Contrarian Profits

And Then There’s This…Thursday, April 09th, 2009 Posted: 09 Apr 2009 01:54 PM PDT Gold didn’t do much on Wednesday. It rallied a bit in the Far East and got sold off mid-morning in London. The low of the day [such as it was] came at the London p.m. gold fix at 10:00 a.m. Eastern time. The subsequent rally got capped shortly after the price punctured $890…and then proceeded to get sold off [on big volume] right into the Globex close at 5:15 in New York. Total estimated volume was 87,493 contracts…with a switch effect of 5,876. Silver was similar. A vertical spike at 8:30 a.m. in New York got squashed…and the low of the day was also at the London p.m. gold fix. And, like gold, the subsequent rally got capped at 1:00 p.m. Eastern before getting sold off to almost unchanged. Nothing to see here folks…please move along. Open interest changes for Tuesday’s Comex trading showed an increase of 1,653 contracts in gold o.i….now 344,929 contracts. In silver, o.i. fell 802 contracts to 93,101. All of this [fingers crossed] will be in tomorrow’s Commitment of Traders report. For the first time that I’ve been reporting Comex gold and silver deliveries, there was not an ounce delivered in either metal yesterday. Nothing happened with GLD or SLV…or at the U.S. Mint. At the Comex-approved precious metals depositories, silver inventories finally rose a bit…but just a bit…208,635 ounces. The usual N.Y. commentator had the following yesterday…”The European Central Bank’s weekly statement of condition marked up consolidated gold holdings with a new book value… €690.186/oz. compared with €621.542/oz. at the year end. One captive CB was reported to have sold €14 million last week, only 0.63 tonnes. The previous week’s net sale was 4.13 tonnes. Disappointingly for gold’s friends, there was no report of any CB buying. The 35.5 tonne sale by the ECB itself, announced last week, has yet to show up in these weekly statements. Usually it takes over a month.” In other gold and silver news, the Central Fund of Canada’s underwriting agreement with CIBC is now complete. Of the $340 million offered…$210 million was taken. That’s a huge amount, even more than I was expecting. The closing should occur on or about April 16th. At that time we’ll find out how much gold and silver bullion they will have acquired. A back-of-the-envelope calculation based on $195 million in bullion purchased [at yesterday's prices] indicates about 130,000 ounces of gold and 6.5 million ounces of silver will be added to their stash. Three stories today. The first is from chinadaily.com…China’s ‘official’ newspaper. It appears that China is more than serious about using their currency for international trade. The headline says it all…”Yuan trade settlement to start in five Chinese cities”…and the link is here. The next story is filed from Johannesburg and is posted at fin24.com. It’s noteworthy in the fact that Philip Klapwijk, the chief cook and bottle washer over at Gold Field Mineral Services [GFMS], says that gold prices could “easily re-attain the $1,000 mark and may well push up towards, and perhaps even through, the $1,100 barrier in the coming months.” I’m not sure whether to be wildly bullish…or maybe I should phone my broker this morning and tell him to hit the bid on every stock I own! As you have probably already guessed…I’m not a big fan of GFMS. But we’ll find out in the fullness of time. The story is entitled “GFMS: Gold can reach $1,100″…and the link is here. And lastly…Canada’s Business News Network yesterday devoted an hour to a program it called “Bear Attack”…which featured interviews with Sprott Asset Management CEO Eric Sprott, New York University economics professor Nouriel Roubini, Long Wave Analyst letter editor Ian Gordon, and financial adviser Meredith Whitney. Gold figured prominently in the discussion. The whole program is well worth watching. The program is broken up into two parts. The link to the second part is easy to find once you get to the first part…and the link for that is here. The worst is over without a doubt. - James J. Davis, Secretary of Labor, 29 August 1930 As I’ve mentioned before, look out for the upcoming crash in the Commercial real estate market. In a story posted at The Wall Street Journal yesterday…”Commercial landlords continue to lose retail tenants at an accelerating pace, indicating that the industry’s troubles are worsening. The amount of occupied space in U.S. shopping centers and malls declined a net 8.7 million square feet in the first quarter of 2009, more than the total amount of space retailers gave back to landlords in all of 2008 and any other year in recent history.” And this is just the start. On that cheery note, all of us here at Casey’s Daily Resource Plus would like to wish you a Happy Passover…and an equally Happy Easter. Source: And Then There’s This…Thursday, April 09th, 2009

