Zeev's Turnips Patch-No Politics (ZEEV)

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*** The Afternoon Gold Report... ***


by Jon Warner
October 1, 2003 (usagold.com)

NEW YORK:

New York spot gold settled lower at $383.70 an ounce, down $1.00 an ounce from yesterday’s close. Dismay over weak U.S. consumer sentiment and Midwest manufacturing reports lifted gold Tuesday, but the safe-haven metal failed to retest Thursday's 7-year highs. Now the market is waiting for Friday's September U.S. unemployment data to set direction. "Until then we'll be consolidating in the low to mid $380s," said a COMEX broker. "We failed to break to the downside that started off on Thursday and Friday last week and that failure has given us a bit of a recovery." Traders now are fixated on the equities markets as all the other markets are rather boring today.

``It used to be the dollar was the safe haven and now the dollar has fallen off its throne, and gold is the safe haven,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``It is investment and speculative demand that is pushing gold higher, based on the dollar declining,'' he added. ``I think the economy is still susceptible to a downturn,'' said Greg Orrell, president of Orrell Capital Management Inc. in Livermore, California, which manages $100 million in gold-mining stocks. ``I believe the spending has been coming from the military side, and I don't know if that's going to lead to a sustained recovery.'' Orrell, who expects gold to trade as high as $475 an ounce over the next 12 months, said he has increased the fund's holdings in mining companies to 5 percent from 1 percent in the past six months. Goldman Sachs analyst Alberto Arias raised his 12 month forecast for gold's trading range to $350 to $410 per ounce from $330 to $370, as prices are expected to be supported by improved demand resulting from dollar weakness, higher than anticipated producer de-hedging, future demand from new trading vehicles and market deregulation in China. December gold futures were down 50 cents at $385.60 in early trading on Wednesday. Arias noted that Goldman's economics research team projects the dollar to decline vs. the euro to $1.24 over the next six months, or 6.3 percent from current levels.

Comment:

Not much happened today while U.S. economic data was not all that good and the U.S. dollar was essentially flat to slightly higher there was nothing to get gold much to move on. Gold ended down a dollar in New York trade as investor interest was diverted by a surging equities market as fund managers put cash back to work after yesterday’s end of quarter “window dressing”. The Hong Kong market was closed for a holiday but will reopen tonight while Mainland China will remain closed for the rest of the week. The precious metals market will keep an eye on tomorrow’s unemployment data for September, which is not expected to be very good but a lot of tomorrow’s data also depends on how much spin and data massage can be passed off on the market and whether it is believed. There simply isn’t anything happening to grab investor interest one way or the other except for the recovery in the equities markets from recent stock market plunges as Fund managers reallocate funds on the first day of the new quarter. Meanwhile gold is holding firm in a narrow range. Yet the United States is still headed for all time current account and record budget deficits this year, Washington's “strong dollar policy” is dead and buried regardless of meaningless mumblings by U.S. Treasury Secretary John Snow, the world finds itself locked in a “competitive currency devaluation” fight, and the economic prospects for world appear set for collapse as global consumers reduce spending – all good reasons for holding precious metals.

The U.S. dollar is under assault from every direction. Even the Japanese have abandoned their policy of “stealth intervention” in a desperate move by not only publicly announcing that they were buying the dollar and selling the Yen, they also entered the currency market not once but twice, tossing another $2 billion away to prop up the dollar yesterday even with help from the Fed. Obviously the fear factor has risen substantially in recent days as the Yen strengthened on a slight improvement on Japanese exports. A stronger Yen will drive another nail in the Japanese economic coffin. Throwing away cash in order to prop up foreign currencies will not likely help out long term when other Asian nations can do the same job as efficiently and cheaper making inroads on Japanese manufacturing. China has taken away a lot of Japanese manufacturing over the last few years. It’s no wonder that Japanese retail gold buying is reported to be strong. As Chinese workers gain in wealth and the new policy of liberalization of the precious metals market in China, demand for physical precious metals (especially Gold and Platinum) will continue to surge. It has been reported that Chinese retail outlets for physical gold have had a tough time keeping the metal in stock. Further liberalization will only serve to increase demand for physical precious metals as retail outlets expand throughout this nation of 1.3 billion people. China is not alone, other Asian countries have experienced rising demand for physical precious metals as well as a surge in demand for precious metals (and precious gems for that matter) in the turbulent Middle East.

-Jon H. Warner-

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