silver - supply getting tight?

  1. 678 Posts.
    Cash price is rather skittish today - tonight should be interesting

    The Afternoon Gold Report...
    by Jon Warner

    September 17, 2003 (


    New York spot gold settled higher at $375.70 an ounce, up $2.60 an ounce from yesterday’s close. Gold gained on a weaker U.S. dollar after yesterday’s FOMC decision to leave rates unchanged and maintaining a bias toward deflation. COMEX gold snapped a 5-day losing streak Wednesday, buoyed by a firmer euro and the Federal Reserve decision Tuesday to leave U.S. interest rates at 45-year lows. "The dollar is off again. Interest rates ain't going up. It held the line, the 21-day moving average at $373," observed a bullion trader. The Fed's decision to leave the federal funds target rate at 1 percent undermined the dollar against the euro, which firmed to $1.1269/72 from $1.1171/77 late Tuesday, promoting gold buying from euro-based investors. "They are still worried about the economy, which is the reason they left the rates at the lows and if that's the story then gold is definitely a better place to be than any dollar-denominated products," said a COMEX broker. "We still keep seeing the buyers come in on dips, mostly specs," said James Pogoda, a vice president of precious metals at Mitsubishi International Corp. "I have to think below $370 it could run into trouble because it might trip some new liquidation," he added. "Reaching the point where some of these guys would be more than $10 out of the money might add some more selling pressure," he said.

    Newmont Mining Corp sees a substantial possibility of higher gold prices its chairman said on Tuesday. Wayne Murdy said "We think the environment is very good for a strong gold price". Asked if he shared the view of Newmont President Pierre Lassonde that gold would hit $450 an ounce over the next year, Murdy said: "I don't predict prices but we feel the trend is that there's still substantial upward possibilities" for the price. Murdy said continuing declines in output worldwide and an extended dearth of exploration were among factors that bode well for higher prices. Low interest rates and a weaker dollar were also boosting prospects for the price, he said.

    Robert McEwen, Goldcorp's chairman and chief executive officer, told the company's annual meeting in June that he believes gold is in the middle of a sustained bull market that will see prices reach $400 an ounce this year and $800 an ounce in six to eight years. Financial analysts cast a bleary eye at the $800 figure -- "he's a bit of an optimist," said Haytham Hodaly, an analyst with Salman Partners Inc. in Vancouver. But Kerry Smith of Haywood Securities Inc. in Toronto expects gold to go through $400 by year end, depending on the economy and a long list of macroeconomic issues. Brian Christie, a financial analyst with Canaccord Capital Corp. in Toronto also sees $400 gold over the short term and through 2004, settling down to $360 over the long term, while Mr. Hodaly uses $350 for his long-term calculations.

    The long awaited inventory concerns over silver are apparently being felt in the market lately. Silver futures recently moved into a backwardation - when nearby prices exceed those of contracts set for later delivery - which is historically viewed as a bullish development for the market. With Comex silver warehouse stocks in excess of 100,000,000 ounces some market watchers are bemused by the emergence of apparent tightness in the market. But it appears that holders of metal are reluctant to part with it at the current time while others seem determined to get their hands on more. "It's certainly getting people's attention, this backwardation, and getting some funds interested in buying," said the head of a precious metals desk at a U.S. investment bank. He added that while it was difficult to ascertain the exact cause of the tightness, market speculation has it that some foreign-based consumers are looking to take physical delivery over the fairly near term, spurring some brokers to scurry around the market in search of willing sellers. "As the market seems to be in a bull mode at the moment, there's not that many people willing to sell what they've got in case prices rise again soon, so the guys looking to meet the delivery requirements are having a little bit of a tough time getting a bargain," the trader said. "That should keep us at least propped up for a while."

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