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Posted on 04/28/2006 11:10:11 AM PDT by Jack Black
NY gold scales new 25-year high, silver shines By 52 minutes ago
NEW YORK (Reuters) - Gold futures surged to a new 25-year high on a falling dollar and worries over Iran's atomic program on Friday, and the rally spilled over to silver, which was already firmer after a launch of a new silver-backed fund.
Strong oil and base metals prices and uncertainty over the U.S. economy fueled waves of aggressive investor buying across the precious metals group, dealers said.
"I think gold has kind of taken on a leadership role," Steve Platt, a broker with Archer Financials in Chicago, said, adding that the yellow metal also was benefiting from a weak dollar.
"People for a long time had not been interested in the precious metals to any big degree, but now you have started to see them look at them once again as a flight to quality in terms of asset diversification," Platt said.
June delivery gold was up $16.70, or 2.55 percent, at $653 per ounce on the New York Mercantile Exchange's COMEX division by 12:11 p.m. EDT, trading in a range of $634 to $655.50, a new contract high.
Spot gold hit a 25-year high at $652.80 an ounce.
"After a period of consolidation, and with $650 cleared, gold could now be set to challenge $680 as tensions in the Middle East draw investors toward gold's safe-haven qualities," said James Moore, an analyst with TheBullionDesk.com.
A report by the United Nations' nuclear watchdog said Iran had ignored a U.N. Security Council call to suspend all nuclear fuel enrichment by a Friday deadline and had accelerated its program, diplomats said.
Oil prices rose 1.5 percent to $72.05 per barrel after the Iran news -- not far from a recent record peak above $75.
The dollar slumped to an 11-month low against the euro after a mixed bag of U.S. data did little to overturn the market's view that the Federal Reserve is nearing a pause in its dollar-boosting interest rate campaign.
The economy grew at a steady clip of 4.8 percent in the first quarter -- its fastest pace in 2-1/2 years and in line with forecasts -- but inflationary pressures in the data were softer than expected, analysts said.
U.S. consumer sentiment, meanwhile, fell in April as worries about high gasoline prices overshadowed a buoyant stock market and strong job growth.
Silver, which is used in jewelry, fabricated products and industrial applications, surged almost 9 percent at one point but held shy of last week's 23-year peak of $14.69.
July delivery silver was up $1.06, or 8.4 percent, at $13.65 an ounce. The morning's high was at $13.70.
Barclays Global Investors' ETF, called iShares Silver Trust, with the trading symbol SLV (AMEX:SLV - news), began trading on the American Stock Exchange on Friday.
Each share is worth 10 ounces of silver bullion.
More than 1.6 million shares had traded on Amex by midday.
"It's trading very strongly, and it's only noon," said a source at the exchange. "Volume might reach 3 million or 4 million shares today."
By Myra P. Saefong, MarketWatch Apr 28, 2006
SAN FRANCISCO (MarketWatch) -- Gold futures rose more than $20 an ounce Friday to levels not seen since late 1980, up more than 10% from prices seen a month ago, after the U.N. Security Council said Iran failed to meet its deadline to halt uranium enrichment and refused to cooperate with U.N.-appointed inspectors. At the same time, silver prices climbed as much as 9% as the first U.S. silver exchange-traded fund began trading.
"Iran continues to provoke conflict and the gold price is reflecting that sense of uneasiness," said Peter Spina, an analyst at GoldSeek.com. "Iran knows they have leverage here, especially with oil above $70 and the U.S. dollar becoming ever so vulnerable." So "all indications are that the geopolitical tensions will continue to support gold at this juncture, with the breakdown in the U.S. dollar adding even more ammo to the run," he said.
The per-ounce price of $700 is now achievable in May, with gold likely continuing to find great support on the downside around $600, he said.
Gold for June delivery climbed as high as $658.20 an ounce on the New York Mercantile Exchange, a more than 25-year high. It was last up $21.40, or 3.4%, at $657.70.
The contract closed down almost $6 on Thursday after China boosted interest rates, raising the prospect of lower metals demand from the world's most populous country. But prices are now well above the month-ago close of $586.70 and the week-ago close of $635.50. Iran has failed to cooperate with U.N. inspectors, the BBC reported, and has done little to answer questions about its nuclear intentions. Friday marked the deadline for Tehran to halt uranium enrichment, which is a step toward creating nuclear energy or nuclear weapons.
