 | | Tuesday, September 20th, 2005 Baltimore, MD
Jackson, WY
Missoula, MT | Metals Rally |  - Gold Rallies Near 18-year High
- Silver Demand Soars in China
- Platinum Hits 17-mth High
- Loonie Touches 13-year High
- Augusta Resource Update
| 
"The house of success is built upon the foundation of self-confidence."
-- Luke Burgess |
Dear Wealth Daily reader:
It was early 1988. The U.S. House of Representatives rejected President Ronald Reagan's request for $36.25 million to support Nicaraguan Contras and I could have cared less. That's because I was too busy living the 80's life.
It was sometime in late January when I went to a friend's house where he was having a party. I had never been to his house before and didn't know my way around the neighborhood so I showed up fairly late.
When I arrived, the party was in full swing. I worked my way through the smoke and hairspray, through the sea of acid washed jeans and florescent hoop earrings, down to the basement. There, someone had told me, was the keg.
As I poured the already half-flat brew into my cup, my buddy, who was throwing the party, greeted me. He asked me about my new car. I had just bought a 1986 Camaro IROC Z28. Back then that car was bad to the bone. So I asked my buddy if he wanted to go for a quick ride to which he replied, "Sure, why not?"
So we hopped into the car, I threw key into ignition, I cranked up the Cr�e, and we took off. And it wasn't five minutes down the road I hit an ice patch. The car spins a 360 and smashes into a telephone pole.
I bust out of the car, and not even thinking about bodily injury, I scream out something to the effect of, "MY CAR!", plus several obsentities.
Fortunately, we weren't hurt.
That was 17 years ago. I thought of this incident when I read a headline yesterday that said gold was at its 17-year high.
But it not just gold that's rallying right now, it's all commodities.
And author of the widely read book Hot Commodities, Jim Rogers believes that this is the fulfillment of his prediction.
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Birth of a Bull Market Jim Rogers' baby is almost 8-years-old.
Back in 1998, when stock brokers were cold calling naive investors about a "hot tip" about a new Internet company selling crocodiles online, commodities trader Jim Rogers was noticing something...
Commodities had become the red-headed stepchild of the Internet bull market. According to Rogers they, "got no respect."
Back then, we heard commodities were dead. Oil, trading for $11 a barrel at the time, was headed for $3 a barrel, one stock market "guru" wrote.
Gold was worthless...an ounce wouldn't buy you a decent suit anymore. Natural gas was so cheap, utility companies were practically giving it away.
Gold and silver explorers closed up shop because it cost more to mine the stuff than to sell it. But, even more telling to Rogers, was the fact that major Wall Street institutions were literally closing up their commodity trading desks.
Nobody could make money trading commodities anymore.
That was the sign Jim needed.
(I should also tell you that our own commodities Cassandra, Mike Schaefer, was echoing those same sentiments.)
When the strongest of the strong hands in the market throw in the towel, that's the birth of a new bull market. This happened in 1998.
Rogers immediately put it in high gear and started a new commodities business.
When Rogers told people he was starting a new commodities index, people laughed. Today, he looks like a genius. And he is.
The commodity bull market that Jim called in 1998, is now 8 years old and gaining steam.
If you believe Jim (and I do), the commodities bull market is in the 4th inning of a 9-inning baseball game. Jim believes the bull market will last 15 years. So, as of right now, the bull market is at a halfway point.
I disagree. I believe the game is a double header.
Let's take a look at the price action of the commodities.
Gold rallies near 18-year high Gold closed yesterday at their highest level since late 1987. October futures soared past $470/oz in New York as investors worried about the U.S. economy. The recent surge of energy prices renewed concerns yesterday of increased inflation.
Gold is always considered a safe investment. The yellow metal is unaffected by the inflation that can hamper returns on things like equities.
Bullion prices have jumped some 12% in the past three months as oil, gasoline and natural-gas have soared to record highs. Some investors buy gold as a hedge against rising consumer prices. Hurricane Katrina, the costliest natural disaster in U.S. history, drove consumer confidence to the lowest since 1992 and led analysts to cut estimates of economic growth.
Demand for gold in China and India are also major factors in the recent price. And investment demand from ETFs continues to be a strong driver for gold.
