Global Investor ,Silver must  confirm the Gold Rally

To confirm gold’s bull market run, silver must settle above $20.78 an ounce.

Silver hit $20.78 an ounce back in March 2008; while gold also hit a nominal high that month, it surpassed contract highs 12 months later while silver stalled.

If there’s an ounce of doubt still apparent in the nine-year bull market for the precious metals it’s silver’s failure to confirm the primary trend in gold prices. Silver has failed to confirm the rising trend in gold over the last four months because it didn’t hit a new high last year whereas gold did.

Historically, gold and silver have rallied together in all precious metals’ bull markets since WW II. I can’t find a period when one metal rallied at the same time the other declined. Though gold is a monetary metal – silver is more tied to the economic cycle because of its industrial usage – the latter nevertheless plays a role amid an uncertain monetary environment. Supplies for both metals remain at historically low levels as production continues to decline.

Any bear market rally for the dollar must be viewed as yet another opportunity to sell the dollar in exchange for gold, silver and the mining shares. I would also add to my holdings in Canadian dollars and Norwegian kroner on any intermittent dollar rally.

The two important columns are the “Total assistance” and “Average cost of living impact.”

The “Total assistance” column details the increased benefits paid by the government to individuals to help cope with the increased costs of an ETS. In reality what this also equates to is the extra cost to the taxpayer - you.

And the “Average cost of living impact” column details the increased cost to the consumer.

Whichever way you look at it, it’s theft from the individual on a grand scale. Because remember, it’s not businesses that pay for this, it’s always the individual. You’ll pay for this through increased taxes plus increased prices.

While I’m on the subject, a quick update for you on our Climate Change education…

Based on what we’ve read so far on Climate Change, all roads lead back to the Intergovernmental Panel on Climate Change (IPCC). All other research is based on the findings of the IPCC. Therefore, if the IPCC have got it wrong, then all the other research its findings are based on is completely useless.

Which rather puts a hole in the argument about there being millions of scientists who have researched Climate Change and found it to be a problem.

Because they haven’t, they’ve merely created models based on inputs supplied by the IPCC, and then added in their own scenarios to spit out the results.

So, the IPCC reports are the next port of call on our Climate Change/Stable Climate education.

But you only have to look at the horse trading over the ETS between the crooks in government and the crooks aiding and abetting them in the Opposition.

We simply ask the following question: If Climate Change is so important that something must be done about it, why is the government allowing the biggest emitters of CO2 and pollutants to get off virtually scot free?

We can answer that question ourselves. It’s because the Climate Change argument is all about a massive tax grab and power grab. It’s got nothing to do with ’saving’ the environment.

Unfortunately, the ‘Stable Climate’ deniers can’t see this because they’ve taken a massive dose of ‘Climate Change Rohypnol.’ They’re drugged up to the eyeballs on Climate Change spin.

Unfortunately for them, after the drug wears off they’re likely to wake up in ten years to find they and their wallets have been severely violated. Trouble is, it won’t just be them that will have felt the pain, everyone will have.

But, as I say, that’s on the table for tomorrow. Today we’re looking at gold priced in Australian dollars. Although it’s not just gold, but silver that’s making some headway too.

One of the frequent comments I get from readers is that the price of gold in Australian dollars has actually fallen in the last few months even though the US dollar price has risen.

You can see that on the chart below:

The Aussie dollar gold price reached a peak of around $1,550 in February this year before sliding to below $1,150 in the space of six months.

You could reasonably argue that in Australian dollar terms the price of gold crashed this year.

The simple reason for the ‘crash’ is due to the ever decreasing value of the US dollar. As you can see on the chart below the Australian dollar has climbed from 63 cents in March to 93 cents today, a near 50% increase:

It has been this ‘crash’ in the price of US dollars that has caused the Aussie dollar price of gold to fall.

The point is whether now is a good time to buy gold? I mean, as Money Morning reader Peter wrote to us yesterday:

“How do we know that “GOLD” being a safe asset is not in a bubble?”

That’s a pretty good question. And of course we can’t be 100% certain that it isn’t in a bubble. Although I’m 99.99% (gold bugs will like that reference!) certain that it isn’t.

But let me put it this way, if someone asked me which would be the best asset class to buy and hold over the next 30 years, my answer would be precious metals.

Rather, share investors should be active with their portfolios taking advantage of high prices to sell and cheap prices to buy. It doesn’t mean you have to be a day trader, it just means taking more responsibility over your investments rather than letting the fund managers cream you.

And as for property, well, it goes without saying that property is in a monumental bubble caused by rampant government and central bank manipulation - invest in property at your peril!

As a long term buy, hold and ‘forget-about’ investment, gold - and silver - wins hands down.

Gold price hits record high on report to ditch dollar

Gold news

The price of gold struck an all-time high Tuesday as the dollar fell on a news report of a plan by Gulf states to stop using the greenback for oil trading.

Gold hit 1,045.00 dollars per ounce on the New York Mercantile Exchange in late trades.

Hours earlier on the London Bullion Market, gold surged to 1,043.78 dollars beating the previous record high of 1,032.70 dollars an ounce struck in March, 2008.

Barclays Capital precious metals analyst Suki Cooper said dollar weakness appeared to be related to reported secret talks about oil being priced in a basket of currencies including gold rather than the dollar,

This “has added to concerns about the future role of the dollar in international financial markets,” Cooper said.

The dollar’s future as the world’s top currency was thrown into doubt on Tuesday as a report said Arab states had launched secret moves with China and Russia to stop using the greenback for oil trading.

Arab states have launched steps with China, Russia, Japan and France to stop using the dollar for oil trades, British daily The Independent reported on Tuesday, but the report was denied by Kuwait and Qatar and reportedly by other nations.

