Thoughts on Markets

Tuesday, May 25, 2010

Option Expirey Day - Volatile Day - Watch the Metals

Beware that today is expiry for options. Thus, we do not know what to expect of the precious metals. We are likely to see intervention to cap at 1200 for gold. The intervention in silver seems more evident at this time.


From Ed Steer's Gold and Silver Daily Report: "Today is option expiry in gold and silver for the June contract... and I'm sure that the bullion banks in New York... led by JPMorgan... will fight like hell to make sure that the huge number of $1,200 gold call options finish out of the money by the end of Comex trading tomorrow. It should be quite a battle... and as I scan the trading activity in Hong Kong right now... I can see that the fight has already begun."

This could provide some buying opportunities today, but one will have to be very cautious about any buying. I am still looking to get more Fortuna around 1.70. There seems to be no real rush to buy.

From James Turk on fgmr.com:

Silver is Inching Closer to an Upside Breakout

May 22, 2010 – Silver is inching closer to its long-awaited upside breakout. The huge accumulation pattern that silver has been building over the past three years is almost complete, as can be seen on the following chart. Check out the article and graph HERE.

From FT.com:

The only currency that can’t be printed on a whim

By Merryn Somerset Webb

Published: May 21 2010 18:27 | Last updated: May 21 2010 18:27

You probably think gold is in a bubble. After all, it hit new highs in dollars, pounds and euros this week – and has pretty much quintupled since its lows of 2001.

What’s more, everyone from Germany to China is still nuts for it. Earlier in the week, this newspaper reported that the Germans have been snapping up coins and gold bars faster than they did even in the aftermath of the Lehman Brothers’ collapse. In the UAE, you can buy bars direct from a vending machine. At Harrods, you can pick up a variety of gold coins over the counter. And – as the gold bears are keen to point out – you can see ads for the purchase of gold all over TV. The article is HERE.

From MineWeb.com:

Polarisation of Canberra and mining sector continues on mining super tax

Heated comment from both sides over the proposed Australian mining ‘super tax' suggests that some compromises may lie ahead despite seeming increased polarization on both sides.

Author: Ross Louthean
Posted: Tuesday , 25 May 2010

PERTH -

The war of words and differing views on the Australian Federal Government's proposal for a 40% resource super profit tax (RSPT) continues. The Labor Government is taking the risky course of inciting the politics of envy while the unified miners and explorers now resorting to warning their shareholders about serious outcomes.

While there is no sign of the Rudd Labor Government giving ground on its intent to impose a 40% super tax on miners, there are now political and business commentators in Australia suggesting a genuine door for negotiations may well be ajar. Read it HERE.

As usual politicians continue to seek new taxes to cover their excessive spending. The thought of reducing spending never crosses their mind. This is a good way to punish the mining industry as our illustrious government has done. The result here was to run the mining industry out of the U.S.

From SeekingAlpha.com:

How Safe Are U.S. Treasuries?

Last week saw another mini-flight to safety. The Euro was pushed down to the lowest point in about 4 years (before recovering), US Treasuries and other Bonds saw yet again an influx of scared money fleeing the global financial markets in droves. But within this trend towards the illusive safety, many investors forget that US Treasuries and similar AAA rated sovereign debt instruments are not without risk. I am not referring to pure credit risk but also to the inherent risk from the mechanics of Bond prices. Although this is very basic, here’s a graphic reminder of the relationship of Bond prices to changes in interest rates. Read it HERE.

The safety comes from liquidity of the Treasuries and is rested upon the "sound" foundation of the full faith and credit of a bankrupt nation.

From SeekingAlpha.com:

Trading in Precious Metal ETFs Hits All-Time High

The markets are still feeling the fear of a contagion effect from Europe’s debt problems. It has sent gold prices to new records and trading in exchange traded commodities (ETCs) to all-time highs.

It’s a full-on trading frenzy. Market fears have pushed gold to record prices this month while ETF Securities‘ popular platinum and palladium funds saw heavy outflows. ETF Securities now says that trading volumes in ETCs are up more than 90% in the last month alone and that 70% of the surge is because precious metals trading. Read it HERE.

From TheStreet.com:

Gold Prices Volatile; Tug-of-War Persists

NEW YORK (The Street ) -- Gold prices were volatile Tuesday as prices were caught in a tug-of-war between profit-takers needing cash and bargain hunters buying gold as a safe haven asset. Read it HERE.

Miners from Scottrade.com:

Currencies from Kitco.com:

Some early prices today: BYDDF 7.18; FVITF 1.908; TBT 38.20; TLT 99.08; DOW off 177.90 at 9884.5 (Wow! That is below the psychological 10,000. Where from here, but down more. Expect some intervention to push it back up near the close. The PPT is likely to be active to preserve the sham of a sound market.); Gold up 6.50 to 1198.80, and Silver off 0.20 to 17.69.

Our God is in control and laughs at the folly of men. He must be hysterical about our White House and Congress and the Australian politicians, as well. He is working all things for His people's eventual good. We rest soundly in this without worry. After all, He loves us with a perfect love, because of the work of His Only Begotten Son.

Best to each, Doug


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