-- Posted Friday, 30 March 2007 | Digg This Article

Oil prices look like they will finish the week settling at prices not seen in six months, due almost exclusively to growing tensions between the UK and  Iran over the capture of 15 British sailors in the Persian Gulf.  The US economy continues to spit out data that fails to lay out any discernable trend.  The sub prime mess is spreading and most analysts believe the contagion is only just beginning.  The easy thing about my job sometimes is that I have a wealth of reasons to pick at any point in time on why precious metals are performing the way they are…this past week I've been stuck and consequently can only point to one possible reason (the old end of month profit taking excuse be damned!).

I believe we'll see on Tuesday morning, with the release of the ECB gold sales updates, the potential culprit behind this lack of performance in precious metals will be revealed.  At a time when logic would suggest precious metals should be outperforming most other investments, we've seen gold painfully inch forward and capture only modest gains in the last two weeks.  In the last two reporting weeks, we have seen sales figures from ECB banks spike considerably.  The average gold market investor doesn't necessarily comprehend the chilling effect that significant Central Bank selling can put on the market in a short period of time. The data on Tuesday will bear out my thesis, but after the last two weeks of significant sale increases (29 tonnes), I have to believe we're seeing another week of heavy sales. The fact that the price isn't collapsing in the face of central bank selling is quite impressive. Last time the market was hit with this much central bank gold was two weeks in September (52 tonnes) when prices fell over $25 per ounce and, of course, May '06 when $1.4 billion in gold sales (75 tonnes) came out of ECB member banks and we saw prices drop over $100 bucks an ounce.

I'll let others opine on the motives behind increased sales at this point in time, but one thing I am sure about is that these past three weeks of limited gains and the gold market seeming to tread water in the face of news that should be sending prices through the roof; it will ultimately turn out to be one of the most bullish market signals in hindsight.  We've seen sales of these magnitudes collapse the gold price in short order, most recently the September and May examples above, but we're not seeing that currently.  The market is having some trouble digesting the increased tonnage, but prices are still heading higher. 

Blanchard and Company, Inc. is the largest and most respected retailer of American rare coins and precious metals in the United States, serving more than 450,000 people with expert consultation and assistance in the acquisition of American numismatic rarities and gold, silver and platinum bullion. The Blanchard Economic Research Unit is a key source of precious metals market analysis and continues to be an important resource for financial and consumer media throughout the United States. Blanchard and its predecessor companies have called the New Orleans area home for more than 30 years. For more information about the company, visit BlanchardGold.com or call the company toll free at 1-800-880-4653.

-- Posted Friday, 30 March 2007 | Digg This Article

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