The Independent’s Middle East correspondent Robert Fisk wrote in his paper: “In the most profound financial change in recent Middle East history, Gulf Arabs are planning — along with China, Russia, Japan and France — to end dollar dealings for oil.”

They would instead switch “to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council (GCC), including Saudi Arabia, Abu Dhabi, Kuwait and Qatar,” added Fisk.

Gold, viewed as a safe-haven investment, has won back favour in recent months as the global economy struggles out of its worst slump in decades.

The run-up in gold has been largely driven by weakness in the dollar, which makes dollar-priced commodities cheaper for holders of stronger currencies, boosting demand.

Gold also wins support from fears about higher inflation because the metal is widely regarded by investors as a safe store of value.

Precious metals consultancy GFMS last month warned that the current upward trend in gold may not be sustainable should global stimulus packages fail to boost flagging demand in the battered world economy and inflation fall as a result.

The Group of 20 leaders of emerging and developed nations recently agreed at a summit in Pittsburgh not to roll back massive stimulus measures that helped contain a severe global recession.

Gold is on the rise again, and it is likely that its price action will test soon the previous highest levels, above $1,000. Currently Gold is trading just below this important level.

The price action has posted a high at $999, above the previous significant peak of last June (point E on the chart). This point E was posted on a resistance line that was the previous oblique support of the bullish move occurred between last October and last March. This ascending technical slope was built by higher lows where the price action was regularly bouncing back.

Click to enlarge

When this support was cleared in April, Gold prices continued their correction before rebounding (from points D to E). The previous support that became a new resistance prevented then a further rise above $1,000.

From this high posted in early June, Gold prices consolidated in a range between $900 and $975. The recent spike has started at the very beginning of the current month and it is likely that the barrier of $1,000 will be cleared soon.

One key indicator is the On Balance Volume (OBV). It shows that the money flowing into Gold futures contracts has been increasing regularly and significantly since the month of May. The volume creates the price action and this rising OBV is a strong indication that a bullish trend has developed.

There is also a medium-term technical support line (in green) that has been backing the price action for the last 5 months. This support line goes through higher low points D, F and G.

The Chande Momentum Oscillator has surged. It has entered an overbought area, which however is not confirmed yet by the Relative Strength Index (RSI).

The immediate target is of course the historical closing price of $1,004 posted in March 2008 (point A). It’s probable that the price action will remain a bit choppy around the key level $1,000 (illustrating the struggle between bulls and bears), but a move significantly higher this resistance level could create a new momentum.

Gold prices sharply corrected after the peak of point A as they were coming from far (below $800). The momentum was exhausting and profit-taking was unavoidable. Rather that today, the price action n has remained above $900 for a long time and the recent rally (from point G) is only a 7.5%-up move. Further upside is therefore possible and would attract new trend following flows.

SINGAPORE (Dow Jones)–Asian stock markets were mixed Friday despite a positive cue from Wall Street, as a lackluster performance by the Chinese stock markets once again tested investor confidence. Mining stocks were rising in Australia and Hong Kong, supported by gains in gold and base metal prices.

Japan’s Nikkei 225 was down 0.4%, Australia’s S&P/ASX 200 was up 0.4% and South Korea’s Kospi Composite was 0.8% lower. Hong Kong’s Hang Seng Index was 0.1% higher with the Shanghai Composite Index up 0.2%, after weaving in and out of the red in early trade. DJIA futures were five points higher in screen trade.

Resources stocks were higher after a surge in gold and base metal prices on Thursday, when spot gold came within a whisker of the key psychological $1,000 per troy ounce level. It was last down $1.70 from New York at $990.

“Now we need to see whether we can attract follow-through interest. During the last two years, gold could not sustain prices above $1,000 and each time quickly fell back,” said Anderson Cheung, director of precious metals at Mitsui in Hong Kong. “If we can maintain prices above $1,000 for two weeks I’ll trust the rally.”

In Australia, gold miner Newcrest Mining was up 1.3%, and Lihir Gold up 1.0%, while BHP Billiton rose 0.2%.

Gold stocks in Hong Kong were also higher, with Zhaojin Mining up 6.2% and Sino Gold 2.8% higher.

Caution was the watchword in markets as the Chinese stock markets failed to build on Thursday’s sharp gains. There were also monthly U.S. nonfarm payrolls data on the slate later.

Bank shares were higher in China after the banking regulator said it was considering gradually removing holdings of subordinated debt from being factored into commercial banks’ capital, rather than treating the move as a one-off deduction.

“A gradual deduction will give the banks time to sell their subordinated debt holdings and lessen funding demand from banks in the near term,” said Jin Lin at Orient Securities. China Merchants Bank gained 1.6% and China Construction Bank was up 1.1%.

Trade in the Japanese market was muted. “The Japanese market won’t move much unless Wall Street, Shanghai and dollar/yen are all pointing in one direction,” said Mizuho Securities market analyst Yukio Takahashi.

Daiwa Securities Group was down 4.6% and Sumitomo Mitsui Financial Group slipped 0.8% after a person close to the matter told Dow Jones Newswires that the two are in final talks to dissolve their partnership in Daiwa Securities SMBC.

Sumitomo Mitsui Financial Group said it was in talks with Daiwa but nothing had been decided regarding dissolving its joint venture.

Korean investors were shrugging off news that North Korea had entered the final phase of uranium enrichment for nuclear weapons and was building more bombs with spent reactor fuel rods. “I don’t think people will be scared of such news as many think the possibility that North Korea can actually uses those bombs to attack is low,” said Kim at HI Investment & Securities.

