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« Lost Principles | Main | Record Dollar Demand for Gold! »
Monday
Nov242008

COMEX: Has it got the gold?

USD Chart 24nov08

Rumour has it that COMEX does not have the gold to fulfil its obligations. The December contracts need to be honoured if this rumour is to be put to bed, however some analysts are of the opinion that COMEX will fail to deliver physical gold and gold will sky rocket. Well, December is not that far away so we will soon know!

If you have the time watch this clip of Max Keiser - Comex default in December, $2000 gold in a day! We don’t go too much on conspiracy theories but Max comes out with his own unique view of world affairs in this clip. There is also a clip which captures John Embrey on BNN television referring to the possibility of a default by COMEX, just click here.


From YouTube to the US Dollar and the chart above, note that the US Dollars upward progress is beginning to slow and also note the gap that has opened up between the dollar and its 200-day moving average. This can’t go forever and we expect to see the dollar return to its 200-day moving average before too long. As and when that happens there will be spikes in gold prices such as the one we witnessed on Friday when gold popped up to just above the $800/oz level. And on this occasion the gold producers joined in with the HUI, the gold bugs index, putting on 45 points, with some of the quality stocks gaining more than 20%. The dollar is walking a tightrope right now and any disintegration in its value will ignite the price of gold.

We are holding firm for now and also looking to deploy the remainder of our opportunity cash shortly. One way or another the final few weeks of this year could still be enlightening.

Have a good one.

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Reader Comments (17)

We will know if Max is correct in the next two weeks !

November 24, 2008 | Unregistered Commenterjen

Jep, its time...for a rant.
Just taken some strategic positions. Not all scarce metals, but that's not important here.

Goldbugs want a rally, and I feel this one is going trough the roof soon for a short term ultra-spike.
Just after I received notice of the goverment shouldering Citigroup for 350 billion dollars total...I knew there is much, much more at hand in the financial world than was obvious in today's numbers. Another round of banks follow in '09. Bailout or failure, it doesn't even matter anymore.

Also Obama's plan, covering some estimated 500 to 700 billion dollars in 2009 and beyond, aiming at delivering 2.5 million jobs in Jan. 2011 is showing crazy expenditures, although needed.

Inflation already is bound to skyrocket. Its going even freakier after these developments. America is going to tears. The dollar is going flatliner...those government fools.

Except for one play, I'm totally out of US stocks. No currency risk for me there. Canadian and Asian, thats my motto. Maybe I join Jim Rogers towards Singapore for the coming decade or so. At least those people save 35 percent of their income. And show a little logic now and then.

From 60 percent still on the sidelines, good investing.

November 24, 2008 | Unregistered Commenterde Graaf

NO DONT BUY WE ARE IN A DEFLATIONARY MODE ! LISTEN TO DEGRAAF! YOU YEAH YOU STOP BUYING THEM GOLD STOCKS ! STOOOOOOOOOOOOOOOOOOOOOOOOOOPPPPPPPPPPPPPPPPPPPPPPP!

November 24, 2008 | Unregistered Commenterjohn

RE: Obama...just saw this cartoon yesterday...very funny haha sad...if you know what I mean--

http://caseyresearch.com/dImage.php?i=1227373226-id.jpg

I'd start nibbling on the junior producers with cash flow NOW...like Metanor, SanGold, CGLD, maybe even Aurcana, Orsu gold. It's like buying cheap options b/c most of their shareprices are below their lowest options. Crazy cheap. AUY is the next level up I'd buy. It was still carrying a "reduced" target by mainstream analysts of 16.50 and is still around $5.00!!

Good luck all...
jt

November 24, 2008 | Unregistered Commenterjo ta

yup going TROUGH the roof soon! i couldnt agree more!

November 24, 2008 | Unregistered Commenterjohn

china and iran switch to gold! will the us investors?

November 24, 2008 | Unregistered Commenterjohn

I don't know who is dreaming in greater technicolour, me or the Comex-bears? If the Bunker Hunt silver-play was not enough of an example to teach us about the System, surely we must be able to see what's coming, after all the unthinkably huge bailouts of "friends of Treasury". All those indispensable to the national security/pride/economy, but most of all the banking system, the essential global financial structure, etc...
No matter how I slice it, the System will save itself by changing the definition of acceptable delivery of almost-failing futures contracts. Failing that, some gold must exist somewhere where the FBI can ride in and confiscate all the terrorist's finances. By definiton, anything or anyone who endangers the financial security of the US is deemed a terrorist.
Coincidentally, I wonder where Iraq' gold is today?
If I'm wrong, would somebody set me straight?

November 24, 2008 | Unregistered CommenterLester

One futures brokers has reported people buying silver contracts who indicate that they plan to take physical delivery. As I recall a silver contract is 5000 oz and physical delivery is in 1000 oz bars.

At sell time, turning in silver bars would incur assay and other cost.

November 24, 2008 | Unregistered CommenterBC

> System will save itself by changing the definition of acceptable delivery

Perhaps or even redo a FDR requirement that people turn in their gold at an official rate. Obama is looking more and more like a New Deal Democrat - perhaps another FRD.

> some gold must exist somewhere where the FBI can ride in and confiscate all the terrorist’s finances

Get real. The need for stealth and transporting bars of gold, do not go hand in hand. Accounts in "friendly" countries would be much more usable. Need cash? Just pull out your handy ATM card. When Mohammed bought his ticket on 9/11 did he just break off a part from a bar of gold? No he handed over a credit card or ATM card.

> I wonder where Iraq’ gold is today?

