Gold And Platinum Soar To Record Peaks

February 4, 2008 | By | Reply More

Precious metal action last week saw gold and platinum soar to record peaks There was some seesaw action during the ride as quick profits were taken off the table but for the present it looks like gold is stabilizing above US$900 an ounce with $1000 an ounce the next target as the US and UKs economic woes continue unabated.

It was interesting to note the performance of the main US stock market indices during the week. Despite the plethora of bad news for the economy and the greenback, a little M & A action, notably Microsoft’s generous bid for Yahoo, and some acceptable results from some companies, kept the stock market looking unaffected and remarkably resilient.

We keep asking ourselves whether the US investment community is as stupid as it appears and is unable to accept the almost definite probability that we have entered into the early stages of a severe recession and bailing out of all but the cream of stocks is a priority.

Optimism is an admirable trait, particularly in the face of looming disaster but we have an alternative theory.

The US markets are led by highly intelligent professionals who are always on the look out for a fast profit. On the receiving end is poor old Joe Public, Mr average investor ripe for the plucking.

The majority of these professionals belong to younger generations to whom buy and hold, look at yields and stable company prospects are old hat. The culture from the boardroom across the economic and, sadly, the political spectrum is increasingly short term.

No longer is there thought given for the consequences to future generations, in fact even the next decade is far from a priority. Scrabbling through the next few months, a year or two, let the next White House incumbent sort it out.

In the meantime and in accordance with the short term principle, speculators headed up by the new wave of hedge fund operators, derivative players, index tracker speculators, shorters, option buyers and sellers, et al are gambling on making a quick buck out of the uncertainty.

Whether it be massive covering of short selling, option expiry or any of the multitude of factors, mainly new and innovative, that distort the natural supply and demand swings of the market the wise guys are making a killing, others are losing or risking their shirts.

For what it is worth that is our theory why the stock markets are not reflecting the economic outlook – but they will – so be very, very careful.

Back to precious metals, it was interesting to note that we are told by the pundits that buying interest in gold and platinum was spurred on as investors had deepening fears of a US led global economic slowdown and were seeking a safe haven for their cash.

Err, ahem – does that explain last week’s stock markets performance!

The electrical power problems in South Africa do not seem to have been sorted so more disruption in mining activity can be expected.

The strength of platinum was reflected in the price of palladium which enjoyed a $30 jump to $410.50 an ounce while silver strengthened to over $17.15 an ounce, all of which leads us to the opinion that there is a gathering momentum of uncertainty in the supply side of the metal market.

Uranium hit the news this week with Russia signing an agreement to supply the US with enriched uranium for ten years with deliveries starting in 2011. The deal is said to be worth circa $6 billion dollars.

Importantly this adds significant credence to the government’s commitment to a nuclear source of energy. It doesn’t matter whether its for green reasons or to cut back on the expense and dependency on fossil fuels as we have long held the view that nuclear is the only practical alternative for both.

Visitors to this site now have a precious metal store to browse and buy from. Featuring bullion and coins we thought the following of interest. The Royal Canadian Mint (RCM) has won the Coin of the Year and Most Innovative Coin awards given by Krause Publications for their laser etched $50 Palladium Big Bear and Little Bear Constellations coin series.

Krause Publications is the US publisher of World Coin News and Numismatic News and other coin research and catalogue titles.

 

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