Monday, May 18, 2009
Where Does Gold Go Next?
It is 6:34 AM and boy, did we have a fun weekend in Eureka! The annual Show What Ya Brung car show had about twice the number of entrants as last year and there were some mean machines lined up on HWY 50. The ole Colonel saw the new GM Camaro for the first time and it is a beauty! Hopefully, the two-year waiting list will help that ailing automotive icon get on her feet. My favorites are still the old muscle cars of the 1960s and early 1970s and there were aplenty; 409s, 442s, 454s, 427s...Yee-ha! The Beach Boys singing "409" on a sunny day across a shutdown Federal Highway full of heavy metal is something to tell the grand kids.
OK, time to get back to work. Grab a cup and let's talk gold.
This report has covered a lot of aspects of gold price in the last several months (see archives in the right column). I thought it timely to carry this conversation forward because so much is happening on the international stage that could give that yeller metal a pop or drop in the coming months. The recent election results in India are a good example:
NEW DELHI -- A surprisingly strong showing by India's ruling Congress party gives a decisive mandate to Prime Minister Manmohan Singh and raises hopes that an important engine of the developing world will continue on a path of economic reforms. (WSJ, 5/18/09)
The Indian stock market jumped 17% this morning on that news until the deluge of buy orders triggered market circuit-breakers. How might that influence gold? On the demand side, India is the world's biggest consumer of gold, primarily for gold jewelry. In the last several months the Indian demand has dropped off sharply. Watch for irrational exuberance to reverse this trend.
So did gold go up this morning? Nope, it's down $10 last time I checked and that brings us to another factor in gold prices: safe haven for investors. The rise in the Indian markets has lifted everyone else including our own DOW and S&P. There is a nice relief rally going on this morning and money is flowing away from safe havens like gold to equity markets. Remember that investors are now the sixth largest holders of gold with over 1,100 metric tons socked away in such things as the exchange traded fund, GLD. OK, who wins this race? More to come buckaroos and you can bet the ole Colonel will be tracking this one on a daily basis. I'd like to close this week with a gold price prediction; stay tuned.
Enough talk, let's walk the walk:
Oil is up $1.42 at $57.76 (July contract). Gold is down $10.1 to $921.2 (June contract); Silver is stays below $14 at $13.710; Copper is up 0.0095 to $2.0270 (July contract); Molybdenum holds at $10.25.
The DOW is up 130 points to 8398.94; the S&P 500, up 12.22 points to 895.10. The miners are mixed today:
Barrick (ABX) $32.65 down 2.51%
Newmont (NEM) $43.78 down 1.41%
General Moly (Eureka Moly, LLC) (GMO) $1.57 up 3.29%
Freeport McMoran (FCX) $46.99 up 4.03% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are up and away on the Indian news (a "tell" for General Moly):
Nucor (NUE) $39.85 up 2.44% - domestic steel manufacturing
ArcelorMittal (MT) $26.86 up 4.39% - global steel producer
POSCO (PKX) $82.24 up 1.91%- South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is up 1.56%