Well, it looks like we only loss 190,000 jobs last month but the unemployment rate ticked above10% to its highest level since April of 1983. What recovery? I don’t see a recovery; just because prices of stock and commodities have moved up we’re NOT back on track. As for the markets, with more people out of work I guess the demand for Crude oil is perceived to shrink?? Oil fell almost 3% today. Who know from here; I’m getting mixed signals. Natural gas prices ended lower by 4% today and 8.5% on the week. We hold January call spreads for clients and expect a push higher very soon. We have yet to pick a bottom in futures but are getting close.

Stocks could go either way though I was impressed by this week’s action. If forced to pick a direction I would say up but it will be with out my clients. Gold did print above $1100 but we will settle below. I feel there is much more upside but do not rule out a healthy correction in the short run. Clients remain long silver; we would like to see a probe to $18 next week. On a pullback that holds $16.20 on a closing basis we would suggest adding to the position.

Gold

Gold dipped slightly overnight but found support at $1,084/oz in the early hours of yesterday morning. It has since recovered and is currently trading at $1,090 /oz. In EUR and GBP terms gold is trading at €735/oz and £659/oz respectively. The US Federal Reserve has signaled that a return to higher interest rates will not be based solely on economic recovery, but dependant also on an increase in inflation and a recovery in the employment market. They remain committed to keeping interest rates “extremely low for an extended period of time”. Meanwhile all eyes and ears will be focused on the Bank of England’s Monetary Policy Committee meeting announcement today as well as the ECB rate setting announcement and subsequent press conference. Although no changes in interest rates are expected the rhetoric will be keenly analysed for any signals of their future intentions.

Oil is still trying to making up its mind on where to go. We have no opinion or positions currently but will most likely have suggestions in the coming weeks. Natural gas looks to close at slightly better levels, we still like 75 cent January call spreads.

Fresh short entries in cocoa enjoyed sliding prices but unfortunately for December puts, too little too late. Sugar gave up 3.5% today; we bought yesterday for clients…not the best timing. We continue to think March will return to 25/26 cents. The trend line all year comes in around 22 cents, if this level gives way we may re-evaluate.

Don’t get me wrong. I love silver. As a very long term investment, you cannot find anything better. If you ignore short and medium term volatility, and simply hold your metal for a long term of years, you will probably do okay. The world is running out of silver. The painful part of this "buy and hold" strategy, however, is in watching prices get periodically clobbered.

Another strategy is to keep a “core” long term portfolio, while, at the same time, keeping a non-core or speculative portfolio. In the speculative portfolio you attempt to profit by buying and selling on the price swings. In both cases, you will buy on the lows, but, instead of just holding for years, you buy low and sell high on a regular basis.

Massed bagpipes, fine malts and a bullish outlook for London's professional gold dealers...

RHONA O'CONNELL did it on the train home, John Reade managed it before the conference finished, and Ross Norman's team were at it throughout.

FOMC: No change in rates and no significant changes in the verbiage as expected. There was mention of inflation expectations but excessive and extended remained in their statement. The problem I see with no change in their course is they are headed down the wrong road, the market is giving the Fed too much credit on getting their timing right. I’m not smart enough to know if they move too early or too late but I’m confident they will get it wrong.

As for the markets, the dollar has started its move lower and virtually all commodities benefited. Oil should close back above $80 as we will be looking for long opportunities for clients. Clients are getting hit on their recent purchase of natural gas, prices are down by 3.5% today… stay the course. Equities trade higher but at this moment we have no opinion, it could go either way?

Gold bulls will want to see a successful back-test followed by a breakout to new highs


It took less than a week for gold to rebound and break out to another new high, with a strong $25+ rally Tuesday despite the U.S. Dollar moving higher on the day. Silver also rallied strongly, up over 4% Tuesday alone. The precious metals had been moving inversely to the dollar, so Tuesday's strong move higher in the face of a stronger dollar could bode very well for continued strength even if the dollar rebounds.

As we said last month, "The precious metals could be in for an extended rally period on this breakout. If so, the miners should be in for a strong bull move."

Silver remains very undervalued on a historical basis (charts below) and is undervalued even against gold (chart below). While gold has begun to receive some interest from a small minority of retail investors, silver remains the preserve of relatively few contrarian investors and the media and financial press rarely, if ever, covers silver. And yet silver is quite likely in the intermediate stage of a bull market that will rival or surpass that of the 1970s.

Silver is currently worth less than $17.00 per ounce. It rose to a recent nominal high $20.88/oz in March 2008. After an 18 month period of correction and consolidation, silver looks set to challenge that high in the coming months. We continue to be bullish on gold and particularly silver and believe that silver will likely surpass its non inflation adjusted high of $48.70 per ounce and its inflation adjusted high of some $130 per ounce in the coming years.

Gold
Gold rose to new record highs yesterday and again this morning above $1,093/oz in what appears to have been continuing reaction to the news that Indian central bank had bought 200 tonnes of gold from the IMF . Gold has also surged in euro and pound terms.

