Turning to the precious metals, we remain quite bullish

of gold in non-US dollar terms, as we have for months.

The market continues to tell us we are right in

remaining so. Note then the chart of gold in Sterling

terms at the lower left of p.1. Where gold in US dollar

terms remains very far below its highs made in early

December, gold in Sterling terms made new highs for

the year only late last week and is challenging those

highs this morning. We might readily say the same for

gold in EUR terms, or gold in CHf

terms, or gold in Yen terms.

Further, the fact that we owned

gold in non-US dollar terms was

one of the things that kept us from

being shaken out of our long

standing bullish posture on Friday

when the Goldman news hit the

Street taking commodity priced

downward in frenzied selling. In Sterling terms, gold

held firm. So too in terms of the EUR; only in Yen

terms did gold waver, and even now, with Yen

weakening and told strengthening, gold in Yen terms is

no insulated from random market noise.

At this point we wish to correct an error on our part…

not the first time we’ve done so, and certainly not likely

to be the last. We said that Friday’s weakness was

almost certainly a frenzy of “spec” selling, and it might

have been except that open interest on the COMEX

rose rather than having fallen. If this was liquidation,

open interest should have fallen and it did not.

Someone added to net short positions on the

weakness, rather than having had “spec” longs rush to

the sidelines. There is no question but that “specs”

sold, but there is also even less question but that the

short position became even shorter, and so too the

longs. This is a battle royale, with the real battle ground

to take place at $1155-$1160. Whoever the large seller

was, that was where his previous great stand was

made, other than the selling done Friday amidst panic.

If $1160 is taken out, that seller shall be in a rather

uncomfortable position. Given that we are trading

$1143 this morning, we are some way from that battle

ground, so we can breathe a bit easier and gather our

forces. As Toby Keith might say, “Whiskey for my men;

bear for my horses” and let’s get some rest before the

real action begins.