THE PACIFIC COMMODITY LETTER
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360-289-9441(March 12, 2000) METALS: Gold fundamentals...culled from today's news. From Russia comes a news story concerning Vneshtorgbank; if you can't pronounce it, you are excused. They have started a $50 million line of credit dedicated to increase purchases of gold in 2000.
Meanwhile, in Great Britain, most Brits disapprove of their gold auctions, e.g., turning their gold into U.S. Dollars, yen, D-marks, etc. The World Gold Council conducted a poll. Recall that 415 tons of the yellow stuff is being sold off, a large chunk at a time.
In the futures pit at COMEX April gold lost another $2.70 and closed at $290.00...so much for that recent rally. It is history. Friday was options expiration day and some large puts were at 290.00 so that is where prices gravitated.
June palladium was up $13.00; traders still awaited actual confirmation of Russian shipments. The silver pit was dead.
From Toronto an article concerning the Mining Millennium 2000 a conference of the mining industry, criticized stick-in-the-mud policies that dampen any new investments or projects.
The White House's Economic Council chairman Baily thinks that lower oil prices will prevail later this year, describing the recent surge as an anomaly. The New York Merc added a $350 strike price gold option to the NYMEX board.
Strike by a small faction of the South African National Union of Mine Workers is in its second week at platinum mine Samplats Rustenburg (PMR). The officials there say no production cuts have been made: its business as usual.
In London, gold at $290.00 has found support while silver at $5.10 is also supported...this did not stop the COMEX from slipping.
Recall what sent gold higher in its most recent surge? The decision by major gold producers to suspend their hedging positions; this has not resulted in higher prices says the World Gold Council. What else is new? Talk about the obvious! "The positive impact" should reveal itself within the next few months says George Milling-Stanley of the World Gold Council. Perhaps he means that gold futures prices will rise. He sure didn't say so, directly, that is. Other producers may continue to hedge but will simplify their positions--in order to exploit rising prices, he suggests.
I have been looking hard for clues to higher gold prices.
With inflation in check, my favorite catalyst is taken out of the picture. The "hedging" factor has been digested and is now dead. My ideas of gold trading at successively higher levels through the end of the year does not look as attractive as it did three months ago: but I will hold on to it a while longer.
May copper has moved sideways between 78 and 81 cents this past week, unable to recover from the fall-off from 82.50 the week before. Price bars have risen and retraced with reluctance to make new highs or new lows. Stochastics are bullish in the short term only and bearish for the 14- and 20-day formulae; directional indicators are bearish and so are the momentum indicators; RSI is in the middle 30's. 9- and 18-day moving averages show wide divergence and a "sell" signal, lagging from the sharp drop of February 28th. Bearish, but support is working...time for a change. As for short-term strategies, that was a cycle turn higher signal Thursday; the low of the day 78.70 led to a 79.90 close and a quick fall-off to 79.15 the following day; very fast action is necessary to exploit cycle turns.
Martin B. Miller
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