Iraq bankers report that Husain's sons backed up a large truck to the National bank a "requested" all gold and foreign currency. The request was honored. You can bet that this would have played out all over Iraq in advance of the US. Either those holding it or men with guns moved it to safe havens. While some amounts of pocket money would have been hidden around the country for Saddam and sons to use as petty cash, any large sums would have been removed.

November 24, 2008 | Unregistered CommenterBC

Lester's makes an interesting comment. The System saves itself...

Speculation/conspiracy mode;
There are reports that some savvy individual has been buying almost all gold coins (and selling through secondary parties) for a hedge against his/her/its long gold position.
Now we hear great stories about COMEX futures on the brink of default.
If they don't default, an entity or entities is/are shorting gold to hold its price artificially low in times when inflation prospects are supposed to rocket gold's pricing. Unless there is another Bunker Hunt cornering the market, you can ask yourself, which entity could actually be doing such a play?
I can only think of one. The US Government, although highly unlikely. We know their crooks anyway you see it...conspirace with me;
- they have the gold/silver to back the contracts,
- gold spot price remains pressurized this way, keeping dollars in places where they are needed more according to the government (treasury bonds, stocks, corporate bonds etc.)

If COMEX would default, long-contracts will probably be settled in cash at spot prices. Another reason to push the price down. Defaults cost less.

Eventually this all supports only the dollar, one could argue. Can anyone comment/correct me on this one, any other speculative thoughts?

November 24, 2008 | Unregistered Commenterde Graaf

de Graaf, we have spoken about Fortescue, the Australian iron ore startup. This looks positive for industrial metals (I include silver as industrial) from: http://articles.moneycentral.msn.com/Investing/JubaksJournal/the-markets-crystal-ball-is-broken.aspx?page=1

"Fortescue Metals has decided to fight a tumbling stock price with information. The company released far more details than usual as part of its September quarterly report. The company's loss for the quarter came to $55 million, excluding the effects of currency fluctuations on its long-term debt and a revaluation of a subordinated note held by Leucadia National.

Fortescue reported that it has used recent weakness in the financial markets to buy back debt with a face value of $65 million for just $45 million. The company also announced that it had amended a contract with a top-five steel mill in China to increase its deliveries to 5.5 million metric tons from 2 million metric tons next year.

Since Fortescue had sold out its projected production for next year, the company's ability to increase sales to that customer implies that some other customer had cut its order for 2009. The amended contract, Fortescue added, was priced in line with the annual benchmark price for iron ore. The company, in fact, said it has not sold any ore at spot market prices, which are about 45% below the benchmark price set in annual negotiations between iron ore miners and the Chinese and Japanese steel industries.

November 25, 2008 | Unregistered CommenterBC

Thanks for the informing link BC.
Jim Jubak points out that their is clear divergence regarding the (monetary) inflation - deflation sentiment among investors. I agree totally with Jubak. A must read.

Back to the point; Fortesque Metals Group.
75+ percent upward momentum BC! Added liquidity within a week. How's your DCA doing?

Reasonable results for FML in a grim outlook. Unfortunately a A$55 million loss for the 3rd quarter. Valin Group joint venture looks promising. Addes sales for '09. All promising regarding the market conditions.
What I find very interesting is the aborted takeover of Rio Tinto by BHP Billiton. I don't yet know why it was aborted, but I see an opportunity here...

I hope you see it too ;)

November 25, 2008 | Unregistered Commenterde Graaf

I made a mistake...yeah I'm human too.
The message above shows Ticker symbol FML and should be FMG, together with the quarter data (don't ask) are changed to full year results some time now :). Unfortunately, a loss of 2.5 billion for FY'08. See financials on website.

BC, have you read bloomberg today? see below.
Risk of FMG is growing by the day. But the opportunity I mentioned could be a takeover bid from BHP Billiton after they aborted the bid for Rio Tinto. BHP got a little scared looking at the market outlook and a new load of debt-arrangements.
A producing (Mid-West) Ozzie like FMG would also deliver value for BHP at lower cost. Now including a new contract with China with the Valin Group joint venture. China is looking for continued growth in the future, so they could start a bidding war with BHP somewhere into 2009. They don't want to be paying top price from (eventually) a single dominant supplier of iron ore.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a3gOdefDYwBg&refer=home

November 25, 2008 | Unregistered Commenterde Graaf

de Graff, I am not so much dollar cost averaging (DCA) as I am buying back in the stock. It is the only base metal I currently hold. I have held it and others in the past. I hold some gold and silver options that are way down. I am currently looking at base metals and energy for future money (CHK, DVN, HBMFF, HL, PBR, TC, UPL, YARIY, ZINC). I basically picked up FMG because it was on my want-to-own list and was on sale.

I found your Bloomberg suggestion good reading. I also see opportunity, not sure if FMG will become a big player or be picked up by one of them.

December 2, 2008 | Unregistered CommenterBC

Today I closed out my Fortesque (FMG or FSUMF). If this continues to be a trading range between 1.25 and 1.75, I may well get back in.

de Graff, any thoughts on Fortesque?

February 9, 2009 | Unregistered CommenterBC

At the moment, I'm not into the exact details regarding Fortesque. My investment analyses must come second to my career search...unfortunately.

But, you made a good deal the first time!!! Congratulations. Doubled your money.

I think (finger in the air) that this trading range you set, is a good buying opp. I'll be back soon after I found a new career.

Priorities...damn priorities :D

February 9, 2009 | Unregistered Commenterde Graaf

De Graff,

We are really sorry to hear about your plight and we will keep our fingers crossed that you land a good, interesting and well paid position very soon. Do let us know how you get on, we have other readers who are in the same boat so your ideas mixed with theirs might pull up an opportunity somewhere down the track.

Sincere wishes from the all team here.

February 10, 2009 | Unregistered CommenterGold Prices

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