Resource Stock Roundup: Thursday, April 09th, 2009 Posted: 09 Apr 2009 01:19 PM PDT The bulls made a valiant effort to fight off the surging bears during Wednesday trading on the Canadian markets. For the tale of the tape, the TSX Exchange added 1.64%, while the TSX Gold was essentially unchanged and the TSX Venture Exchange, Canada's largest junior exploration bourse, gave back 0.19% with the decliners beating out the advancers by a 350 to 327 margin on volume of 119 million shares traded. Aurizon Mines (AMEX:AZK) inked a C$50 million bought deal financing comprising just over 9.7 million shares priced at C$5.15 each. The gold miner ended the day down C$0.51 at C$5.13. Shares of Goldsource Mines continued to slump on the back of the last batch of drill results from the Border coal project in Saskatchewan. Goldsource fell C$0.15 to C$1.38. Teck Cominco (NYSE:TCK) cashed in 5.6 million shares of Kinross Gold (NYSE:KGC) that it acquired in January on the sale of Teck’s sixty per cent interest in the Lobo Marte property in Chile. Teck got $18 per share for a cool $141 million. Teck ended the day up C$0.77 at C$8.74. We may have bounced off the bottom but on a year over year comparison, the value of trades on the junior bourse is down 77.2 per cent, while the trading volumes are down 29.7 per cent. More importantly, equity financings are down 64.8 per cent over the first three months of 2009. We shall see what Thursday trading has in store. Source: Resource Stock Roundup: Thursday, April 09th, 2009

Would You Be Interested in Earning a Steady 15% a Year? Posted: 09 Apr 2009 12:47 PM PDT Notes from the Investment Underground April 9, 2009 Palermo Viejo, Buenos Aires, Argentina Why you should invest in pipeline companies… Wither Geither's stress test results? Congress vs the Treasury… Check out of USA Inc with these four BRIC EFTs… How to survive the "Great Money Famine of 2009"… Three questions for Barney Frank… Congressional panel: Liquidate banks, fire top execs… PPIP FLOP… Geithner's latest Orwellian manoeuvre… And more! *** We've added a new section to Notes. It's called "Must Reads" and it's basically a list of the day's must read articles on money-making and the markets. It's at the very bottom of the issue. Tell us what you think: info@contrarianprofits.com. Don't be shy. We've got thick skins. *** We love DailyWealth. It's quite possibly the single best free source of contrarian money-making ideas out there (apart from Notes, of course). Today, 12% Letter editor Tom Dyson says an easy way of making steady yield of up to 15% on your money a year. Tom reckons that if you like earning steady income, there's no better business right now than pipeline companies. This is a list of pipeline stocks with yields as high as 15%. Thanks, Tom. *** Sssshhh… Rumors persist that the reason the Treasury won't release its stress test results for banks is that the department doesn't like what it found out and reckons Mr Market won't either. Or is it because releasing the results will reveal the stress tests for what they really are: an attempt at mass deception? Read more here. (A mysterious leak has since appeared in the NYT. See below.) *** It's also pretty damn obvious that Geithner's "legacy loans" program is going to be a flop. And a big part of the reason for this is Congress's recent pressuring of the FASB to get rid of mark-to-market accounting rules. This from Jack McHugh at The Big Picture: Tim Geithner's troops are seeing less interest in PPIC than they had expected. The program's complex requirements and a fear of future rules changes apparently have caused fewer players to want to join in the fun of bidding for toxic assets with taxpayer-sponsored leverage. I'm sure Treasury will come up with some changes (read: sweeteners), but with banks now allowed to mark their portfolios as they wish, it is quite possible the lack of demand for PPIC will be met with an equally small amount of supply. Chalk up the lack of interest on both sides as unintended consequences numbers one and two for our newly seated Congress. Pressuring FASB into embracing "Miss Mark-to-Market" accounting will hurt PPIC supply, while It was the retroactive attack on the employees of AIG and other financial entities by our nation's elected officials that is likely crimping demand. A thank you note from Tim Geithner to the Democratic leadership in both chambers is unlikely to be forthcoming. *** The U.S. is clearly on its way to becoming a banana republic. Right now, the only thing saving it is the dollar's reserve currency status. One of the world's most successful investors realized this a long time ago and moved to China. One way to hedge against this outcome is to invest in BRIC nations (Brazil, Russia, India and China). Writing in Investor's Daily Edge, Ted Peroulakis reckons you can make "hefty profits" by investing in BRIC economies at current levels. Ted recommends four ETFs to cash in on these emerging markets. 1) The best way to play Brazil:  iShares MSCI Brazil Index (EWZ). This Exchange Traded Fund holds a nice basket of Brazilian stocks and seeks to mirror the Brazilian stock market as measured by the MSCI Brazil index. 2) The best way to play Russia: Market Vectors Russia ETF (RSX). This Exchange Traded Fund holds a nice basket of Russian stocks and seeks to mirror the Russian stock market as measured by the DAX Global Russia+ Index. 