THE REAPER

P.O. Box 84901, Phoenix, Arizona

(November 25, 1997) METALS: PRECIOUS METALS–Presently, nobody wants to own gold. December gold again fell to its $300 low on November 25. Silver gave up the ghost that day as well. Asians, who have been the biggest buyers of gold, began selling gold during their currency crisis. If the Asians are sold out, which is likely soon, and the central bank sales are discounted by the market, who is left to sell? Markets bottom when there are no more sellers. My turning point work, in effect now or possibly early December, has the bottoming process carrying into first quarter 1998. Silver was clearly the strongest member of the complex, with COMEX silver inventories having fallen 35% from the end of May to 129.62 million ounces. India has been absorbing all of the above ground silver. Silver stocks are the lowest in 12 years. December silver needs to close strongly above $5.50 to accelerate the uptrend. Expect support at $4.80-5.00. Regarding gold, central banks seem to be jawboning their news releases, timing them precisely to keep gold prices down. There are now rumors that a European central bank may eliminate gold completely from its reserve holdings. The Bundesbank has been lending gold since last year to increase its return on its reserves. More than 60 central banks now lease out gold. That pressures gold. Gold demand fell 53% in Southeast Asia during third quarter compared to last year. Widespread selling of jewelry has occurred in Asia. Southeast Asian demand for gold could be off 50100 tonnes from the 455.1 tonne level at the end of 1996. Nevertheless, world-wide gold demand increased 6% during the third quarter. Gold mines are beginning to close because it is unprofitable to mine at these prices. December gold must close above $320 to return the intermediate trend to neutral, above $340 to turn the intermediate trend up. In copper, falling Asian demand has weakened prices. Copper recently hit a 13-month low. Platinum prices have weakened somewhat with the global economic decline. Palladium prices are holding rather firm. There is expected to be a 40% decline in platinum and palladium supplies out of Russia this year.

RECOMMENDATION–Investors who are purchasing core holdings of gold and silver coins and mining stocks on weakness–hold. Futures investor's may purchase February gold on a strong close above $310 with $300 open protective stops, holding for a test of $340. Futures investors profitably long December silver, take partial profits, preferably on strength, and use $4.89 open protective stops.

R.E. McMaster, Jr.

Consensus National Futures and Financial On Line Index

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