Doug Casey's 30 years experience in the resource business give him a rare and deep knowledge of this sector. More importantly, however, is that he is the most instinctive contrarian I have ever met and that, in my opinion, is the key to his remarkable success as a speculator - Rick Rule, Global Resources
Doug Hornig
Doug joined the Casey team as a freelance writer on the former publication What We Now Know, a perfe... More
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The Daily Resource 5/2/06:
Good morning. . .It was a lackluster day for gold on Monday after the fireworks of Friday, as traders caught their collective breaths. Gold noodled around between $655 and $660 for the whole day, but in the end clung to its modest overnight gains, closing at $657.60/oz., up $6. Overnight, gold never fell below $654 in the far East and, as we head for today’s New York open, it is selling for $660.50 in London.
Platinum built on its Friday gains in another strong showing, adding $14 to $1160/oz. Overnight, platinum has drifted slightly lower and is currently trading at $1157.
Silver continued to lead the market, as it punched briefly through the $14 mark before settling for a gain of 41 cents on the day, at $13.92/oz. In the past two days’ trading, silver has gained back 11.33% of the value lost in last week’s crash. Overnight, silver fell as low as $13.64 in early London trading but has since pushed higher and, as we approach today’s open, is selling for $13.98. (Click here for charts)
With stronger than expected numbers coming out yesterday in personal income and spending, and construction spending, the Hightower Report offered the opinion that “economic growth and economic sentiment still isn't being derailed by consistently rising commodity prices. Some might suggest that the metals got the best of both worlds Monday, as stronger economic numbers came in conjunction with a weaker US Dollar. Certainly the Iranian dialogue and firmer energy prices provided the gold market with the majority of its buying interest.”
And it added, with regard to silver, that “With the silver market seeing a favorable lift from both the industrial and precious metals tilt to start the week out, it is clear that a number of bullish themes are operating. In fact, for the market to manage the gains in the face of partial closing in Europe due to the May Day holiday, suggests that activity is set to remain very active.”
Perennial gold bug James Turk is pretty optimistic, too. “I’m already on record, he writes, “as stating: ‘I’ve been saying since December that I do not believe gold will go back below $500—ever.’ Given gold's continued strength, we now have to seriously consider the probability that gold will never go back below $600—ever.
“The flight from fiat currency around the globe is accelerating, so the safety and security offered by gold remain compelling. In fact, more and more people are recognizing that they are better off holding gold instead of fiat currency, and the buying coming from gold's new converts is helping to propel gold higher.”
And Dow Theory Letters’ Richard Russell is convinced the party has just begun, especially for investors in mining stocks. He writes: “Still no gold or silver stocks on the top 25 most active stock list. From what I see, the U.S. public isn't in gold at all. Most have never even seen a gold coin...Gold now rising against virtually ALL foreign paper junk currencies. Sooner or later we'll see a world rush to buy gold.”
You mean it’s not even happening yet? Wonder what the real thing will look like. . .
In the currency market yesterday, the dollar stabilized somewhat against the euro. In late trading Monday, the euro was changing hands at $1.2568, as opposed to $1.2631 on Friday.
The buck got some support from some unexpectedly positive economic reports. Factory activity increased by 2% in March, vs. an expectation that it would be flat. Construction outlays were more than double those projected. And personal incomes increased by 0.8%, the biggest gain since September.
Inflation was also up, with the core figure rising 0.3%, the largest jump since October.
“Today's inflation figures should not materially impact interest-rate expectations, with the market leaning towards 'one and done,' “ said Michael Woolfolk, senior currency strategist at the Bank of New York.
Dollar bulls were also buoyed by a story out of CNBC, wherein anchor Maria Bartiromo said Fed chief Ben Bernanke told her that the media and the markets had misinterpreted his words last week as a signal that the central bank would pause after one more rate hike.
Speaking on the air, Bartiromo said she spoke to Bernanke at a Washington dinner Saturday, where he reportedly told her his remarks were simply an attempt to create flexibility for the Fed. He reportedly said that data would continue to determine rate moves. (Click here for currency prices)
In the energy market, oil prices continued the climb begun on Friday after four straight days of declines. Crude for June delivery shot up $1.82 to $73.70/barrel on the New York Mercantile Exchange, bringing the two-day rise to over 4%. May unleaded also rose steeply, closing at $2.1466/gallon, up 5.74 cents.
Most of the price climb is due to “Iran jitters with the U.S. still pushing toward U.N. sanctions,” said James Williams, an economist at WTRG Economics. “When you add that on top of the loss of a fifth of Nigerian production, Bolivia's move toward the Venezuelan model of total control over oil produced by foreign companies and the summer driving season staring us in the face, it is easier for prices to go up than down,” he said.
Williams referred to a story, reported by BBC News on Monday, that Bolivian President Evo Morales has ordered foreign energy firms to hand over all natural-gas and oil sales to a state-owned company. The companies have six months to renegotiate their contracts or leave the country, Morales said, according to the report.
Bolivia appears to be taking its cues from Venezuela. A recent report from the Wall Street Journal said Venezuelan President Hugo Chavez was planning more moves to curb the activities of foreign oil companies in his country.
Trading was light in the base metals on Monday, with the LME closed for holiday. Copper was up 4 1/3 cents, at $3.306/lb. Nickel was up over 11 cents, at $8.80/lb. Zinc was up 5 cents, at $1.516/lb. Aluminum was down less than a half-cent, at $1.245/lb., while lead was essentially unchanged, at $0.5315/lb.
Analysts see no end to copper’s uptrend. Eleven of 15 traders, analysts and investors polled by Bloomberg News on April 27 and April 28 said copper will advance for an eighth consecutive week.
That’s what’s happening . . . Until tomorrow!
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