The Boyz are Back - Rest in the Lord for Peace and Joy

Once again we are treated to a flagrant display of market intervention by the boyz. Shortly after the London open, they played their game and hammered both gold and silver. Then they hammered again as both fought back to rise.


Both silver and gold are down after the three day holiday after having a banner week. Gold is currently 647.60 and silver 14.49. Both are on down ticks. The miners are off some today, but still trading near their recent highs. DROOY 6.74; HL 3.24; HMY 11.39; SLW 9.19, AND VGZ 2.56. We may have to adjust our buying range a bit higher.

From MineWeb.com:

South African gold output in downward spiral

No longer the world's leading gold producer, South Africa's output of the yellow metal continues to fall as mines get older and grades decline.

Author: Lawrence Williams
Posted: Tuesday , 26 May 2009

LONDON -

For most of the last century and the first few years of this one, South Africa was by far the world's largest gold producer, but production has been dwindling steadily since the 1970s as some of the biggest mines have aged, old mines have closed and grades are dipping. This process shows no evidence of slowing - indeed it may be accelerating, compounded by electrical infrastructure problems across the country and much stricter investigations into mine accidents and fatalities which has led to mines being closed for several days while such adverse events are examined by the authorities.

Last year, South Africa fell from being the world's largest producer to number three - behind China and the U.S.A. - but some thought it might recover its position given all the mines were shut down due to power shortages for a few days during the first quarter - and electricity has effectively been rationed to around 90% since. Read it HERE.

Not good news for South Africa. China is the new winner in the race for top producer.

From the Daily Pfennig: "The U.S. Treasury will auction $162 Billion in securities, with maturities ranging from three months to seven years. $162 Billion Folks! In one week! This supply has got to be choking the foreigners we need to buy it so that our deficit can be financed! When will they do the Roberto Duran, "no mas"? Let's hope it doesn't come to that, but quite frankly I wouldn't blame the buyers if they did back away... Too much of something isn't good..."

Remember the Economic principle of Supply and Demand. When the supply is great, value is usually less. In this case, it would appear to be less attractive to buyers which would lower demand. Of course, the Fed is committed to buying much of the left over with more debt.

From MineWeb.com:

Commodities a buy

The Bank Credit Analyst has upgraded commodities to overweight, with energy at the top of the buy list.

Author: Barry Sergeant
Posted: Monday , 25 May 2009

JOHANNESBURG -

The general pricing level of resources stocks listed around the world has now moved up to the best levels seen since October 2008, as investors and other increasingly search for value, as the global economic crisis increasingly recedes on tickets for speeding, and for speeding against the traffic flow.

For one, strategists at the Bank Credit Analyst have upgraded commodities to overweight, with energy at the top of the buy list. Among the key themes, commodities should benefit from both a weaker dollar, "and a shift in investor portfolio preference toward real assets as a hedge against inflation". The upturn in BCA Research's global leading economic indicators is seen as "another positive sign for the commodity complex".

While supply-demand fundamentals remain idiosyncratic for each commodity, in singling out energy as "top" of the buy list, BCA Research argues that "the rally in oil from the low $30s is technically impressive against the weak global demand backdrop and elevated inventories". Oil prices have touched $62/barrel recently "despite lofty US oil inventories (notwithstanding recent inventory declines) and the fact that Americans are driving much less than last year".

The higher price of oil is seen as reflecting in part the upturn in Chinese oil imports and car sales at a time when oil production is lagging. Russia, states BCA Research, "continues to have difficulty boosting output and oil production has been flat for most OPEC countries. Saudi Arabia has cut production sharply". Read it HERE:

When the Bank Credit Analysts speak, we should listen.

From DailyReckoning.com:

Mogambo wrote,"I admit that I did not read the article, but as far as I know, there are only two good reasons to own gold; to preserve wealth when prices are stable, and to make a lot of fiat wealth when your government acts so stupid as to create, or allow to be created, excess money and credit that eventually destroys the currency, especially when undertaken so as to enlarge the size of government, like now, which makes the problem of inflation worse because those more government weenies have a bigger incentive to save their own phony-baloney jobs, but can only make things worse."

Mogambo Guru speaks with straight tongue.

From MondayMorning.com:

As GM Cruises Toward Government Deadline, U.S. Automakers Must Learn to Deal With a Permanently Smaller Market

By William Patalon III
Executive Editor
Money Morning/The Money Map Report

General Motors Corp. (NYSE: GM) is closing in quickly on its June 1 deadline to finish overhauling its operations, or opt for Chapter 11 bankruptcy. Because that deadline is actually one week from yesterday (Monday), analysts and investors will be watching GM closely this week.

No matter which path GM chooses – conventional restructuring or bankruptcy – the U.S. Big Three of GM, Ford Motor Co. (NYSE: F) and Chrysler LLC will have to adjust to the U.S. auto market's post-financial-crisis "new reality." Automakers will sell only 10 million cars and trucks in the U.S. market this year, the worst in at least 30 decades – and roughly 38% less than the 16 million vehicles that were... You can read the full article HERE.

Even with bail outs and or bankruptcy, they are not out of the woods for the future.

The markets remain choppy and highly volatile. We must use extra caution in any purchases and be quick to sell general market stocks which remain as we seem to be nearing the end of the bear rally. I am out of the general market, as I have even sold the DIA options traded during the last four weeks. The Mogambo hit the nail on the head of the reasons for holding gold.

It is not that we put our trust in gold, but rationally see it as a hedge against the proliferation of unbacked paper currencies of the world. From a biblical view, gold and silver are true money and have been used for many centuries. God even mentioned that the gold was good early in the Book of Genesis. God's way is always best.

We must always study the word of God and follow His way. He made each of us, and knows us in great detail. Thus, He, alone, knows the paths we should follow. He is sovereign in all things.

Rest in the Lord for the peace that passes all understanding. Be obedient to Him and work for His glory and the expansion of His kingdom on earth. There is no other way than through Jesus Christ, our Savior and Lord.

Best to each, Doug