Gold is in a major break-out mode. The next support challenge is $475. Then $500 will be targeted.
$500 gold would stimulate increased mining, but at the same time cause a decline in the demand for gold for jewelry fabrication.
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 Silver Demand Soars in China December futures for the white metal opened today at $7.40/oz on the COMEX, only ten cents under the metal's 65-day high. But this is only the beginning of a silver rally.
Silver prices will rise over the next five years as demand in China expands faster than domestic supply.
Analysts say that Chinese silver demand will jump to about 6.3 million pounds by 2010, from 3.5 million pounds last year. The increase would make China the 3rd biggest consumer of the metal behind the US and Japan.
China's $1.65 trillion economy, which grew 9.5% in the second quarter, is already the world's biggest consumer of commodities such as steel, copper, tin and iron ore. Prices for most of these commodities have reached record levels in recent months as producers have failed to keep up with demand.
The 1.3 billion consumers that make up China's population are likely to buy more jewelry as they become wealthier. And silver, that costs about 63 times less than gold and 127 times less than platinum, will attract younger buyers.
"By 2010, we expect China to be using more silver than it mines."
- Tim Spencer, senior metal analyst with a London-based group | Silver is also used in consumer products such as electronics and in photographic film. And as in the case with jewelry, sales of these products are also likely to expand as China's wealth increases.
The global demand for silver was over 52 million pounds last year. 44% of that came from industrial applications and the rest from photography and jewelry.
China's stockpiles of the metal have been hit hard, thereby increasing the likelihood it will have to source its supplies from abroad. Experts estimate that China's silver inventory may be as low as 4 million pounds.
Platinum hits 17-mth high Platinum hit a 17-month high of $937/oz by mid-morning today.This is platinum's highest price since April 2004, when the metal rose to a 24-year high of $942.
Precious metals have been following gains in gold as jitters about inflation and uncertainty over the U.S. economy ignited fund buying.
Experts are saying that platinum could spike above $950/oz or even above its previous all-time high of $1 040, achieved in 1980, as early as October.
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Loonie hits 13-year high The Canadian dollar soared to its highest level in more than 13 years, on expectations surging commodities prices will spur economic growth.
The loonie rose as high as $0.8571, its highest point since Jan. 24, 1992. The currency closed at $0.0557 U.S. cents, up substantially from Friday.
Crude oil, which has been tied to the dollar's climb in recent months, jumped by $4.39 a barrel yesterday amid concern that a Tropical Storm Rita could cause supply disruptions in the Gulf of Mexico.
U.S. interest rates expectations also supported gains.
Raging Bull
It was several weeks ago that Mike Schaefer told readers that he thought the TSX-Venture exchange was about to rebound and begin a massive rally.
He was right. Take a look at a chart of the index:
As we speak, the speculative, natural resource stock heavy TSX-Venture is sitting at record highs.
Look for more gains in the coming weeks.
***
Augusta Resource Corporation to expand Rosemont Project - Adds 2 more drill rigs
Monday September 19, 2:13 pm ET
TSX-V: ARS
VANCOUVER, Sept. 19 /CNW/ - Augusta Resource Corporation (the "Company") is pleased to provide the following update on its exploration and development activities at The Rosemont Copper/Moly Project:
The Company has expanded its drilling campaign to 10,000 metres from its original confirmation and in-fill program of 3,000 metres. The Company has contracted the additional 7,000 metres with Layne Christensen. There are currently three drills active on the property. The original program was designed to update the historic resource estimate for this large copper deposit. The additional 7,000 metres of drilling is designed to add new measured and indicated resources to the main Rosemont zone that is still open to the east. Assaying on sawn drill core is being conducted by Actlabs of Tucson Arizona under a strict QA/QC program, reviewed by an independent professional, that includes inserted standards, blanks and check assays.
A pre-feasibility study on a 60,000-80,000 ton per day copper/molybdenum mine and milling complex and a corresponding technical report are now planned for completion in the first quarter of 2006. Washington Group International Inc. has been retained to lead the pre-feasibility study and Stantec Consulting has been retained to develop the environmental, hydrological, closure and permitting plans, schedules and cost estimates. Augusta is also formulating and permitting work programs for both the Mount Hamilton Molybdenum Tungsten property and the Lone Mountain copper zinc property.