3) The best way to play India: PowerShares India (PIN). This Exchange Traded Fund holds a nice basket of Indian stocks and seeks to mirror the Indian stock market measured by the Indus India index. 4) The best way to play China: iShares FTSE/Xinhua China 25 Index (FXI). This Exchange Traded Fund holds a nice basket of Chinese stocks and seeks to mirror the Chinese stock market measured by the FTSE/Xinhua China 25 index. (To get more money-making ideas from Ted, follow this link.) *** As millions suffer through the Great Money Famine of 2009 , my friend Martin Weiss of Weiss Research can give you access to the world's richest depression-proof market. It's a market that… 1. Gives you the opportunity for substantial income and/or large capital gains no matter how ugly this recession becomes — and can keep the cash flowing to you long after the recovery arrives; literally for the rest of your life … 2. Lets you start with investments that sell for peanuts and than up the ante as you gain confidence … 3. Gives you the flexibility to spend less then a half-hour a day on this opportunity, and to take time off whenever you like … 4. Lets you do it anywhere — at your home, your office, on vacation — anywhere in the world, and … 5. Unlike a business opportunity, never requires you to hire a single employee, invest in inventory, spend a penny for marketing or any of the other expenses that cut into profits. Weiss’s depression investing plan is a blend of currency ETFs, high-return currency CDs, and World Currency Options. You can get all the details here. *** Barney Frank is a populist idiot. Maybe this is too obvious a point to make, but we'll make it anyway. Frank's brilliant new idea is to take a pot shot at Moody's rating agency. He's displeased with the possibility that Moody's may downgrade U.S. municipalities. Frank says this action "would raise interest rates on cities and towns making it expensive to borrow funds for infrastructure developments." What's the people's champion gonna do about it? He's gonna rake Moody's over the coals at a Congress hearing, that's what. *** Notes has some questions for Frank. Why didn't he have a problem with Moody's upgrading toxic assets during the boom? Doesn't he realize that dodgy ratings were a major cause of the current crisis? Does he intend to lean on other ratings agencies? Does he want Congress to control the ratings over other securities? Idiot. *** Frank isn't the only politician fascinated by flying in the face of common sense. Despite being told in simple terms by the Congressional Oversight Panel that firing top executives and liquidating insolvent banks may be a better way to solve the economic crisis, the Treasury continues down the path of creating zombie banks courtesy of the U.S. taxpayer. "All successful efforts to address bank crises have involved the combination of moving aside failed management and getting control of the process of valuing bank balance sheets," the panel, headed by Harvard Law School Professor Elizabeth Warren. (Hat tip to The Big Picture. ) *** The government's shenanigans and incompetence will bring dire consequence. Porter Stansberry of Stansberry & Associates puts it best in the most recent issue of the S&A Digest (available only to subscribers of Stansberry & Associates research): Our leaders have grown arrogant. They’ve forgotten what made America great. They seem to believe God bestowed wealth upon our country. They’ve borrowed an unfathomable amount of money – confident they’ll be able to tax future generations of Americans. But in fact, the wealth of our country is almost completely owned by individuals. And right now, these individuals see nothing but endless decades of additional government deficits, rising taxes, and a paper currency that’s being destroyed. They see the free market system being corrupted. And most importantly, they see a nation that used to espouse the ideals of limited government and personal liberty heading down the road of a socialist experiment, led by an inexperienced, charismatic, and wildly popular leader. They know what’s coming. And so should you. What do you think? Send you comments to info@contrarianprofits.com. *** My old man is in town today. He's down here to see his grandson, among other things. Yesterday, we went to a local parrilla (grill restaurant) around the corner from out new offices in the Palermo Viejo part of Buenos Aires. Dad thinks we may have been a little hasty here at Notes yesterday in calling the end to the sucker's rally. This is what he had to say on the subject in yesterday's Daily Reckoning: It could be that the rally is over… and at only about 15% up from the bottom. That would be a disappointment to many investors. They were just beginning to think the worst was over. Which makes us think that the rally is probably NOT over. It's too soon to hammer the bulls. Not enough of them yet. This market should rise more… in order to draw in more suckers. You saw our guess yesterday. We're headed towards a Great Deception. The