Weekly metals Report....11/05/09

This week has certainly been one of historic proportions. It began with the Central Bank of India purchasing 200 metric tons of Gold from the IMF at a discounted price of $6.7 Billion (USD).This started the “Bull Run” to all-time highs $1096.50 (Globex) & $1095.00 (Comex) while also setting record NET LONG POSITIONS (300,000) + on the Comex. The Gold Bullion purchase by India shows a total lack of confidence in the U.S. Dollar and concerns of pending inflation. It is reported the IMF is offering another 203 metric tons for sale. Despite the apparent lack of interest from China “It would be Cheaper for China to buy domestically mined Gold than purchase Bullion the International Monetary Fund is seeking to sell” according to a Peoples Bank of China advisor. Despite China’s response most Gold traders see the Chinese purchasing the IMF Gold out of necessity to diversify their portfolio away from the greenback. China is the worlds largest producer of Gold and is certainly closing in on India’s title of “worlds largest consumer of Gold”. The Chinese are showing an insatiable appetite for both Gold and Silver as a hard currency to protect their new found wealth against global economic turmoil. Tuesday and Wednesday the FOMC held their monthly meeting. There was no rate hike and reiterated its position to keep interest rates low for an extended period.This action may send a message to the international community to continue the “status quo” BUY GOLD because the U.S Dollar is will probably continue to struggle versus the EURO. This recent two month GOLD rally (MAMMOTH RALLY) has been fueled by (1) HEDGE FUND BUYING (driving force ...flight to safe haven) (2) HUGE SPECULATIVE BUYING, (3) EXTREME U.S DOLLAR WEAKNESS, and (4) GLOBAL INFLATIONARY CONCERNS just to name a few. Thursday we finally got better news concerning the number of jobless Americans seeking unemployment benefits as the Department of Labor Reported…U.S Jobless Claims Fell more than Expected to 512,000…
Hopefully this is an indication the LOSS in the job sector is slowing. There are still concerns regarding the Commercial Real Estate Sector and many market watchers are looking at this sector to get worse.
Dubai (GOLD CITY) is reporting a rise in tourism which certainly will translate to an increase in Gold volume. Gold sales in Dubai were up 10 % in October. With all that has occurred this week there is certainly one thing we can state “Gold is the imperial currency” and currently the world’s choice. Even though the Silver has been in the shadow of Gold the Silver market showed an 18% third quarter return and with its duo identity as both a “precious metal” as well an “industrial metal” I believe the upside is much greater for Silver. However the trading volume Is less and the volatility is much greater but the industrial demand is phenomenal.
The recent trades in the Gold and Silver have been volatile, choppy, and I expect this trend to continue because nothing has changed!

Mike Daly /Gold Specialist