow from Blackdome,
Plans Aggressive Exploration of Elizabeth Gold Property
On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia.
Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013."
For complete information on Sona Resources Corp. please visit: www.SonaResources.com