bulls are deceived into believing we're in a new bull market. They'll be disappointed when this rally falls apart. They'll give up on stocks and sell the market down to the 5,000 level…or below. The gold and commodities markets deceive the bears. They expect prices to go up as the feds put in more money. They'll be disappointed when gold sinks. You saw the big whack they gave gold on Monday. It went down hard. Yesterday, it recovered slightly – back up $10. The big spenders will be disappointed too. They've got debt. And they're counting on consumer price inflation to lighten up those debts, making them easier to pay. Instead, deflation will make their debts heavier… weighing down so heavily on the debtors that many of them will be crushed by it. *** Annoyingly, today's market action tips the argument is dad's favor. At the time of writing, the Dow, the S&P 500 and the Nasdaq are all up between 2% and 3%. News that Wells Fargo's preliminary Q1 results were stronger than expected has boosted optimism. So has a handy leak in the New York Times that the 19 major banks will indeed pass the Treasury's stress tests. *** We're fascinated by the timing of this leak… and its contents. As we've been saying for weeks now at Notes the prime mover in the markets right now is Uncle Sam. Here's how it works. The government announces some sort of positive announcement about its fight to 'fix' the economy, moving the markets higher. Then, after traders have time to digest the news, the markets move lower again (PPIP, Fed's quantitative easing initiative, the various bailout behemoths, etc.) The NYT leak is no different in our view. When the real data comes out, expect it to be a lot worse than the convenient NYT leak makes it out to be. A couple of things stick out as significant: 1) The only 'source' quoted in the NYT article is "officials involved in the examinations." This story is a plant by the Treasury. Nothing more. 2) These two sentences also tell a story: Regulators say all 19 banks undergoing the exams will pass them. Indeed, they say this is a test that a bank simply will not fail: if the examiners determine that a bank needs "exceptional assistance," the government, that is, taxpayers, will provide it. We were under the impression that the stress test was to determine whether insolvent banks should be taken into a government-sponsored receivership and liquidated rather than sucking up more tax dollars by way of bailouts. But if even the regulators say this is a test that a bank simply won't fail, what is the point of them? *** Geithner's stress tests are just another Orwellian smoke and mirrors manoeuvre from a dishonest Treasury department – and by extension a dishonest administration (sorry, Obama supporters) – determined to subsidy banks with taxpayers' money. *** This from William Black, a former senior bank regulator and S&L prosecutor, courtesy of Naked Capitalism: "There is no real purpose [of the stress test] other than to fool us. To make us chumps." Black says Geithner is now essentially saying: "If we lie and they believe us, all will be well." *** The depressing reality is that the stress tests are reversed engineered nonsense designed to provide cover for the Treasury's massive wealth transfer from you, the taxpayer, to failed banks. Josh Rosner at Graham Fisher & Co (a guy who predicted the peak of the U.S. housing market and the likely contagion of structured securities into the real economy) says there's not a single regulator in Washington that takes Geithner's test seriously. The trick is to make the stress test not terribly "stressed." Here are quick initial thoughts on the stress test… The underlying macro-economic assumptions of the stress test are not terribly "stressed". They are more probable than unlikely: * 0.5% GDP growth in 2010, after -3.3% in 2009 is now looking quite realistic * 10.3% unemployment rates in 2010, after 8.9% in 2009. We have estimated, if government stability plans fail, the rate will rise to 11% in 2010) * 7% declines in home prices in 2010, 22% in 2009 (They are down 18.8% y/y and 27% since 2006 peak, we have estimated a 2011 trough. Long term trends in home prices suggest that we will revert close to the peak levels of the previous cycle) Go figure… *** With meager oil or gas resources of its own - yet with a combined energy need of 27.7% of world supplies - Europe's at the mercy of petroleum powerhouse Russia… But now, China's deep pockets are challenging Russia's deep reserves for control of Europe's energy supplies. And three strategically located petro-players will soon play a crucial role in European energy independence - or Chinese energy dominance… Either way, you stand to gain as much as 183 times your money - if you're invested in these "target" companies before April 30th. Follow this link to learn more. *** From the mailbag… ** Explain to me in economic terms where you came up with this “factoid”: If the bear market rally in U.S. stocks fizzles out, risk appetite will plunge, triggering a return to gold. That is not fact nor is it even common sense. A plunge in stock