Tuesday, January 23, 2007

A fantastic day for gold

Gold, silver and their mining stocks enjoyed a strong rally today. Spot gold gained $11.50 or 1.82% to $644.9. The HUI index ended at the high of the day, 329.82, a gain of 4.69% on the day. The stocks were much stronger than the bullion, which is a sign of bull market action. The gold bull has done its utmost to throw off as many riders as possible. Although I foresaw some turbulence in Crossing the line, the depth of the correction (to HUI = 306) took me by surprise. Granted we are not out of the woods yet until we successfully assail the 340 level, things are definitely looking up. Since I'm Back on board the PM train on Jan. 13, I plan to enjoy the ride for quite a while longer.

There was a very interesting development yesterday, in case you missed it.

Blanchard and Company has learned that the International Monetary Fund has adopted a landmark accounting change to the way Central Banks account for their gold loans, giving this sector of the commodities market more transparency than it has ever had, the precious metals market leader announced today ... the newly adopted accounting change means that Central Banks will no longer include the amount of gold they have loaned and sold into the market as part of their reserve total assets.

The full press release can be found here. The Gold Anti-Trust Action Committee (GATA) has long maintained that central banks have "leased" out much of their gold to short sellers; however, this information has been masked from the public because the central banks have been keeping leased gold and gold in the vault as a single line item. I don't know how many or how soon the central banks will adopt this new disclosure rule. But if they do and GATA turns out to be right, it will be unbelievably positive for gold prices.