The new record high price and the price at these levels is not extreme given that the India central bank buying shows that there is a huge appetite for gold around these price levels as the average price paid for the 200 tonnes (bought by the Reserve Bank of India) was around $1,045/oz. Indian central bank officials have suggested that they wish to buy another 200 tonnes from the IMF. Thus, gold prices over $1,000/oz are sustainable in the long term and there would appear to be a long term floor under the gold market around the mid $1,000s/oz. Our start of year forecast of gold prices over $1,200/oz in 2009 looks quite possible, especially with two of gold’s seasonally stronger months upon us (November and December).

Friday’s Registered silver was 52,695,755. Eligible silver totaled 60,985,505, Combined total of 113,681,260, the lowest level of stocks since 2006.

Dollar up commodities down, stocks up oil up, stocks down, Treasuries up… well, not today. Be wary of the decoupling as new relationships may be forming.

We are thankful we took oil shorts off yesterday for clients, albeit at a small loss being prices were higher by $1.25 today as of this post. Natural gas is higher by 2%, clients were able to buy the January $5.50/6.25 spreads recommended yesterday at slightly better levels today paying $1800/per.

Gold
Gold is continuing its strong upward run and is currently trading at $1.061.40/oz. In EUR and GBP terms, gold has risen again and is trading at €720/oz and £650/oz respectively.

The majority of participants at the LBMA Precious Metals Conference in Edinburgh were bullish for gold’s outlook going forward. The chairman of the London Bullion Market Association, Kevin Crisp, said that the environment for gold prices is set to stay positive as concerns over the stability of other markets fuel investment into hard assets. The conference heard how the European Central Bank believe that gold will remain an important asset for European central banks as risk diversification becomes a more significant issue. Paul Mercier, deputy director general of market operations at the ECB, said that “gold makes sense as a contributor to risk diversification." He said the Eurosystem holds 10,800 metric tons of gold, roughly one third of world gold reserves.

As we get closer to the day inflation kicks into full force, it is worth noting some common gold:silver ratios. History has more or less showed us that the historical ratio has averaged between 20:1 - 25:1 (depending on the measured time horizon). I personally like to break it down using different ratios for periods of low to moderate inflation and high and double digit rates of inflation. As a rule of thumb for times of low to moderate rates of inflation (below 5 or 6%), I use a ratio between 45:1- 55:1. During times of high to double digit inflation (late 70's style) I revert back to the historical ratios between 15:1-30:1. Given the current low level of "headline inflation" (which is nonsense anyway), which has to inevitably rise over the coming decade, silver is very attractive on the gold:silver ratio, currently at 64.36. Though inflation is said to be "very low" (according to the governments convoluted measure), my expectation for it rise sharply over the coming years, makes silver an absolute bargain.

Gold
Gold has experienced a strong opening yesterday morning and is currently trading at $1.052/oz, $8 higher than its close on Friday. In EUR and GBP terms, gold has risen and is trading at €712/oz and £643/oz respectively.

Gold fell 1.4% last week but rose nearly 4% in the month of October which is traditionally a poor month for gold (unlike the seasonally stronger months of November and December). Gold looks set to make gains this week on growing concerns about the health of the US economic recovery and possible further falls in equity markets internationally.

Oil traded to new lows but lower levels could not hold. We advised clients to take their January put spreads off at break-even and moved that money into longs in natural gas. Natty prices were lower by 4% trading to their lowest level since mid-September. Prices have moved lower 8 out of the last 9 sessions, a move we feel is unsustainable. Clients bought January $5.50/6.25 call spreads for $2100.

Cocoa has formed an interim top; for new entries we would advise selling rallies with stops above the recent highs. December puts are running out of time for clients, we need prices to collapse. Sugar moved higher, we will re-evaluate long entries for clients and may be willing to buy higher than previous stated levels, stay tuned. OJ was lower by almost 4%, clients put in gtc profit orders today on their January puts. Coffee was higher by 5% today, on what was rumored to be fund buying. We have no client exposure.

Gold: As of Friday morning, Gold is trading at $1.043/oz and traded in a $22 range over the past 24 hours, hitting a low of $1,026/oz Thursday morning.

Gold then rallied strongly and closed at $1,046.40/oz and has maintained Thursday’s gains in Asian and European trading. Some of the short term frothy excess has been removed from the market and the selloff has seen physical buyers in India return to buying for the wedding season.

This post is just a quick update on three positions that I have discussed in the past—namely, Exxon Mobil Corporation (XOM), Pan American Silver Corp. (PAAS), and Blue Nile, Inc. (NILE).

Back in mid-August, I provided an update on my ExxonMobil position. My positions remain the same. Until this past week, I was doing extremely well. On Thursday, ExxonMobil released its earnings and slightly disappointed the street, and the stock dropped modestly—largely in sympathy with the overall markets. I have yet to read Seeking Alpha's XOM transcript, but will do so before the end of this weekend. My quick take is that I will likely continue to hold XOM into year-end.

Short covering, month end, dollar rally, call it whatever you want. Here is the scorecard: short Crude oil, short the S&P, Short Euro-currency, Long the Yen, short silver, long Treasuries (NOB spread).

We advised using today’s’ retracement in corn to buy or get positioned in a portion of the corn you want to own into the USDA on November 10th. Additionally clients were buyers of February live cattle on today’s setback. Clients bought futures and at the same time just out of the money puts. They were not filled on their limits on calls, will try again next week.