Daewoo Securities was up 1.3% while Daelim Industrial rose 1.0% on news of a KRW762.86 billion order to build a gas processing plant in Iran. Hyundai Motor though was down 2.8% and Hynix lost 3.9%.

Property developers were mostly higher in Hong Kong with Soho China up 4.4% on news that the commercial property developer had won an auction for a plot of land in Beijing with a CNY4 billion bid.

In New Zealand, NZ Farming Systems Uruguay rose 5.8% on speculation that Singapore-based Olam International, which this week took at 14.4% stake in the company, may buy more and trigger a full takeover offer. Fletcher Building rose 2.5%, and Pumpkin Patch was up 0.6%, tracking their U.S. peers.

Singapore’s Straits Times Index was down 0.2% while Malaysia’s main index was 0.4% higher and Indonesia’s main index was up 0.1%. Philippine shares were up 0.9% and Thai shares were flat. New Zealand’s NZX-50 was 0.4% higher and Taiwan’s main index was up 0.6%

In currency markets, the major foreign exchange pairs were keeping to very tight ranges as traders pulled to the sidelines ahead of the U.S. payrolls at 1230 GMT. A Dow Jones Newswires poll of analysts tipped payrolls to drop by 233,000 in August, after a 247,000 fall in July.

The euro was little changed against the U.S. dollar, at $1.4245, from $1.4252 in New York Thursday, and at Y131.87, from Y132.00. The U.S. dollar was at Y92.57 from Y92.75.

Base metals were extending their gains from Thursday with LME three-month copper at $6,322 per ton, up $72 from the London kerb, and aluminum at $1,869, up $16. Lead was also stronger given capacity shutdowns on lead poisoning concerns in China, with LME lead at $2,330 per ton, up $60.

Japanese government bonds were weighed by weakness in U.S. Treasurys Thursday and stronger stocks. The lead September futures contract was down 0.23 at 139.13 points and the 10-year yield up two basis point at 1.32%.

(Gold is the December contract on the NY Mercantile Exchange. Silver, copper and oil are the September contracts.)

NEW YORK - The Standard & Poor’s 500 index is four digits again. The widely used stock market measure broke above 1000 on Monday for the first time in nine months as reports on manufacturing, housing and banking sent investors more signals that the economy is gathering strength.
The index is used as a benchmark for many mutual funds.
Indices all rose more than one per cent, including the Dow Jones industrial average, which climbed 115 points.
The market’s July rally blew into August on the type of news that might have seemed unthinkable when stocks cratered to 12-year lows in early March.
A report predicted US manufacturing activity will grow next month, the government said construction spending rose in June, and Ford Motor Co said its sales rose last month for the first time in nearly two years.
The day’s reports were the latest indications that the recession that began in December 2007 could be retreating.
Hope of a recovery, based on better corporate earnings reports and economic data, propelled the Dow Jones industrial average 725 points in July to its best month in nearly seven years, restarting a spring rally that had stalled in June.
The Dow rose 114.95, or 1.25 per cent, to 9286.56. The S&P 500 index rose 15.15, or 1.53 per cent, to 1002.63. It was the first finish above 1000 since early November.
The Nasdaq composite index rose 30.11, or 1.52 per cent, to 2008.61, its first close above 2,000 since October.

LONDON - European stock markets rallied after upbeat data from the United States and the 16-nation eurozone raised hopes about the prospects for a recovery.
London’s FTSE 100 index ended the day up 74.1 points, 1.61 per cent, at 4682.46 points, after hitting its highest point so far this year.

FRANKFURT - The Dax rose 94.71 points, or 1.78 per cent to end at 5426.85.

PARIS - The CAC 40 gained 51.53 points, or 1.5 per cent, to 3477.8.

TOKYO - Japanese share prices ended mixed as investors took a breather after the market ended last week at a near 10-month high on growing optimism about the global economy.
The benchmark Nikkei-225 index slipped 4.36 points, or 0.04 per cent, to 10,352.47.

HONG KONG - Hong Kong stocks rose 1.14 per cent to a near 11-month high, boosted by another surge on the mainland despite some dealers staying on the sidelines ahead of first-half corporate results.
The Hang Seng Index rose 233.93 points to 20,807.26, its third consecutive gain.

WELLINGTON - The New Zealand sharemarket made moderate gains on sustained confidence even though eftpos company ProvencoCadmus was placed in receivership.
The benchmark NZSX-50 index closed up 31.6 points, or one per cent, at 3047.85. Turnover was worth $NZ78.45 million ($A62.12 million).

SYDNEY - The Australian sharemarket is expected to open higher on Monday, after US markets rose to a nine-month high overnight as manufacturing, housing and banking reports suggesting that the economy is gaining strength.
At 0716 AEST on the Sydney Futures Exchange, the September share price index contract was 56 points higher at 4266.
In economic news, the Commonwealth Bank and the Australian Chamber of Commerce and Industry release their business expectations survey covering the June quarter.
The Australian Bureau of Statistics releases retail trade data for June and the June quarter, and the house price index data for the June quarter.
The Reserve Bank of Australia holds its August board meeting to consider interest rates, inter alia.
The second day of the 2009 Diggers and Dealers mining forum will be held in Kalgoorlie, Western Australia.
The Australian share market closed moderately stronger on Monday, led by the banks amid quiet trading on a bank holiday in NSW and the ACT.
The S&P/ASX 200 index was 19.4 points higher, or by 0.46 per cent, at 4263.4 while the broader All Ordinaries index rose 21 points, or 0.49 per cent, to 4270.5.

