Gustav Blows Over And So Do Gold and Silver
The headline pretty much says it all. Gustav didn’t turn into a monster storm and that was the equivalent of a gut punch for crude oil, which has now traded to within a few dollars of the downside target I provided previously (low $100s). Meanwhile, the U.S. dollar might still have some more work to do?to the upside. The net result is a rude welcome back for gold and silver investors from their summer break, as silver has given up over $1 and gold almost $40 so far today. This constitutes a step back, a pretty big one, but it is still par for the course in the one step back, two steps forward bottom-forming process. Both silver and gold remain above their absolute August lows as I write this. More importantly, they have the chance today to put in an exhaustion low, something they have not both done so far. Look for a bounce of 70 cents or more from the low in silver and 20 plus?dollars in gold by the end of today with some continued strength for a couple of days, ideally taking out last week’s highs. This is not a prediction, just what an exhaustion low?could look like (by only referencing price — ideally we also get other signals as well). Frankly, this would be quite a feat for the monetary metals at this point given the rather ugly sentiment out there.
I have been buying Gold/Silver for 5 years. In the past several months I have witnessed the worst PM price action ever.
I believe the fiat-masters know what is coming and are putting heavy pressure on real money, this to quell a safe-haven move.
They will fail and I see a huge move up in price in 4Q.
Is it a coincidence, or does the timing of the Republican Convention and the PM collapse seem very suspicious?
Well if you really want a tinfoil hat, what about the whole mess with the VP selection and trying to take the focus off that?
did the dollar react to oil or vice versa? Somebody should overlap these charts at this critical juncture. pretty crucial for the analysis of PM near-term future.
The basis between cash and futures is saying something. As we speak
cash silver is above the near month prices. How much will the large silver
holders who also trade the basis be able to make with this condition?
Not so fast, the active contract has moved to December in both gold and silver so that is the month that should be used for basis calculation. No month other than December should matter at this point for silver.
Tom,
Nice forecast about the exhaustion low
Silver went up from 12.55 to 13.30 - an increase of 75 cents, gold went up from 795.20 to 814.60 - almost 20$.
Oil has also posted a nice comebck of 5$ or so, only the currencies seem locked in previous trends…
Maciek.
Today’s action in the shares-to-metals ratios for both gold and silver makes me skeptic about the exhaustion low.
GUSTAV might not have been a MONSTER….but do not forget the saying DEATH FROM A THOUSAND PAPER CUTS. This is what is happening in the OIL markets. Gustav might not have landed a KNOCK DOWN punch, but it got one in the KIDNEYS….and it hurt.
From THEOILDRUM.com:
“Kinetic Analysis Corporation estimates the impact of Hurricane Gustav on Oil production in the Gulf of Mexico.
Kinetic Analysis Corporation (KAC) is forecasting a shortfall of 17 million barrels of oil (MMBBL) for the month of September, based on an expected loss of 40% of normal Gulf of Mexico Production due to Hurricane Gustav. The Gulf of Mexico normally produces 33.6 MMBBL of Oil out of 155 MMBBL produced domestically. Only 138 MMBBL are expected to be produced in September. With imports averaging 300 MMBBL per month, and refining usage at 458 MMBBL, approximately 20 MMBBL would have to be tapped from stocks during the month of September to maintain current usage levels.
We expect production to be back up to to 95% by the end of the year. We expect a long-term production loss of approximately 3%, since Gustav’s swath went through some areas that Ivan, Katrina, and Rita missed, and older, less productive wells that suffered damage will probably not be restored to operation.
The LOOP terminal, source of 25% of US oil imports and the only VLCC class supertanker port on the US East Coast, was directly in the path of the storm. In addition to damage to the offshore port itself, the connection pipelines to shore are also vulnerable to storm damage. Our baseline estimate is 10-14 days downtime for the port itself. As there is some potential for undersea slumping and scour, pipeline disruption is possible and could further aggravate supply issues.
For refineries and distribution, mainly short-term disruption is expected due to precautionary shutdowns; no long term impacts are expected unless there is significant disruption of the pipelines. Flood-related delays in repair and restoration due to high rainfall rates are possible if the storm lingers in the impact area.
Storm total damage (residential, commercial, and infrastructure) is estimated at $35-40 Billion.”
So….even though GUSTAV was not the MONSTER the FINANCIAL MARKETS might have thought…..it was still SEVERAL PAPER CUTS. And we have 3 more possible STORMS in the PIPELINE. There is nothing GOOD for the FUTURE BEARISH PRICE of OIL….only HUNDREDS more PAPER CUTS. This will INFLUENCE the PRICE of GOLD and SILVER.
As of now…..the MEDIA has DOWNPLAYED the RUSSIA BUILDUP and CHESS GAME between it and the USA….as well as the FACTS behind the FUTURE OIL SITUATION. All bets are off for ANY LIES worth SAYING after 2010 with PEAK OIL…..the FAN will HIT THE CHIT.
So in the MEANWHILE…we can sit here and watch the CLOWNS and MAGICIANS SWEET BULLETS trying every ACT they can….to keep the AUDIENCE from LEAVING THEIR BOOB TUBE and getting a DOSE OF REALITY.