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The Coming Big Money Bang

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil rose in early trade on short covering and came within 14 cents of a new all-time high at $83.76, but it then fell on profit taking in late trade and ended back under $82 in volatile end of the quarter action as traders watched weather in the Gulf of Mexico and kept their eye on any news about geopolitical developments over Iran and Nigeria.

The U.S. dollar index plummeted to new all-time lows below 78.0 for the first time in its over 40 year existence as tame Core PCE inflation data furthered speculation that the fed will continue to cut interest rates and lessen demand for the currency as other countries are holding interest rates at current levels or even raising rates.

Treasuries rose in early trade on tame inflation data that pushed interest rates lower, but they fell back off in late trade and ended near unchanged after the dollar accelerated its losses following comments from the fed’s Poole who defended the fed’s recent 50 basis point cut in rates.

The Dow, Nasdaq, and S&P traded mostly slightly lower on worries over upcoming earnings reports in surprisingly light volume for the last day of trading of the third quarter.

Among the big names making news in the market Friday were Avaya, UAW and GM, 3com, and Freddie Mac.

The Commentary:

“After briefly consolidating around $730, some $10 to $15 higher than expected, gold is climbing to new heights.   Why?   Because the U.S. $ is breaking massive support and falling to new lows.  

Alongside oil prices climbing when many expected a fall we have entered a new era for gold.   One where the gold price is driven by macro-economics and currencies.  Investment demand is the gold game now as many new funds find their way into gold, probably for the first time.   The quarter end brings book squaring not only in gold but also on mortgage related investments, for the first time since the crisis began.   The market is telling us something is going wrong, horribly wrong in the monetary world.”- Julian D.W. Phillips, www.goldforecaster.com

“Gold returns to the center stage Friday reaching fresh record levels. Gold is returning to its historical attribute as a monetary instrument. With the US Dollar falling to new lows, capital is looking for a preservation of wealth asset. As foreign currencies become more expensive and suspect themselves, gold is quickly becoming an asset choice. A lack of faith in the US Dollar’s ability to preserve purchasing power will continue to flood the gold market with investment demand. This is the key driver. I would expect in the coming months the process will continue, in waves, with gold surpassing the $800 level as investors begin to focus on the $1,000 level.”- Peter Spina, www.goldforecaster.com

“December Gold finished up 10.1 at 750, 2.5 off the high and 4 up from the low.

December Silver closed up 0.275 at 13.92. This was 0.19 up from the low and 0.06 off the high.

With another big range up extension this week coming in the wake of a fairly significant spec and fund long positioning in gold from the prior week, it isn't surprising that the Press and trade began to toss around the idea that gold was becoming over extended. However, the bull camp could suggest that the presence of corrective talk means that the market isn't totally bullish. On the other hand, the market did see suggestions from Gold Fields Mineral Services that gold miners could eventually resume hedging. However, the dialogue from GFMS at a gold conference seemed to suggest that the hedging interest might be several years away! With the US Dollar falling aggressively on Friday, the gold market certainly saw an escalation of financial flight to quality anxiety and that might have been accentuated by the weakness in the US equity markets.

With gold exploding higher on the charts it wasn't surprising to see December silver rise to the next even number zone of $14.00. However, the silver market had to discount a reversal in the copper market and weakness in the equity market in its track higher. Fortunately for the bull camp the positioning reports in silver will not fully reflect the fact that December silver managed to rise more than 30 cents an ounce above the level where the COT reports were measured at the beginning of the week.”- The Hightower Report, Futures Analysis and Forecasting

GATA Posts:

How Barrick's hedging gold in a rising market could be a bonanza

Northern Rock gets another L5 billion from Bank of England, pays dividend

Citigroup acknowledges central bank scheme to suppress gold

The Statistics:

As of close of business: 9/27/2007

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

Note: Change in Total Tonnes from yesterday’s data: The LSE added 4.21 tonnes.

COMEX Gold Trust (IAU)

Note: No change in Total Tonnes from yesterday’s data.

Silver Trust (SLV)