NYMEX

Oil and natural gas prices rose sharply on the weakening dollar and on new signs of life from manufacturers that suggest the recession may be loosening its grip.
Benchmark crude for September delivery rose three per cent, or $US2.13 to settle at $US71.58 a barrel on the New York Mercantile Exchange. It was the third straight day of substantial increases on the energy futures markets and the first time in a month that crude traded above $US70.
Natural gas, a major source of power generation, spiked by more than nine per cent on a day when both China and the United States reported stronger manufacturing activity.
Production from US manufacturers jumped to its highest level in more than two years last month with new orders to restock businesses that had cleared inventories as the economy slumped.
The decline in manufacturing has been slowing since December and officials with the Institute for Supply Management, a trade group of purchasing executives, said Monday that signs of growth in the sector could emerge as early as next month.
Manufacturing in China expanded at its fastest clip in a year, according to a survey by Hong Kong brokerage CLSA Asia-Pacific Markets.
In other Nymex trading, gasoline for August delivery rose 5.67 cents to settle at $US2.0693 a gallon and heating oil gained 3.88 cents to settle at $US1.8713.
Natural gas for August delivery jumped 37.8 cents to settle at $US4.031 per 1,000 cubic feet.
In London, Brent crude prices rose $US1.85 to settle at $US73.55 a barrel on the ICE Futures exchange.

COMEX

Commodities traders placed more bets on an economic recovery on Monday, adding copper and aluminium to their portfolios as the dollar sank to fresh lows.
Upbeat reports on manufacturing activity around the world moved investors to dump traditionally safe-haven assets like the dollar and government bonds in favor of riskier assets that stand to benefit more as the economy improves.
Copper was the standout among metals, soaring 4.4 per cent to close at a 10-month high after the Institute for Supply Management said US manufacturing activity declined during July at the slowest pace in nearly a year. The private trade group said its manufacturing index rose more than expected in June.
Reports showing similar improvements in the manufacturing sectors in China, Britain and the euro zone added to the market’s optimism. Particularly encouraging was a survey of China’s manufacturing sector, which hit a 12-month high.
Copper prices have nearly doubled this year due mainly to solid demand from China. On Monday, prices rose 11.5 cents to settle at $US2.7385 a pound on the New York Mercantile Exchange. Aluminum prices jumped 4.2 per cent.
Among precious metals, September silver rose 31.2 cents, or 2.2 per cent, to $US14.2520 an ounce, while October platinum gained $US25.50, or 2.1 percent, to $US1239.70 an ounce.
Gold for December delivery added $US3 to $US958.80 an ounce.

(Gold is the August contract on the NY Mercantile Exchange. Silver, copper and oil are the September contracts.)

NEW YORK - Wall Street ended modestly lower on Wednesday as the market consolidated recent gains, largely shrugging off a plunge in Chinese shares and weaker-than-expected data from the US factory sector.
The Dow Jones Industrial Average shed 26 points, 0.29 per cent, to 9070.72.
The Nasdaq composite dipped 7.75 points, 0.39 per cent, to 1967.76 and the broad-market Standard & Poor’s 500 drifted down 4.47 points, or 0.46 per cent, to a close of 975.15.

LONDON - European stock markets, resisting a slide on Wall Street, advanced, drawing strength from corporate earnings results.
The London FTSE 100 index gained 18.69, or 0.41 per cent, to close at 4547.53 points.

FRANKFURT - Pharmaceutical group Bayer surged 5.44 per cent to 42.23 euros after reporting results that beat expectations.
Despite a third consecutive quarterly loss auto maker Daimler added 4.55 per cent to close at 31.46 euros. The company foresaw an improvement in its operating results by the end of the year.
Lufthansa edged up 0.21 per cent, having released some of its results just ahead of the market close. The airline reported a 15.7 per cent slide in first half sales.
The Dax rose 95.58 points, or 1.85 per cent, to 5270.32.

PARIS - In Paris, earnings reports drove the market. The CAC 40 index lifted 34.65 points, or 1.04 per cent, to 3365.62 points.

TOKYO - Japan’s Nikkei stock average edged up 0.3 per cent to a seven-week closing high, buoyed by high-tech shares such as Tokyo Electron, but gains were capped ahead of key company earnings.
Nippon Steel fell 3.5 per cent after the company said it swung to a quarterly loss, widened its first-half loss forecast by 10 per cent, and said it would not pay a first half dividend.
But trade was thin and investors were hesitant after a nine-day rising streak was broken on Tuesday — the longest such run in 21 years — and ahead of a slew of Japanese earnings this week.
The benchmark Nikkei-225 index edged up 25.98 points, or 0.26 per cent, to 10,113.24.

HONG KONG - Hong Kong shares closed 2.37 per cent lower on Wednesday as China counters tumbled after a slump on the Shanghai bourse.
The benchmark Hang Seng Index ended down 489.04 points at 20,135.50.

WELLINGTON - After rising for the previous 11 trading days, the NZ sharemarket took a breather on Wednesday, in line with trends in foreign markets. Brokers said it was a mixed market with selected stocks still attracting buyers.
The NZSX-50 index closed down 28.01 points, or 0.93 per cent, at 2990.47. Turnover was worth $NZ61.95 million ($A49.39 million). There were 37 rises and 40 falls among the 108 stocks traded.
From below 2740 points in mid-July, the benchmark NZSX-50 index reached 3018.5 on Wednesday, its highest level since last October.

