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A nice bounce in the metals with gold up to key resistance.
The trusts and funds are responding as well as the mining companies, ahead of tomorrow's important September Non-Farm Payrolls report.
One notable variant in this is the unusually large premium being given to the Central Gold Trust. This is almost certainly due to a short squeeze as it is one of the least 'liquid' of the closed end funds with only 16.6 million units. The premium on PSLV is expansive but it is usually so.
I have done some redrawing of the daily Gold chart which will be released this evening.
"...the unforgiven
Fire which Prometheus filch'd for us from heaven."
Lord Byron, Don Juan, Canto I.
"So we went to Atari and said, 'Hey, we've got this amazing thing, even built with some of your parts, and what do you think about funding us? Or we'll give it to you. We just want to do it. Pay our salary, we'll come work for you.' And they said, 'No.' So then we went to Hewlett-Packard, and they said, 'Hey, we don't need you. You haven't got through college yet.'"
"Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it."
“Innovation distinguishes between a leader and a follower.”
“I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.”
"The cure for Apple is not cost-cutting. The cure for Apple is to innovate its way out of its current predicament.” (1999)
"Almost everything -- all external expectations, all pride, all fear of embarrassment or failure -- these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart."
“Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?”
Steve Jobs
"The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro.
Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold."
China World News Journal, Shijie Xinwenbao, 04/28/2009
The market rallied today again on headline hopes of an orderly resolution to the Greek default.
There is likely to be a Greek debt default and restructuring. What the market does not yet understand is how it will be packaged and the extent of the damage to the debtholders, in particular some of the European banks.
According to Bloomberg the Europeans are running new bank stress tests based on a range of scenarios. I think the biggest variable is a haircut on the debt ranging from 21 to 50 percent.
What is a bit disappointing is that gold and silver continue to move with stocks, in the 'risk on risk off' trade. It would be better if gold were to rise as a risk aversion flight to safety trade. But of course there is quite a bit of perception management going on.
Non-farm payrolls coming up, and it may remind the markets of other risks. Be careful. The downtrend is not yet broken.
I tend to view 1540 to 1580 as key support for the gold futures based on the third chart.
Depending on how they wrap the rescue I am still thinking that a rally and some spikes will take gold back into a track to hit $2000 by year end. But let's not get ahead of ourselves.
Another low is possible at the supports indicated. And there is significant risk yet in the year end target. But once the ball gets rolling a $150 up day could break the usual pattern of capping rallies at 2%. The western central banks have used quite a bit of their reserves in this latest beat down of bullion.
And I still think the silver Comex market will resolve into a de facto default with forced cash settlements. I am not sure how they will justify this travesty. I think a case could be made that we are already there with so many deliveries being pushed into paper settlements with GLD and SLV.
But let's allow this to play out to the almost inevitable bitter end. There will be a story, and there will have to be some provision to head off an avalanche of litigation.
Greece is going to default, one way or the other.
The real question is how they will package it, and how big the haircut will be to the debt holders, anywhere from 21 to 50 percent.
Europe is running 'stress tests' again on the banks, obviously to see how they will fare against a range of scenarios.
I think they might buy the news if the haircut is below 50 percent and no banks are taken down with it. But this *could* be a secondary reaction depending on how they spin the deal.
