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[DiscoverGold]

If It's Yellow..It Must be Gold By Jon Nadler - 30 Jan 2009 at 10:40 AM GMT-05:00


Global investors were out in force overnight, seeking anything that had either little risk, or no counterparty liability. The search came up practically empty-handed, save for a few tonnes of gold, silver and platinum, which were promptly stashed into various vaults around the world. The GLD ETFs tonnage was last seen closing in on the 845 tonne figure.

Gold tried once again for the $920-$925 mark and although it stalled under $930 per ounce, a six month high, the metal shows signs that dip buyers are probably intent on trying for the critical $940-$952 zone before reconsidering the latest surge. Let's see what may have motivated the latest safe-haven quest for bullion - not a difficult task, these days.

Finding a positive headline in market and economic news overnight was confined to keyword searches that involve only the word "gold" and "precious metals." In part, that explains the fourth assault on the $920 mark in gold prices, this time, a successful one. Highs of $928.20 were recorded in bullion as fresh records were set in euro terms and as market participants awaited grim news on the U.S. economic front. The world's largest economy is expected to show a rate of shrinkage of 5.5% during the last quarter. That kind of contraction has not been seen since 1982 in the U.S. On the other hand, Japan's factory output fell 9.6%, the largest fall in its record books.

Today's roundup of all things falling includes an assortment that reads something like this: European inflation dropping to the lowest level since the creation of the common currency, Honda's profits plunging by 90%, Toyota and Porsche recording larger and larger declines in revenue, freefalls in same at NEC, Hitachi, Fujitsu, Dexia, Banco Popular and Exxon Mobil, the Nikkei slumping 250 points and just to round things out, former Illinois Governor Rod Blagojevich fell from his Governorship, while the world's glacier's shrank for the 18th consecutive year. Oh, there was one thing that rose last year: sales of alcoholic beverages. Go figure.

New York spot metals dealings opened as follows: gold - up $12.70 at $921 per ounce, silver up 13 cents at $12.48, platinum up $10 at $983and palladium down (?) $1 at $192 per ounce. What else was up? The U.S. dollar, at 86 on the index. Back to divergence as the week draws to a close. U.S. GDP numbers loom this morning and players are huddled in deep trenches, awaiting the inevitable fallout. Gold's next mission is to try to close out the week at or above a half-year high.

Stock index futures do not bode well for the Dow's market day. Something else that does not look good for Wall Streeters: bonuses are an endangered species. President Obama blasted 'shameful' payouts to execs, while AG Andrew Cuomo is said to seek the return of $4 billion in such money from Merrill.

GDP figures showed a 3.8% rate of contraction, but if inventory buildups are excluded, the figure rises to 5.1% - fairly close to analyst estimates. In any case, economic spin doctors will be very busy today, with some cheering the 'not as bad as expected' number, while others point out the harsh reality of a deep contraction 'no matter how you slice the numbers.' The dollar appeared to take the news as a good excuse to make further headway on the index, oil values floated higher, but stock futures showed little in the way of improvement on the news.

While Russian gold output soared 13.3 last year, the term 'open pit" mining has taken on a whole new, quite fragrant and rhyming meaning as Japan found gold where one would...least expect it:

"A sewage treatment facility in central Japan has recorded a higher gold yield from sludge than can be found at some of the world's best mines. An official in Nagano prefecture, northwest of Tokyo, said the high percentage of gold found at the Suwa facility was probably due to the large number of precision equipment manufacturers in the vicinity that use the yellow metal. The facility recently recorded finding 1,890 grammes of gold per tonne of ash from incinerated sludge.

That is a far higher gold content than Japan's Hishikari Mine, one of the world's top gold mines, owned by Sumitomo Metal Mining Co Ltd, which contains 20-40 grammes of the precious metal per tonne of ore. The prefecture is so far due to receive 5 million yen ($55,810) for the gold, minus expenses.

It expects to earn about 15 million yen for the fiscal year to the end of March from the gold it has retrieved from the ashes of incinerated sludge.

"How much we actually receive will depend on gold prices at the time," the official said. Some gold industry officials expect prices this year to top the all-time high above $1,030 per ounce set in 2008, on buying by investors worried about the deepening economic downturn."

At the rate things are going, the name and location of that plant might have to be kept secret, lest midnight expeditions to remove sludge get underway soon. At least the thieves will be easy to track down....

Jon Nadler

Senior Analyst

Kitco Bullion Dealers Montreal

Direct: 1 [phone] ext. 1360

U.S. and Canada Toll Free: 1 [phone]

www.kitco.com and www.kitco.cn

[e-mail]

George.

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