SYDNEY - The Australian sharemarket is expected to open flat to low on Thursday after US stocks finished in negative territory and commodity prices dropped overnight.
At 0710 AEST on the Sydney Futures Exchange, the September share price index contract was three points higher at 4100.
In economic news, the Australian Bureau of Statistics (ABS) releases building approvals data for June.
In equities news, Lihir Gold releases its second quarter production report, Elders Rural Bank posts annual results, and Austar United Communications issues first half results.
Heartware International Inc will hold its annual general meeting.
Future Fund chairman David Murray will address the American Chamber of Commerce in Australia on “The Frameworks and Focus for the Future Fund and Nation-Building Funds”, in Sydney.
On Wednesday, the Australian share market snapped a 11 trading day bull run, closing down more than half a per cent amid profit-taking in the resources sector.
The benchmark S&P/ASX200 index closed down 26.7 points, or 0.64 per cent, at 4142.8 points, while the broader All Ordinaries index lost 25.1 points, or 0.6 per cent, to 4148.9 points.

NYMEX

Oil prices tumbled after news of swelling US inventories revived market worries about weak demand in the world’s largest energy consumer.
New York’s main contract, light sweet crude for September, dropped $US3.88, or nearly six per cent, to close at $US63.35.
In London, Brent North Sea crude for September delivery shed $US3.35 to settle at $US66.53 a barrel.

COMEX

Gold for August delivery dropped $US11.90 to $US927.20 an ounce on the New York Mercantile Exchange.
September silver fell 48.2 cents to $US13.258 an ounce.
September copper decreased 4.3 cents to $US2.4775 a pound.

MORNING MARKET REPORT

Gold is the August contract on the NY Mercantile Exchange. Silver, copper and oil are the September contracts.)

NEW YORK - Wall Street shares drifted to a mostly higher close on Friday as investors mulled disappointing earnings reports.
The Dow Jones Industrial Average rose 23.95 points, 0.26 per cent, to finish at 9093.24.
The technology-heavy Nasdaq composite dropped 7.64 points, or 0.39 per cent, to 1965.96, snapping a 12-session winning streak.
The broad-market Standard & Poor’s 500 index added 2.97 points, or 0.3 per cent, to close at 979.26.

LONDON - European stock exchanges closed narrowly mixed on Friday as a near two-week rally ran into profit-taking ahead of the weekend.
In London, the FTSE 100 index of leading shares was up 16.81 points, or 0.4 per cent, at 4576.61 points.

FRANKFURT - The Dax fell 17.92 points, or 0.34 per cent, to 5229.36.

PARIS - The CAC 40 index slipped 7.27 points, or 0.22 per cent, to 3366.45 points.

TOKYO - Japanese shares rose for an eighth straight day, ending at the highest level in more than three weeks after Wall Street posted its best finish of 2009.
The benchmark Nikkei-225 index climbed 151.61 points, or 1.55 per cent, to 9944.55.

HONG KONG - The benchmark Hang Seng Index closed up 165.09 points, or 0.83 per cent, at 19,982.79.

WELLINGTON - The benchmark NZSX-50 index closed up 42.54 points, or 1.46 per cent, at 2961.17.

SYDNEY - The Australian sharemarket is likely to open higher after a mostly positive lead from the US and the commodity market.
At 0707 AEST on the Sydney Futures Exchange, the September share price index contract was 26 points higher at 4,091.
In company news on Monday, Australian Foundation Investment Co Ltd annual results and Australand Property Group first half results are due.
The case brought by the Australian Securities & Investments Commission (ASIC) against James Hardie Industries NV in the NSW Supreme Court resumes for a penalties hearing.
On Friday, big miners helped drive Australia’s stock market to its highest close since last November.
The benchmark S&P/ASX200 index closed up 25.7 points, or 0.63 per cent, at 4089.8, its highest close since November 10.
The broader All Ordinaries index gained 24.7 points, or 0.61 per cent, at 4097.3 points, its highest close since November 6.

NYMEX

Oil prices rose, powered higher by growing optimism that the US economy is on the mend.
New York’s main futures contract, light, sweet crude for September delivery, climbed 89 cents to close at $US68.05 a barrel.
In London, Brent North Sea crude for September delivery increased $US1.07 to settle at $US70.32 a barrel.

COMEX

Gold for August delivery fell $US1.70 to $US953.10 an ounce on the New York Mercantile Exchange.
September silver gained 10.5 cents to $US13.875 an ounce.
September copper fell 0.2 cent to $US2.522 a pound.

NEW YORK - Wall Street shares opened a new month and quarter on an upbeat note, as an encouraging report on the US manufacturing sector helped offset weak news on the labor market.
The market appeared to focus on a report showing signs of improvement in the US manufacturing sector in June even though it failed to grow for a 17th straight month.
That news helped to offset a survey from a payrolls firm showing the US private sector shed 473,000 jobs in June.
The Dow Jones Industrial Average gained 57.06 points, or 0.68 per cent, to settle at 8,504.06.
The Nasdaq climbed 10.68 points, or 0.58 per cent, to 1,845.72 and the Standard & Poor’s 500 broad-market index increased 4.01 points, or 0.44 per cent, to settle at 923.33.

LONDON - European stock exchanges surged ahead in line with a robust opening on Wall Street and in response to the positive US manufacturing data despite worse-than-expected unemployment figures.
The London FTSE 100 index added 91.5 points, or 2.15 per cent, to close at 4,340.71 points.

FRANKFURT - The Dax gained 96.8 points, or 2.01 per cent, to end the session at 4,905.44.

PARIS - The CAC 40 rose 76.56 points, or 2.44 per cent, to 3,217 points.

TOKYO - Japanese shares dropped despite the Bank of Japan’s quarterly Tankan survey showing that business confidence among major Japanese manufacturers had improved for the first time in two-and-a-half years.
Many investors were disappointed because they had hoped for a better reading, dealers said.
The benchmark Nikkei-225 index lost 18.51 points, or 0.19 per cent, at 9,939.93 points.

HONG KONG - Closed for a public holiday.

WELLINGTON - The New Zealand sharemarket closed lower, reflecting weakness in offshore markets.
The benchmark NZSX-50 ended down 15.737 points, or 0.563 per cent, at 2,780.369.

