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Rumors of (Further) Wars Link to a Yesterday, bullion prices and mining shares took a hit as the U.S. dollar spiked higher in value in a rather short period of time. Today, the markets reversed, so although Dow Jones and the dollar had been higher earlier in the day, they lost all or most all of their gains in a dramatically short period of time. In fact, the Dow Jones averages were strongly higher this morning, but fell to close essentially flat on the day. The dollar fell far harder, and more stunningly than it rose yesterday (http://quotes.ino.com/chart/?s=NYBOT_DXY0). The index was off 1.21% to another new, all time low. The prices for gold and silver also started the day to the down side, but ramped to higher prices by the close of the session. Gold closed at $455.20, another new generational high, with a gain of $5.30 on the day. Why the turnaround? Well, OPEC did let word out that they are prepared to cut production to support oil prices, which have fallen rather dramatically in recent days, but I don't think that's it. After all, crude oil prices and oil company stock indices were not moved very much at all. What I did find in the news, however, was a CNN report that the U.S. fears Iran is developing super long range missiles capable of reaching Europe, and perhaps even the Untied States. This is with aid in part from North Korea, China and certain former Soviet satellite nations. Given whispered reports in recent months that the U.S. wants an excuse to go to war against Iran, here now is growing justification that can build toward that potentiality. So, add rumors of further wars onto the economic pressures building behind raw materials prices - as if a falling dollar (from the twin deficits) and pending shortages of raw materials are not enough. Today's market action aside, a lot of analysts have none-the-less been calling for a correction in mining stocks and bullion prices. I'm not so sure. While precious metals (PMs) do appear to be at resistance, the dollar does not appear to have reached support. It could fall much further before a rally that would drive down the PMs. This makes me think it possible that a continuing fall in the dollar should keep alive the current momentum in metals prices and mining stocks. Should there be a correction, though, it most likely will only be a minor blip on the downward plunging trend lines. But, that's just looking at trends. Trends aside, there is no telling when world markets will wake up to the fact that critical shortages are developing in above ground sources for industrial metals (including silver). Many of these are at historically high prices now in nominal dollar terms, and the realization that stocks are about to be depleted could send trend lines for everything off the charts. I do believe that could happen ("could" is the operating word) at anytime within the next several months. EXAMPLE: Copper - In April '02 stocks in London were around 990,000 tonnes v. today at 57,000 tonnes - a loss of >94% in 31 months. EXAMPLE: Nickel - In July '03 London stocks were around 35,500 tonnes v. today's at 17,700 tonnes -a decline of around 50% in 16 months. In another example, molybdenum prices have reached a dramatic new high of around US$27.00 per pound. Prices just last August had been thought high at $18 per pound. The previous record year was 1980, when the price averaged a few pennies more than $12 per pound. And, the story is quite similar with many other metals, as well as energy related products, such as uranium, crude oil and natural gas. It all spells inflation to me. THE
CHINA SYNDROME: 15/11/2004
- Hong Kong air cargo volumes hit records on huge increases. 15/11/2004
- "Lifestyle" consumer goods feature high on Chinese shopping
lists. 01/12/2204
- Exploding commodity prices will yield "obscene profits" for
mining companies. Some
thoughts: End
legal tender laws. End government debt as an "asset" for
reserve banking. End the Federal Reserve System. "The
study of money, above all other fields in economics, is one in which
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Larry S. Levy is editor of Arts 'n Mines, a private email newsletter for special friends, guests and selected industry insiders. It is not available to the public. EXTRACTS is compiled from portions of the newsletter not dealing with specific mining issues. Mr. Levy also contributes economic and historical commentary on these subjects to international publications. He is retired from his former practice as a property valuations expert, during which time he held leadership roles in the premiere trade associations, lectured, and published articles on valuation topics. |