Monday, October 02, 2006

THE GOLD AND SILVER REVIEW, SEP. 31st 190th Edition.

September 30th, 2006
190th Edition
Chris G. Waltzek
*$598 Gold - $11.41 Silver*

Despite end of month & quarter portfolio shuffling gold shorts searched in vain for their heads as precious metals soared to their loftiest point in 3 weeks. The Sept. 26th central bank gold selling deadline came and passed without incident, increasing upward momentum. Meanwhile, Gold bulls were further encouraged as crude oil exploded higher on Wed and Thurs climbing $4 to $64, once again igniting inflation fears and rewarding precious metals investors.

In fact, gold and silver continue to astound even the most stubborn analyst, posting positive gains over the past 5 years. In the last twelve months, gold is up over 30% while silver has gained almost 70%. In 2006, gold has tacked on 16 percent, more than twice that of the Standard & Poor's 500 and the meager 1.4 percent return of the 10-year Treasury bond. For the week, Gold rallied every day into Friday where it closed near the break-even level, the longest streak in four months. Gold gained impressive $10 closing at $598 while silver climbed $.19 ending at $11.41.

Many analysts are now calling for gold to surpass its former record of $873 an ounce set in January 1980. Battle hardened experts like Jim Rogers expects, $1000, Jim Sinclair $1650 and Doug Casey thinks the yellow metal will soar into the thousands. Although Wall Street is mostly discounting the primary uptrend in precious metals, the sharpest minds in the industry unanimously agree that gold and silver will dominate the markets as the commodities bull marches forward.

Meanwhile, gold pundits commented on their market of choice. Peter Grandich noted: "While some more backing and filling is possible, gold has once again withstood a sharp and violent correction, a trademark pattern in secular bull markets.."
Next, Dale Doelling, chief market technician at Trends in Commodities expects a powerful rally ahead: ".. if I'm right, the metals will find their footing leading to a rally that will get a lot of traders' attention.." Clearly the gold and silver bull is alive and well in the minds of top market watchers.

Adding fuel to the precious metals recovery, the approaching holiday season is increasing desire for the yellow metal. India, the largest gold consumer is responsible for more than a quarter of global demand. Now that the 2 week Shradda period of ancestor prayer has past, gold purchases will pick up during the more favorable Diwali festival of lights, which is slated this year for Oct 21st. Gold jewelry is widely accepted as the traditional gift of choice regardless of social standing.

In related news, the Commerce Department recently announced that consumer price inflation reached an 11-year high last month just as personal incomes and spending fell to the lowest levels in 12 months. The shocking figures lead many analysts to speculate that the stagflation specter is alive and well.

Meanwhile, the former Fed. Chairman Paul Volcker commented on soaring prices this week noting there was no political will to battle inflation. Mr. Volcker is widely credited with slowing the economy and launching unemployment to such a degree in 1980 that inflationary pressures temporarily subsided. Unfortunately for the current Fed. Chairman, soaring Fed Funds would decimate the already falling housing market and send the economy into a depression due to the massive overhang of domestic debt and deficits. In other words, the Fed. cannot apply the same economic remedy at this time because the inflation bug has mutated into a far more menacing and tenacious threat. In related news, Sweden's central bank announced it would sell up to 10 tonnes of gold over the next twelve months, insuring that its central banker would never receive the much coveted Nobel Prize in economics.

In currency market news, the dollar market rallied sharply this week on the heels of lessoning tensions in the Middle East and a positive economic announcement. Consumer confidence rebounded in September according to a U.S. Conference Board report. The consumer confidence index climbed to 104.5 in September well above last months record low of 100.2.

In geopolitical news this week, media sources indicate that Tehran may agree to halt its nuclear enrichment program if the West keeps the deal behind close doors.
Rumors abound regarding a proposed settlement between the US and Iran's president. Sources are hopeful that a stalemate will ease Middle East tensions.

Looking over at the energy sector, after falling below $60, black gold rallied sharply this week briefly touching $64 per barrel on Thursday before settling in at $62.45 on Friday. Since peaking at almost $80 two months earlier, oil has fallen by more than 20 percent on reports of slower than expected economic growth. Analysts now expect that OPEC will curtail output to decrease its losses due to the recent energy price tumble. However, only its Nigerian member appears willing to commit to the cause. Lower output should help to firm crude oil prices in the months ahead. Interestingly, one of the worlds top market analysts, Jim Puplava announced his price forecast of $200-$300 per barrel in the years to come.

In numismatic news this week, many coin enthusiasts are excited to find silver coinage in the most unexpected places, their local bank vaults. Kennedy half dollars containing 40% silver are popping up around the country as inflation causes the typical shopper to unwittingly put silver coinage back into circulation. Many people know that 1964 coins contain 90% silver. However, only wise coin collectors are aware that 1965 to 1970 Kennedy half dollars contain 40% silver. Simply exchange a few worthless paper bills for a few rolls of coins. In just a few seconds you can glance at the entire roll in one hand, searching for coins without the red copper sandwich style striping on the edge. Then return the rest to your bank. You just picked up some silver for only fifty cents per coin. Its a great way to get your kids interested in coin collecting and maybe even help prepare for their education as silver soars to and above $100 per ounce!

To This Weeks Guests and the Trading Wizards Gold & Silver Forecasts, Please Go To:

Thanks for reading.
Chris Waltzek
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