SYDNEY - The Australian sharemarket is expected to open higher after Wall Street rose on positive economic data and commodity prices strengthened.
At 0710 AEST on the Sydney Futures Exchange, the September share price index contract was 16 points higher at 3,877.
In economic news on Thursday, the Australian Bureau of Statistics releases international trade in goods and services data and manufacturing production data, both for May.
The Australian Office of Financial Management conducts a tender of $900 million in Treasury notes in two tranches maturing on October 23, 2009, and January 22, 2010.
In equities news, information technology firm ConnXion Ltd holds an extraordinary general meeting.
Tiger Airways Australia will launch its Sydney-Melbourne route.
On Wednesday, the Australian share market started the new financial year on a downbeat note, with major resources and financial stocks losing ground after profit-takers moved in.
The benchmark S&P/ASX200 index lost 80.9 points, or 2.05 per cent, to 3,874 points, while the broader All Ordinaries index fell 75.5 points, or 1.91 per cent, to 3,872.3 points.

NYMEX

Oil prices fell after bouncing above $US71 as markets reacted to a mixed report on US petroleum inventories.
The US Department of Energy said in its weekly report that American crude oil reserves tumbled 3.7 million barrels in the week ending June 26, the fourth weekly drop in a row.
The market had expected a lighter decline of 2.1 million barrels.
But the department also reported growing domestic inventories of key refined products gasoline and distillates.
New York’s main contract, light sweet crude for August delivery fell 58 cents from Tuesday’s closing price to $US69.31 a barrel.
Brent North Sea crude for August delivery lost 51 cents to $US68.79 per barrel.

COMEX

Prices for gold and other metals rebounded as the US dollar lost ground against other major currencies.
The US dollar declined as stocks moved higher after reports showing stabilisation in the manufacturing sector both in the US and abroad stoked some risk taking among investors.
Precious metals benefit from a weak dollar as investors often use gold as a hedge against inflation.
Metals reversed big losses from the day before that had been sparked by a weak report on consumer sentiment.
Gold for August delivery rose $US13.90 to settle at $US941.30 an ounce on the New York Mercantile Exchange.
July silver gained 16.6 cents to $US13.74 an ounce, while July copper was up 5.7 cents to $US2.315 a pound.

NEW YORK - Wall Street shares vaulted higher, with investors optimistic that the US congress was on the verge of a deal on a massive rescue plan for the financial sector.
The Dow Jones Industrial Average gained 196.89 points, or 1.82 per cent, to 11,022.06.
The Nasdaq composite added 30.89 points, or 1.43 per cent, to 2,186.57, and the Standard & Poor’s broad-market index increased 23.31 points, or 1.97 per cent, to 1,209.18.

LONDON - The London FTSE index rose 101.4 points, or 1.99 per cent, to close at 5,197.02 points.

FRANKFURT - The DAX added 120.16 points, or 1.99 per cent, to close at 6,173.03 points.

PARIS - The CAC 40 gained 112.27 points, or 2.73 per cent, to 4,226.81 points.

TOKYO - The Nikkei lost 108.5 points, or 0.9 per cent, to close at 12,006.53 points.

HONG KONG - The benchmark Hang Seng Index closed down 27.56 points, or 0.15 per cent, at 18,934.43.

WELLINGTON - The benchmark NZSX-50 index closed down 21.964 points, or 0.67 per cent, at 3237.715 points.

SYDNEY - The Australian stock market is expected to open stronger today after US political leaders struck an agreement in principle on a $US700 billion plan to revive the crippled financial system.
It is hoped both houses of US congress will vote on the plan within days.
Wall street and European markets have reacted positively to the news, with major indices recording gains of around two per cent.
At 0735 AEST, the Sydney Futures Exchange’s December Share Price Index contract was up 63 points at 5,057.
In news today, Greater Bendigo Gold Mines holds a general meeting.
Heritage Gold NZ, a company listed in both Australia and New Zealand, holds its annual general meeting in Auckland.
The Emissions Measurement and Information Systems conference continues in Sydney.
Yesterday, the benchmark S&P/ASX200 closed down 54.5 points, or 1.09 per cent, at 4927.4, while the broader All Ordinaries lost 47.4 points, or 0.95 per cent, to 4960.8.

NYMEX
Crude oil rebounded on hopes that the $US700 billion bank bailout plan would stabilise the teetering US economy and boost domestic energy demand.
New York’s main contract, light sweet crude for November delivery, rose $US2.29 to settle at $US108.02 a barrel.
In London, November Brent crude rose $US2.15 to settle at $US104.60 a barrel.

COMEX
Gold prices fell as an agreement in principle on a US government financial rescue package prompted investors to sell safe-haven assets in favour of stocks.
Gold for December delivery fell $US13 to settle at $US882 an ounce on the New York Mercantile Exchange, after earlier falling as low as $US868.80.
Other metals traded mixed. December silver fell 16.5 US cents to settle at $US13.275 an ounce, while December copper rose 2.8 US cents to settle at $US3.1345 a pound.

Very quietly compared to all the noise about the big bailout proposal from the US Government and the other move for the Fed to offer a lifeline to struggling mutual cash management funds, new steps to relieve distressed commodities markets were launched Friday by US regulators after Lehman and AIG woes triggered a wave of selling and emergency actions by exchanges earlier in the week.

The Commodity Futures Trading Commission, the main regulator of US commodity markets, said it was ”prepared to provide temporary and conditioned hedge exemption relief for firms taking on swap positions from distressed companies”.

The move would allow Wall Street’s investment banks and trading companies to take over some large commodities’ positions held by Lehman Brothers and AIG, known as swaps, without surpassing limits set by the regulator and the exchanges on speculative limits.