"When you ignore the U.N., you ignore all the nations of the world at once," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com. "This, as we have learned, is suicidal."
"Gold is on the boil because of the immediate ramifications of all this for oil, and also because it finds itself at the center of immediate demand by safe-haven buyers," he said.
So at the moment, the biggest drivers are "more Iran than [the silver] ETF -- more dollar than oil," he said.
"If we see real stampede to ETF next week and oil surging back, then of course $675-$700 gold and at least $15 silver are in the short-term cards," he added.
Iranian President Mahmoud Ahmadinejad has said his country "does not give a damn" about U.N. resolutions that seek to stop it from enriching uranium because of fears the country is planning to develop nuclear weapons, the BBC reported.
Since resuming its research program earlier this year, Iran has insisted that it is aiming to generate power only for civilian use.
U.S. Secretary of State Condoleezza Rice said at a NATO meeting in Bulgaria that the Security Council's credibility will be tested in how it deals with the Iran issue, the BBC said. The U.S. and other western governments are calling for trade sanctions if Iran refuses to cease its activities. Added support
Adding support to gold, "with most of Asia and Europe closed Monday for May Day holidays, traders are likely to be reluctant to go home short given the current geopolitical picture," said James Moore, an analyst at TheBullionDesk.com.
Overall, "the precious-metals markets are experiencing significantly higher volatility than we've seen in quite some time, and that can signal that a retracement may be in the offing," said Dale Doelling, chief market technician at Trends In Commodities.
"But it's looking more like a consolidation at this point and, barring an all-out collapse, the trends in all of the metals markets remain favorable," he said. June gold has strong support at its recent low of $610.50, he added.
UBS raised its 2006 and 2007 gold price forecast earlier, predicting that continued investment-fund demand for commodities will support price gains. "Fund flows into commodities have been more vigorous than anticipated; supply response remains anemic," said analyst Daniel Brebner.
UBS is raising its 2006 gold price forecast 12% to $630 an ounce and its 2007 forecast 25% to $750 an ounce. "A number of respectable institutions raised their current year and 2007 forecasts for gold and more of them are no longer afraid of mentioning the word 'record' when it comes to future gold prices," said Kitco.com's Nadler.
Silver ETF launches
In silver trading, futures prices for the July contract jumped to a more than one-week high of $13.85 an ounce, trading last up $1.25, or 9.9%, at $13.84. A month ago, the contract closed at $11.613.
The first silver exchange-traded fund in the U.S. launched Friday on the American Stock Exchange this morning. (SLV : ishares silver trust) ishares
Silver prices have run up sharply ahead of the launch of the ETF from Barclays Global Investors, which has been in the works for more than a year. The ETF is backed by 1.5 million ounces of silver, deposited by Barclays earlier this week.
"Silver, which got butchered because the slope of the daily chart began resembling the angle of a shuttle launch, seems to have found support as it approached the April lows," said Doelling. July silver lost 2.7% on Thursday.
"With the silver ETF now trading, I look for some continued volatility but, eventually, silver should have no trouble making new contract highs," he said. Overall, "demand is exceptionally strong and we forecast a very successful future for these silver-backed shares," said GoldSeek.com's Spina.
"Despite short-term gyrations, silver is still on track to move past $15 this year -- targeting upwards of $20-$25," he said, adding that there is "tremendous support" around $10 an ounce.
Elsewhere, July platinum was last up $13.90 at an all-time futures high of $1,160 an ounce and June palladium added $5.70 at $370 an ounce.
July copper was up 3.4 cents at $3.215 a pound. Prices tapped a record of $3.33 Thursday before ending that session lower.
"Copper's recent ascent is a bit troubling, and this market could experience the same type of ambush that silver experienced," said Doelling.
Among gold, silver and copper, "I'm most cautious on copper and would avoid any new long positions for now," he warned.
"The precious metals have always had a penchant for undoing months of gains in a couple of days time, and the recent action in silver is a perfect example," he said.