DOES NOT mean a run in gold. That is absurd. It is possible but in no way factual. For one thing, gold is a speculation and if people are risk averse, as you stated they would be (”widespread systematic risk in the financial system”) then common sense says they would be risk averse to ALL markets. Why do you make these claims when you must know they are bogus? And Shah Gilani who is a Contributing Editor to Money Morning has given as good a reason as any why stocks will go up. But who says any of you newsletter guys know what you are talking about. You are trying to sell subscriptions and more. Steve B. Notes comment: It's widely understood, Steve, that the recent rise in gold prices is linked to the recent fall in stocks. It's hardly controversial. Investors sell gold when they think things are getting better. What part of that is "bogus"? Gold is a hedge against risk ("disaster insurance as commodities investor Rick Rule puts it). It may be common sense to you that when people are risk averse, they're risk averse to everything. But this isn't the case. As to us "newsletter guys" trying to sell subscriptions. You're right. We do sell subscriptions. That's what pays for all the free money-making you get. Of course, the subscriptions we sell make a lot of people a lot of money. Otherwise, there wouldn’t be a newsletter business. Not big on logic, are you Steve? *** Quote of the day: “Cramer is a buffoon. He was one of those who called six times in a row for this bear market rally to be a bull market rally and he got it wrong. After all this mess, and after Jon Stewart, he should just shut up because he has no shame.” New York University economics professor Nouriel Roubini. Have a great weekend, Will Bonner Must reads: Cramer vs Roubini: Another war of words for CNBC star (The Independent) Obama wants taxpayers to bail out banks directly (NYT) Elizabeth Warren introduces Congressional Oversight Panel's April report on the first six months of the TARP (YouTube) At least ten states consider major tax hike… Better hope you don't live in one of them (WSJ) Unemployment claims at 5.84 million – the all time record (Calculated Risk) Interactive graph of the Fed's balance sheet (Real Time Economics) Kass buys Berkshire (TheStreet) Former regulator on why Geithner's stress test for banks is a "complete sham" (Clusterstock) © 2009 Contrarian Profits All Rights Reserved Nothing in this e-mail should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Protected by copyright laws of the United States and international treaties. This Newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Contrarian Profits . P.O. Box 925, Frederick, MD 21705 USA

Base Metals Move Little Posted: 09 Apr 2009 12:40 PM PDT The base metals were mixed on Wednesday. Copper ran at $2 again, and again was turned away at $1.98 right around noon, after which it fell to finish at $1.9483/lb., down a quarter-cent. Nickel was down in the pre-dawn hours but rallied through the rest of the day, closing at $4.8368/lb., up 5¼ cents. Zinc was sharply higher through most of the day, ending at its intraday high of $0.603/lb., up a penny. Aluminum was modestly higher, adding a quarter-cent to $0.652/lb., while lead was modestly lower, shedding a half-cent, to $0.5956/lb. Copper continues to struggle to close over $2, carding a fractional loss yesterday after it fell short of what is proving a formidable barrier once again. Analysts said the metal's run early in the day followed the stock market. "A little bit of buying has crept through on the back of the Dow," said James Roberts, of Sucden Financial in London. "The turnaround in prices is equity-driven." But the upturn in the dollar likely put a lid on things. "We expect the currency markets and technical signals to continue exerting a strong influence over short-term price direction," wrote analysts at Standard Bank. Stockpile data was non-supportive, as inventories monitored by the LME rose by 2,300 metric tons yesterday, to 504,200 tons. But canceled warrants—metal earmarked for delivery—continued to soar, advancing to 59,825 tons yesterday, up from 27,675 tons a week earlier. Inventories are still up by 48% this year, but with a lot of metal heading out for China, some see improvement ahead. Analyst Judy Zhu was somewhat optimistic, writing that, "Data related to consumption of industrial commodities lead us to believe that the worst time for China's demand may have passed, though we still believe that an immediate, strong rebound is unlikely." It's not only copper that's streaming toward China, either. As Platts wrote, "The wide spread between Chinese refined zinc prices and those quoted on the London Metal Exchange has led to an increase in zinc imports over the past three months, as local importers make huge profits." While supplies are tight now, "Industry participants, however, expect zinc imports to slow down by mid-May, when the buying season ends. Zinc end-users in China, such as zinc alloy producers, usually buy materials between February and May every year once they are back from the Lunar New Year break end January," Platts wrote. Source: Base Metals Move Little