”This will allow for continued risk management and orderly functioning of the markets,” the CFTC said in the statement.

That means in particular the huge oil market will be stable.

AIG acts as a counterparty to a substantial portion of the $US30 billion invested in the DJ-AIG commodity index, the second most popular benchmark in the asset class. Lehman Brothers was also a significant player in commodities markets.

The CFTC added that it was coordinating with commodity futures exchanges to facilitate rare block trading, which allow the transfer of large positions. That would allow the people liquidating Lehman and winding up AIG’s speculative positions to handle large groups of deals with the same counterparties.

“CFTC staff is engaged in heightened monitoring and surveillance of financial company single-stock futures traded on futures exchanges – in coordination with the SEC’s emergency action on short selling and in our collective effort to prevent manipulation of financial stocks,” the Commission said.

That will be significant as already there are traders developing ways of circumventing the ban on short selling: one is sell the S&P500, then hedge the stocks you don’t want; in effect you short sell the stocks remaining in the position unheeded.

The move links to the one on Friday where cash funds were guaranteed. Many mutual funds have commodity based offerings and investors use the associated money market fund when moving their money from fund to fund..

The US Treasury on Friday rushed to the aid of ailing money market funds, saying it would guarantee the holdings of funds as it attempted to prevent the spillover of the financial crisis to the $US3.4 trillion business.

In establishing the temporary guarantee program for the US money market mutual fund industry, the Treasury tapped the Exchange Stabilisation Fund, which was established by the Gold Reserve Act of 1934 in response to the Great Depression. The support will be done via the Fed.

The move to shore up the fund is designed to allow the Treasury to insure the holdings of any publicly offered eligible money market mutual fund – both retail and institutional – that pays a fee to participate in the program.

It came after the Reserve Fund was forced to reveal it was ‘breaking the buck’ in paying investors 97c in the dollar and not the usual $1 in redemptions after being exposed to $800 million worth of Lehman Brothers debt that is facing big losses.

Crude oil rose Friday in New York, capping the biggest three-day rally in almost a decade, on speculation government measures to resolve the bank crisis will spur the economy and bolster petroleum demand.

That’s the theory, the reality is that there will be no impact on the US economy and oil prices will start sliding very quickly.

Oil rose 6.8% on Friday as output disruptions from hurricanes in the US and attacks in Nigeria’s main oil producing region continued to have as much impact on price and sentiment as what was happening in the sharemarkets and credit system.

October crude futures jumped $US6.67 to settle at $US104.55 a barrel in New York after rising 7.4% to touch a day’s high of $US105.25 a barrel.

Oil prices rose 15% last week, the biggest three-day rally since December 1998 as shorts scrambled to cover short positions.

That lifted the week’s performance to a 3.3% gain, the first weekly rise since mid August. It’s still down 29% from the high of $US147.27 reached on July 11.

The October contract expires tonight, our time, so when the Fed and the US Government moved on the mega bailout, traders decided to cover their positions.

Inventory positions in the US in the wake of twin Hurricanes Gustav and Ike will be key figures for the market this week.

Energy companies have resumed about 12% of oil production and a quarter of natural-gas output in the Gulf of Mexico after shutting almost all of it before the hurricanes.

The Gulf accounts for about 26% of American oil output and around 14% of gas production.

In Nigeria, Shell warned that the recent escalation in militant attacks would hurt earnings. The country has lost about 280,000 barrels a day from the violence on top of production already shut-in, according to government officials.

November Brent crude rose $US4.42, or 4.6%, to $US99.61 a barrel in London.

Gold futures dropped sharply on Friday to end a very volatile week.

But it still had its biggest weekly gain in almost nine years on the turmoil in the financial markets.

Comex December gold futures fell $US32.30, or 3.6%, to $US864.70 an ounce in New York, but the metal jumped 13% over the week, up $US100.20, the best since October 1999.

Comex December silver futures dropped 22.5 USc, or 1.8%, to $US12.475 an ounce on Friday. That left it up 16%, the best since early 1987.

Gold is now up 3.2% so far this year, while silver has dropped 16%.

Comex Gold for immediate delivery rose $US18.26, or 2.2%, to $US869.23 on Friday.

Comex December copper futures rose 11.05 USc, or 3.6%, to $US3.1765 a pound in New York. But that still left the metal down half a per cent over the week.

On the London Metal Exchange, three month copper rose $US311, or 4.6%, to $US7,060 a tonne, or $US3.20 a pound. The price is up 5.8% this year.

Nickel however had its biggest weekly drop in almost four years as stocks of the metal rose to a nine-year high, signalling weak demand from consumers, led by stainless steel producers.

London Metals Exchange stock rose 0.9% to 52,326 tonnes, the highest since July 1999.

That was after a 0.6% dip in second quarter stainless steel output this year, compared to the same quarter of 2007.

Three month nickel ended at $US16, 843 a tonne. The fall was more than 12% for the week, the biggest since October 2004.

The International Nickel Study Group said the world’s nickel surplus rose for a third month in July as consumption of the metal dropped to a nine month low.

The INSG said nickel production of the metal exceeded demand by 9,900 tonnes tons in July, compared with a surplus of 7,700 tonnes in June.

Lihir Gold Limited (ASX:LGL) is a gold mining, development and exploration company, focused on the Lihir gold mine and processing facilities located in Papua New Guinea.

Yesterday we saw that Sino Gold Mining (ASX:SGX) was likely to take advantage of the strong Gold price rebound. Today we have a look at a similar stock, also strongly correlated with Bullion prices. The analysis is therefore almost the same as the 2 stocks (SGX and LGL) have the same price action.

