asia and the metals - silver breaks out

Good morning folks and happy Friday!


First of all, asia did NOT have a good finish to the week. Japan lost
1.55%, Korea 2.83%, Taiwan 1.35%, HongKong .39% and India lost .36%.
Only mainland China gained, being up .59%.


But the story yesterday was silver and the precious metals. Silver
broke out yesterday in a huge way, hitting 22 year highs. Some of this
is attributed to the pending silver ETF and some to the energy price
spike. Regardless, silver opened yesterday morning at 9.75 and is
sitting at 10.20 right now and most of the silver stocks were up in the
high single digits or low double digits.


Gold is at 568.50 =.20 (started thursday at 564), silver at 10.20 +.05,
platinum is 1053 +8, and palladium 298 +3. XAU closed at 139.09 +3.62.


Note: below is a bit of an aside on the pm markets and all, so ignore
onless this interests you.


As mentioned before, there are confusing metal prices. There are spot
prices which have a bullion market which is pretty much open for 24
hours - it closes during the week early after lunch EST for a hour or
so, and then reopens. On Friday it closes at 1 or 2 EST for the weekend
and reopens VERY early monday morning in asia.


And there's the precious metals Futures market which is what you see
quoted normally on CNBC. This figure normally exceeds the spot bullion
price because it's set in the 'future' - say 1-3 months out. I say
normally higher, but this is only in a rising bull market [read: it's
gonna cost you more tomorrow than today if the traders see the market
continuing to rise].


Now, are you confused enough? Good, 'cause it gets worse. Now there are
the mining stocks which are reflected in the averages (XAU and HUI,
etc.) AND YOUR PRECIOUS METALS MUTUAL FUNDS.


These are the companies that mine the actual metals and sell them on
the spot market. They are listed in the various stock exchanges around
the world, although many have ADR's on our exchanges. The other two
very big exchanges for them are South Africa and Toronto.


Anyway, these are stocks, so while the 'product' they make is some
precious metal that gets traded on the spot market, their actual stock
price is subject to many of the same forces that impact the various
stock exchanges. This means that if the markets have a huge day up,
mining stock prices will likely be up too - even if spot prices for the
metals are down. And vice-versa - if the market has a very bad day,
mining stocks will often be carried lower with the bunch in spite of
spot bullion prices actually being up.


So you can't really expect that in the very short run, bullion prices
and mining stock prices will MIRROR each other. What you CAN expect is
that over the intermediate and longer term, they will parallel each
other. By this I mean that if the metals are in a full blown bull
market like they are now, the trend for the stocks will ALSO be in a
bull market.


And while their trends will run in parallel, their individual action is
often used to predict the others action. I've talked about this as
waiting for either spot prices or mining stock prices to CONFIRM the
others moves. This is due to the fact that they are supposed to
parallel each other and when they DON'T, or are temporarily out of
sync, it troubles the players. Folks ask, 'why aren't the miners
gaining if spot prices are soaring?' [or around here, why isn't my pm
mutual fund going up when gold's hitting new highs?]


And that's why this is a cornfuzzled market - lots of different
investment vehicles all trading in their own markets each with it's own
rules and quirks.


Hey, but enough. It's friday and let's make it a great one and an even
better weekend.


peace,


rono