Crude Inches Higher Posted: 09 Apr 2009 12:07 PM PDT In the energy market on Wednesday, oil rebounded slightly, with crude for May delivery closing at $49.38/barrel, up 23 cents. May reformulated gasoline dropped just over 2 cents, to $1.4396/gallon. In its weekly inventory report, the Energy Information Administration said that crude supplies rose 1.7 million barrels in the week ended April 3, which was lower than analysts' expectations. The EIA also reported that gasoline inventories rose 600,000 barrels while distillate stocks declined by 3.4 million barrels. Refineries operated at 81.8% capacity, up slightly from a week earlier. "Crude stocks didn’t increase as much as anticipated but stocks remain well above the high end of the normal range," said James Williams, of WTRG Economics.. "On the consumption side the U.S. is using less of everything … The data is a clear indicator that the recession has changed consumer behavior," Williams added. Source: Crude Inches Higher

Dollar/Euro Nearly Unchanged Posted: 09 Apr 2009 11:32 AM PDT In the currency market, the dollar was essentially unchanged against the euro. Late Wednesday, the euro was trading at $1.327 vs. $1.3267 on Tuesday. The buck got a bit of a lift after the release of the minutes of the Federal Open Market Committee’s March 18 policy meeting. The notes showed that members saw a worsening economic environment  in mid-March, with all agreeing that "substantial additional purchases of longer-term assets … would be appropriate … Members agree that the monetary base was likely to grow significantly." There was little debate in the FOMC on the question of buying longer-term Treasuries, with the major disagreement coming over how much to buy. Some members said the prospect of deflation argued for "very substantial purchases," while others said some of the heavy lifting could be accomplished by other Fed programs, particularly the new Term Asset-Backed Securities Loan Facility. "What happened to a solid recovery in 2010? As it stands, the minutes provided ample justification for the Fed’s decision to engage aggressive quantitative easing," wrote Matthew Strauss, of RBC Capital Markets. The euro was also harmed when the Irish government estimated that its budget deficit will soar to 10.8% of GDP this year, in spite of emergency budget plans to slash spending and increase taxes. Source: Dollar/Euro Nearly Unchanged

Precious Metals Go Flat Posted: 09 Apr 2009 11:05 AM PDT Gold was up early in the overseas markets, fell off into mid-morning in New York, rallied back to peak at $890 just before the end of the Comex, then declined again through the Globex, finishing at $880.00/oz., down $1.10. Overnight, gold is slightly higher. Platinum had a decent day, rising into the second hour in New York, before pulling back a little and trading sideways for the rest of the day, ending at $1175/oz., up $12. Overnight, platinum is sharply higher. Silver traded all day between $12.20 and $12.40, zigging and zagging before closing with a slight gain at $12.26/oz., up 4 cents. Overnight, silver is little changed. (Click here for charts) It was a very blah day for the precious metals as nothing much showed up to provide a sense of direction, with equities posting mild gains, oil bouncing back over $50, and the dollar static. The reason why investors are buying gold, "fears of longer- term inflation and currency debasement, remain intact," wrote John Reade, the head UBS AG (NYSE:USB) metals strategist in London. Once gold prices have stabilized, "we expect bottom-fishers to begin the next cycle of investment." But in the meantime, opposing forces are contending. As Dan Norcini, writing on jsmineset.com, put it: "Gold is still caught in the tug of war between risk and risk aversion with traders unsure exactly how to trade it. Physical buying of gold from overseas, especially India, is strong below the $900 level but that is insufficient in and of itself to push prices higher. It can serve to put a floor under the market but to take gold higher, it is going to require strong investment interest. Interestingly enough, the reported holdings of the gold ETF, GLD, have remain fixed for some time now." As far as silver goes, many are looking for it to break out at some point this year, and the key may lie in some New York warehouses. As Norcini wrote: "Silver drawdowns out of the Comex continue on their torrid pace with another 2 million ounces coming out yesterday. Whoever is taking the silver out of the HSBC (NYSE:HBC) warehouses has managed to draw down stocks from near the 80 million ounce mark (registered category) in December of last year to yesterday's 63 million ounce mark. That is no small feat." Norcini goes on to speculate, "I think it no coincidence that the reported holdings of the silver ETF, SLV, have also shown a reported increase since the first of this year of some 52 million ounces." If there is a connection, that would be most interesting. Source: Precious Metals Go Flat

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