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THE REAPER
P.O. Box 84901, Phoenix, Arizona
(September 25, 1997) METALS: Bullish power is building in the precious metals. Demand for gold in Asia is extremely strong. More concern about central banks selling of gold, about 25% of the world's gold supply, is being discounted. A rumor had again surfaced that European central banks would be selling 200 tons of gold. It had less effect on the market. A hike in the gold lease rate, a sign that central banks had stopped their leasing programs and were considering selling gold outright, had a negligible effect also. When bearish news cannot drive a market down, it often means it's on bottom. (The lease rate was raised from 2% to 4%.) Platinum and palladium prices are strengthening on demand for automotive catalytic converters. There will also be platinum eagle coins minted by the U.S. Mint. Even copper could get a boost from IBM's announcement that it will use copper instead of aluminum in making semi-conductors. London copper inventories are the highest in 15 months, though. Asian demand for copper has dropped as well. Silvers demand is increasing in Europe as well as general industrial demand. December gold closing strongly above $330-$334, December silver closing strongly above $4.80-$5.00 is quite bullish.
RECOMMENDATION–Investors who purchased December 1997 gold and silver call options–hold. Investors who are purchasing core holding of gold and silver coins and mining stocks on weakness–hold. Consider adding to positions. Futures investors profitably long December gold use $319.70 open protective stops, adding to long positions on a strong close above $330 and $334. Futures investors profitably long December silver use $4.57 and $4.64 open protective stops, adding to long positions on a strong close above $4.80 and above $5.00. Futures investors profitably long October platinum take profits.
R. E. McMaster, Jr.
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