Metals Shine in Flat Market

[Excerpted from Bill Cara's Daily Report]

While the broad market was vacillating in a narrow range onWednesday, underneath the surface something was a glittering. Ahead ofthe upcoming G-20 meeting, precious metals were bid, and bid, and bid,all day long (GLD + .22%, SLV +2.85%), and volume in the goldminers($XAU +8.6%) matched the break-out in price.

By the closing bell in New York, the S&P 500 (994.75 -3.29 -0.33%), DJIA (9,280.67 -29.93 -0.32%) and NASDAQ Composite (1,967.07 -1.82 -0.09%) had another losing session, but the Great Reflation anti-$USD play was on.

In Canada, the Toronto Exchange Composite (10,701.32 +11.54 +0.11%), which likes a higher $WTIC Crude Oil (68.05) price, but didn’t get it, was subdued. But the Toronto Venture Board (1,184.89 +21.65 +1.86%), which likes a higher gold price ($Gold 978.80 +22.90 +2.40%) was ecstatic.

Wednesday, among the ten sectors in NY, the losers were the Financials and Energy (XLF -0.9% XLE -0.7%). Continuing to sense trouble in the financial sector, traders sold off the Banks ($BKX -2.3%), and REITs ($DJR -1.9%). The Basic Materials (XLB +0.9%), led by metals and precious metals, were a winner.

The US Dollar ($USD 78.39 -0.35 -0.44%) was a loser as traders are continuing to wonder if the G-20 meeting will result in changes to the global reserve currency agreement. As to the other major currencies, the Euro (142.65 +0.47 +0.33%) and the Yen (108.43 +0.76 +0.71%) were stronger, while the British Pound (161.63 -1.21 -0.74%) and the Canadian Loonie (90.46 -0.16 -0.18%)flew south against the USD.

The leaders of the winning Cara 100 company stocks yesterday were the Goldminers, which were our favorite Silver Wheaton, Goldcorp and Kinross Gold (SLW +11.2% GG +10.1% KGC +9.9%). The Cara 100 company stock losers were led by Whole Foods and Brunswick Corp (WFMI -3.5% BC -2.3%), but the losses were not major.

Earlier Thursday, the Austral-Asian markets were lower except for China (2,845.0 +4.79%) and Hong Kong (19,761.7 +1.23%). As for the others, Japan’s Nikkei 225 (10,214.6 -0.64%), Australia (4,432.9 -0.08%), and India (15,398.3 -0.45%) had minor pull-backs.

As for the European stocks early Thursday morning, France (3,575.6 6:58AM ET +0.07%), Germany (5,333.0 6:58AM ET +0.25%) and the UK (4,821.2 6:58AM ET +0.08%) were all quiet ahead of the ECB report.

The US Treasury long bond ($USB 122.34 +1.12 +0.93%) rallied as Treasury yields took a tumble for the 30-year (4.104 -0.94 -2.24%), the 10-year (3.295 -0.80 -2.37%) and 5-year (2.260 -0.68 -2.92%) instruments. The Treasury bill yield remained unchanged at 0.130, which is a dangerously low level.

Precious metal prices were jumping earlier Thursday morning: the spot (cash) market was as follows for gold (983.90 +9.34 +0.96% 07:14am ET); palladium (289 +6 +2.12% 07:14am ET); platinum (1239 +7 +0.57% 07:14am ET); and silver (15.715 +0.355 +2.31% 07:14am ET), respectively.

At the start of the day, futures prices were as follows for the Euro [1.4300 +0.0028 +0.20% 07:04am ET], and DJIA [9313 +36 +0.39% 07:04am ET], and for Crude Oil [69.15 +1.10 +1.62% 07:04am ET].

Things are quiet but the mood is upbeat. Traders will be watching what happens to prices this afternoon.

Comments

[Mad Hedge F...:]

efhjj. Just as it is prudent to top up your flood insurance ahead of the hurricane season, investors are loading up on gold ahead of the treacherous September-October stock trading period. Yesterday’s $22 move up shows that attempt number six to run the yellow metal up to a new high has begun. Silver happily tagged along for the ride, tacking on 70 cents to $15.49. Historically, September is the best month of the year to own the barbaric relic, showing an average 3.5% gain over the last 20 years. The onset of the Indian wedding season, Ramadan, and the run up to the Christmas and the Chinese New Year jewelry buying binge are all conspiring to give gold a boost. A tip off this was coming was the big put selling seen for the shares of the gold ETF (GLD), and Kinross (KGC). One good way to play gold at this late stage might be the shares of highly leveraged unhedged producers like Rangold resources (GOLD), Jaguar Mining (JAG), and royal Gold (RGLD). Confirmation that the markets are moving towards risk aversion can be found in the euroyen chart, which hit a one month low at 131, after double topping at 140.50. If gold does break, it could tack on 20% very quickly to $1,200. Keep those American gold eagles.

Sep 03 10:19 AM