Click to Enlarge

Two charts illustrate this: the first one is the LGL price development in parallel with gold prices (Gold in red line), while the second one is the LGL/SGX comparison (SGX in blue line). There again the positive correlation of LGL with both Gold and SGX is flagrant.

Click to Enlarge

As indicated yesterday, many indicators argue for a strong rebound of the Bullion, in the current context of financial crisis and uncertain business climate. Gold price soared yesterday, the biggest gain ever posted in one day, as the credit market turmoil convinces investors to pull their money out from equities and to put it back in safe-haven assets. Yesterday SGX jumped by 22.54% and LGL bounced 15.89%.

As same causes create same consequences, a further momentum is expected for LGL.

Several signals argue also for a positive development.

The stock actually lost 61% of its value between the historical high posted in last March, at $4.39 (well the real historical high had been posted in October 2007 at $4.45), and the recent low posted last week (at $1.6950). The stock has been obviously oversold and, as it has already bounced back impressively, a large retracement is more than likely.

The MACD just triggered a bullish signal yesterday, as it crossed above its signal line. So did the Relative Strength Index, which has quit the oversold area and has been soaring for a week now. The On Balance volume indicator (OBV) provides a running total of volume and shows whether this volume is flowing in or out of a given stock. Here the OBV has also clearly bottomed and has turned upward: money is flowing back into the stock. Once again, if both price and volume move on the upside, it’s a good sign that a bullish momentum is building up, and that a positive trend may be possible.

A significant retracement of the recent decline is likely. Yesterday the price closed at $2.48, well above the 23.6% Fibonacci ratio. The next objectives are therefore $2.7 then $3.1 (the 38.2% and 50% retracement ratios).

The slump in global commodity prices, led by oil and gold, is looking ominous for producers, and great for consumers and economies like China, India and the US and Europe. But the reasons for the fall are sending a different message; one that you might not want to hear: the rest of this year and much of 2009 is going to be miserable, more miserable than we have so far seen in 2008. Oil prices eased further overnight after initially rising on the fighting in Georgia: prices fell under $US114 a barrel before closing at $US113.01 in New York.  Gold fell more than $US33 an ounce in overnight trading, and then fell a further $US4 an ounce in early Asian trading yesterday to trade around $US828 an ounce, the lowest level since late December, 2007. It then rose a touch, then fell sharply by almost $US16 an ounce to trade around $US813 an ounce. Gold actually hit an intra day low in Asia yesterday around $US802 an ounce.It then recovered and traded around $US822 this morning. Oil is now down more than $US33 a barrel form its peak a month ago of over $US147 a barrel, a fall of more than 22%. Prices have fallen more than $US6 a barrel from before the Georgia fighting started last Thursday. But gold prices have plunged by more than $US50 an ounce since the fighting started last week and that is as good an indicator (along with oil) on the enormous switch in sentiment in global commodity markets. The Australian dollar fell, rose and then fell well under 88 US cents in Asian trading yesterday, while the US currency jumped under $US1.49 to the euro to maintain its rapid appreciation. The Australian dollar was actually closing on 87 US cents late yesterday as oil and gold prices continued to weaken.It was at 87.60 US cents this morning. A month to six weeks ago fighting in such a sensitive area, plus the bombing of a major oil pipeline, like the one in Turkey at the weekend, would have seen a surge in oil prices, while gold would have chased itself higher as nervous bears sought their usual haven of value or protection in volatile times. Now the normally nervous nellies in the markets don’t seem to care. Investors no longer see commodities, especially gold and oil, as havens or plays to make money.It is an astounding change in sentiment. The surge in the US dollar has become too powerful as momentum from big investors searches for new havens of safety. And they have found it in the US which they figure won’t lose as much as leaving money invested in Europe, Australia, New Zealand, or in commodities. Markets like commodities would have reacted negatively to news of war in the Caucasus, which is an important oil-exporting region.

The fact that oil and gold prices keep falling strongly suggests that investors/traders now strong believe the world economy is in bad shape. That is bad for oil prices, gold and other actively traded commodities.

If you believe that speculators were responsible for some of the strong surge in commodity prices, then you have to blame them for some of the rapid retreat in commodities in the past month.

When we look back at this time we will see that the first 11 days or so of July were the peak of the current commodity price surge.

But while there’s good news in lower commodity prices, the fact that markets now reckon 2009 is going to be worse than this year isn’t good news.

There are some important statistics due out in Europe (eurozone growth for the June quarter) and the US (retail sales and industrial production) which could confirm the downturn in both giant economies, or at best, sluggish growth.

And what are big investors doing? Selling commodities (open interest positions, which are contracts not closed out or delivered on any given day) are falling, indicating that the investors who plunged into commodities, are retreating.

And they are buying US shares.

But for Australia there’s goodish news from China, with consumer price inflation down and signs the economy is not tanking in an inflationary spiral (See accompanying story).

This slump in oil and other commodity prices is sending a message that global economy will worsen, not improve: a message that the Reserve Bank has been very alert to.

It’s why the bank has been pushing a message of an incipient easing in monetary policy with a rate cut next month.

The Bank is angling to make a pre-emptive cut in rates (just as it launched pre-emptive rate rises, starting a year ago to tackle inflation) to allow the economy room to adjust to any further downturn in the global economy.

Reserve Bank Governor Glenn Stevens has made it clear on a couple of occasions that the bank moved early to act against inflation, not wait until inflation appeared, then act.

It’s why its reading of the global economy, and the rapid slump in domestic activity, has seen it push domestic economic growth to equality with inflation in its short to medium term policy objectives.

And that’s why the National Australia Bank yesterday warned that the RBA had to avoid engineering too hard a landing for the economy.