Saturday, September 09, 2006

THE GOLD AND SILVER REVIEW, September 10th - 187th Edition

September 9th, 2006
187th Edition
Chris G. Waltzek

*$609 Gold - $12.13 Silver*
Silver once again outpaced the yellow metal this week, climbing to a three month record level - while gold briefly touched a one month high point. On Tuesday investors returned from the long Labor Day Holiday with a ravenous appetite for silver, hungrily bidding up prices to $13.37, the highest since May 30th on news that the worlds largest silver producer, Mexico reported a near 20% annual decline in output. Whereas, a dollar rally and continued slide in crude oil prices constrained the yellow metal.
For the week, profit taking lead gold $15 lower, closing at $609 while silver slid $.79 ending at $12.13. However, gold and silver remain the best investments for the year. Silver's 12 month chart reveals an astounding $5 or 70% increase twice as high as gold's impressive $150 or 35% advance.
Moving on, lower inflation concerns lead crude oil prices temporarily lower. A report showing U.S. oil inventories above last years figure and the end to the U.S. summer driving season sent oil to a five-month low point. Adding to downward pressure, easing Mid-East tensions and a major oil discovery in the Gulf of Mexico was reported by media sources. The recent pullback lead to a surprisingly low close of $67 on Friday. A far cry from two months earlier, when crude oil climbed to a record $80 per barrel.
Meanwhile, despite rumors over increased central bank gold sales with the upcoming September 26th central bank quotas, UBS Investment bank raised its near term gold forecast by $20 to $650 and next quarters projection to $690 per gold ounce. Moving on to the silver market, since its outset in April of this year, Barclay's silver ETF has now accumulated a surprising 100 million plus ounce silver reserve. Some analysts believe that the ETF silver purchases may be adding additional support to the highly illiquid market.

Moreover, if recent market history is a reliable guide, gold may benefit from seasonal tendencies at some point in September. According to one source, gold has moved higher in each September of the past 5 consecutive years. As Christmas and related holiday's approach jewelers tend to accumulate gold and silver in anticipation of sharply higher gift related sales. However, jewelers, the biggest seasonal buyers have sharply reduced purchases this year according to the World Gold Council. Market watchers are hopeful that dwindling jewelers supplies will lead to increased demand for gold and silver as the winter season approaches. Furthermore, this past Friday marked the beginning of the Hindu period known as, Shradh, where believers halt new ventures including gold purchases. Not until September 23rd will followers again consider buying gold.
Shifting over to currencies, an explosive short-covering rally in the dollar market rattled investors, leading the greenback to a six week high. As a result, rumors over higher rates circulated among floor traders. Investors are concerned that the explosive dollar rally and gold slide may be hinting further Fed. rate hikes ahead at the upcoming September 20th FOMC meeting. In fact, Treasury Secretary Henry Paulson noted he was firmly in support of a strong dollar policy. Despite this weeks rally, the dollar remains lower by near 5% this year.
Furthermore the Bank of Japan held interest rates constant following this weeks deliberation, adding upward pressure on the dollar. Media sources indicate that traders will be watching the upcoming Group of Seven meeting slated for Sept. 16. It is hoped that the G7 ministers will promote currency appreciation among nations with excessive trade surpluses.
In related precious metals news, a fire broke out Thursday in a Siberian gold mine. The blaze left over 30 miners underground fighting the blaze according to authorities.

The fire appears to be the result of a welding incident and was first noticed near the lunch hour approximately 300-400 feet below ground level. About half of the 64 trapped miners were evacuated one media source noted.

The remaining miners battled the blaze in an attempt to rescue workers within the 3 mile long mine. Emergency crews directed clean air into the tunnel to combat smokey conditions. The nation's mines are accustomed to such difficulties due in part to safety irregularities.

Moving on, in numismatic related news this week, The Central Ohio Numismatic Associations annual Ohio State Coin Show will begin on Friday and run until next Sunday. Admission is only $3 and 100 coin dealers are expected to attend including US., foreign and ancient coin collections at the citys largest annual show, between the hours of 10 am. to 6 pm. Friday and Saturday and 10 am. to 4 pm. next Sunday.
Here's a review of the Gold Stocks & Precious metals charts. The following section is included to help investors identify low risk, short term entries for long term precious metals positions. I expect gold to breach $1000 dollars and silver to climb above $20 per ounce in the coming years.

In gold equities news, last week I expected strength early on followed by a run to the 155 area. The XAU almost reached the target before beginning a powerful sell-off.

BOTTOM LINE ON GOLD STOCKS: The daily and weekly candlesticks are very bearish, I expect selling early next week as traders digest this weeks false break-out.
Looking at the precious metals charts: As forecasted in last weeks report, gold and silver were strong early this week. Silver rocketed higher on Tuesday but failed to hold on to early gains ending with a bearish hanging man candlestick. Skeptical traders picked up on the sign and sold off for the remainder of the week.

BOTTOM LINE ON PRECIOUS METALS: Both gold and silver recorded bearish closes. However, they remain at the low point of their trading ranges. I expect early weakness as traders test support levels.
Shifting over to the stock markets
In equities news, my last report suggested a strong market open followed by consolidation. This week the stock market cooperated. The Dow closed at 11,392 down 70 points. Meanwhile, the S&P finished at 1,298, off 13 and the Nasdaq at 1,265 lower by 27.

BOTTOM LINE FOR STOCKS: All three indexes recorded bullish candlesticks on Friday, I expect strength early next week followed by sideways market action.
Don't miss the second hour of this weeks program with my featured guests Kal Gronvall and Joe Granville.

September 9th, Goldseek Radio Highlights:

*Joe Granville & Kal Gronvall*
In the first hour, I lead off with a recap of this weeks top market headlines. Next, the Goldwizards join me to discuss the markets. Ever bullish, Bob Chapman shows why gold will shoot to 1,700 in the next few years as soon as 2008. He offers a gold stock that he thinks could triple or more in the next few years. Next, Gary Kaltbaum continues to monitor the semiconductor sector for market clues. He believes the semi's are the best leading indicator. Plus, Jack Chan tells listeners how to glean valuable information from the COT data and provides a website with free COT charts.
In the second hour, legendary market watcher Joseph Granville is skeptical regarding the recent stock market rally. He thinks that the trend has changed and that the short sellers are in control and making money. Joe cites a bearish Dow Theory divergence as the catalyst which could bring the entire market to its knees. He tells market neophytes and experts alike how to implement his proprietary indicators, the OBV and the Granville New High/Low. He also explains that although company earnings is a poor forecasting tool, it remains the most watched statistic by Wall street and Main street alike. Next, the dollar is collapsing according to Kal Gronvall. Kal is concerned that silver bugs may be misguided and he lays out his plan for all precious metals investors. He's a much bigger fan of gold at these levels. Kal is absolutely convinced that the dollar will collapse within less than three years.
Be sure to send over an email to with your gold and silver price prediction for next weeks close. The listener who comes closest will receive an autographed copy of Joe Granville's latest book, a $75 value free of charge. Remember to bookmark for your daily source of leading precious metals news and commentary.
To This Weeks Guests and the Trading Wizards Gold & Silver Forecasts, Please Go To:

Thanks for reading.
Chris Waltzek
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