Looking at supplies, gold inventories were unchanged at 7.69 million troy ounces as of late Thursday, according to Nymex data.
Silver supplies fell 663,216 troy ounces to 123.6 million troy ounces. Copper fell 50 short tons to 17,632 short tons.
On the equities side, indexes tracking the metals-mining sector were poised to recover Thursday's losses of around 3% and end the month around 12% higher.
I thought I'd put these together. The silver ETF is interesting. The link between gold an Iran is interesting. Another high. Bring on the Gold Bears!
In other words, if you bought a gold wedding band in 1980, it's finally worth what you paid for it again.
So does this mean all those commercials on the conservative radio talk shows aren't full of sh!t?
Nope, not yet. But all the coins and mining shares I bought 5 years ago are up 100%+. It's all about the timing, always.
Only a fool would have bought gold at the top in the 80's. Likewise, it did not take a genius to see 12 months ago that precious metals, especially silver, were set for a big rise. In the past 9 months silver has nearly doubled in value. Those who keep reminding us that there was a top in the 80's are probalby the same ones who have missed out on the recent run up in prices, because they had tunnel vision and thought one fact comprised the whole story.
The real question is this: why are the prices of all of the following in parabolic rises -- gold, silver, zinc, uranium, copper, iron.
You deliver a lecture on when to buy and then ask that question?
Demand. Sheesh.
The coins I bought in February are up 35%!
I hope people keep slamming on silver while being fooled by the overvalued NYSE! I'm betting that when the market inevitably corrects itself AGAIN, the same people who lost thousands (or more) in 2000 will lose again.
The nephew says that most coin shops in the Carolinas and Georgia will not sell silver at any price this week due to volatility and gold coins are becoming scarce. When so called coin dealers refuse to buy or sell then there is no "market" for the small time buyer to get in.
Soon the ads will appear in the papers offering to buy gold and silver. This will mark the next leg up as the public becomes engaged. The trading days of Gold below $700 and Silver below $14 can be counted on two hands (if not one.)
Gold and Silver will go sky high this time as paper money goes on the strategic defensive. Like the Luftwaffe the dollar will be decimated in the coming months.
Oh well, you seen one Great Depression then you've seen them all. Those darn Asians are buying all the gold!
HG
You may find the following article of interest, because frankly, our memories of what stuff sold for are not especially reliable.
http://www.zealllc.com/2005/gorex3.htm
The better number to look at, IMO, is the average ratio between the price of an oz of gold and a barrel of oil, over many years.
I find the 2nd chart pretty interesting. Turns out the average Gold-oil ratio (GOR) is a smidge over 15. But as you can see, it has wandered considerably far afield from that number getting as low as 6.6 or so, an all-time low last year, when oil was spiking (but gold had not yet run up) to as much as 35 highest of the high, but 25:1 a few times and 30 a few times. Interesting article.
So is oil too high or gold too low?
Gold is too low. I will bet my 100th birthday on that : )
Heh heh. You got it. Silver, better.
Comex gold warehouse stocks were down 277,163 ounces Tuesday at 7,334,350, while silver stocks were up 3,010 ounces at 123,627,373.
I am not sure the gold drawdown indicates folks taking physical delivery, but I'd sure bet that way.
btw, you may find this site useful: www.netdania.com click on "quotelist".
Free RT quotes on PMs, and their charting, with every type of study you can name, is quite cool. Click on any item for their charts.
I have talked myself into adding more physical Ag today.
btw, forget not that those 123 MM oz Ag are let's say 75% spoken for by SLV....they have ITM calls on some, not all they will need.
Oh yeah, there's the small matter of a 700 MM oz short Ag position.
And finally, the COTs are as bullish on silver as I have seen in a long time.
Would you happen to know ounces of gold are short?
Not in ounces...I suppose there is a correlation between the current COT short position and the no of ounces, and its prob not a big deal to do the math.
The gold COT doesn't seem much different than it usually does this week. It's silver that has really changed.
Incidentally, adding 3000 oz Ag to COMEX is utterly nothing, and I take it you realize that.
Tacky charts. They really need to log-transform the gold-to-oil ratio before plotting it.
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