***
Smart Money vs. Dumb Money Mike Schaefer forwarded me this press release from today, with a short email that read:
"See, I was right. Oil is about to correct before heading higher."
The press release is the premise for his recent 2 trades in the Daily Energy Alert. and forthcoming trades in the coming days.
Mike highlighted in red the most telling portion of the release. Remember, his Power Position Ratio measures the strength of buying or selling of the smart money vs. the dumb money.
It would appear that his latest trade thesis in DEA is spot on.
Take a look:
"National Oceanic and Atmospheric Administration forecasts still showed Tropical Storm Rita heading for Texas, where key U.S. crude refiners are located. Hurricane warnings remain in effect for Florida, the U.S. government agency said.
'The NOAA does not provide much comfort there. It's heading for pretty close to Houston. Its projected path couldn't really be much worse,' Barclays Capital commodities analyst Kevin Norrish said.
But brokers said crude had been overbought in yesterday's rally, which was driven by an even stronger surge in refined products such as gasoline and heating oil which would most likely be in short supply if refiners get hit.
Gasoline futures in New York which surged 14.4% Monday, gave up only a little ground. Unleaded gasoline futures were down 727 points, trading at $1.97 a gallon at 1052 GMT.
Nymex front-month crude was down 91 cents at $66.60 a barrel while IPE Brent was down 96 cents at $64.65/bbl.
With products taking central stage, trade was thin in crude, amplifying the impact of even small trades.
'At his rate if you've got 100 lots you can move the market,' a London-based oil futures broker said.
Brokers said buyers were staying away to get a clearer picture of Rita's path and to gauge this week's U.S. crude oil and products inventory data due out Wednesday.
The storm pushed the ongoing deliberations of the Organization of Petroleum Exporting Countries into the background.
The group has been meeting since Monday to hammer out a proposed deal, but any decision is seen as having little impact on the market since there is no real shortage of crude oil. Most OPEC members are already pumping near their maximum capacity and are having difficulty finding buyers for offers of more crude.
But OPEC is under increasing political pressure from oil importing countries smarting from the sting of soaring energy prices.
Oil experts from the 25 European Union members will meet Wednesday to discuss oil prices as fears of a new hurricane in the Gulf of Mexico have sent prices skyrocketing.
OPEC ministers broke for lunch Tuesday without having reached agreement on output policy.
Ministers leaving the meeting said there were still two proposals on the table.
Sources said OPEC was wrangling over the terms of a plan to offer up to 2 million barrels a day of spare capacity if needed to stabilize oil prices.
The other proposal on the table, said to backed by OPEC's de facto leader Saudi Arabia, among others, would involve raising the group's output ceiling by 500,000 b/d to 28.5 million b/d.
Energy consultancy PFC Energy said in a note that the OPEC offer of spare production capacity is a "de facto suspension of quotas," and would send a stronger political message than raising output quotas by 500,000 b/d.
Meanwhile, in Nigeria, security was being tightened at oil installations in the wake of ethnic unrest after the governor of one of the southern oil-producing states was arrested at the airport in London last week."
I told you last week that Mike's trading system was gearing up for as he put it, "an avalanche of trades."
He's already made 2 trades... and more are coming.
To reserve a spot in the Daily Energy Alert, visit: https://server.publishers-mgmt.com/dea/
To learn more about the Power Position Ratio, visit: http://www.wealthdaily.net/dedicated/dea1.html
-- Luke Burgess
To remove yourself from the Wealth Daily Profit letter, visit: Remove.
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Wealth Daily Profit Letter, Copyright (C) 2005, Angel Publishing, LLC. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or solicitation of an offer to buy or sell securities mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy nor the statements made herein. Neither the publisher nor the Editor are registered investments advisors. Subscribers should not view this publication as offering personalized legal or investment advice. Unauthorized reproduction of this newsletter, or its contents, by Xerography, facsimile, or any other means is illegal and punishable by law. Please note: It's not our intention to send email to anyone who doesn't want it. If you would like to remove yourself from this mailing list, please see the instructions at the bottom of this message. NOTE TO OUR READERS: Angel Publishing, LLC and Wealth Daily Profit Letter do not act as an investment advisor or advocate the purchase or sale of any security or investment. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question. | |
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