Kinross Gold Corp T.K

Kaplan daily commentary

[Wildstuff]

Although the traditional external forces upon the precious metals markets last week would have normally produced higher prices last week, the opposite result occurred with prices cascading sharply lower. For the week, the USD was broadly lower against the major currencies of the world, but did not have the supportive effect usually seen. While one corporate scandal and fraud after another unfolding in the stock markets in the US, it had little to no effect on prices, and the broad indices closed down fractionally. It was a most confusing, most unusual, and difficult trading week where the markets seemed to do exactly what was not expected. Gold opened sharply higher on Friday morning as the USD was being beaten down, continuing the recent trend. The Euro was up over 100 points and was approaching parity with the USD. Soon thereafter, the Federal Reserve and the European Central Bank, at the behest of the Japanese Central Bank, intervened in the foreign exchange markets, selling the Euro and selling the USD and buying Yen. While such actions roiled the markets, in the end they were unsuccessful as the USD was still considerably lower at the end of the day. But such unexpected actions immediately put gold on the defensive from the opening, and prices tailed off slowly for hours. Then, the excitement of a "bear raid" occurred. About half of the decline in the gold price for the last week occurred in just the last few minutes on Friday as prices plummeted, basis the August gold contract, to $310.50 in just minutes, only to rebound sharply to close near $314.00. With London closed by that time, thereby limiting the number of participants in the gold market, with the silver market closed, thereby limiting the "players" in the market, some large traders pushed prices to levels where sell stops were WIDELY known to exist. As these sell stops were triggered, prices plummeted. Of the 45,000 contracts traded on the exchange for the day, about half were executed in the last 5 minutes. All the weak longs in this market were finally excoriated and purged from this market. Anyone who had their sell stops just below recent lows is now out of the market. All in all, I do see last week's markets as somewhat aberrant, and I do look for a quick recovery. In fact, I have wagers with several clients that gold will rally sharply over the weekend and will open at least $4 higher when New York opens Monday morning. The inherent weakness of the gold market these past few months is that the price has been propelled higher by investment and speculative interests alone, often a fickle and transitory consideration. Commercial and industrial demand has been just awful, as demonstrated by the fact that gold lease rates remain at multi-year lows. Industrial concerns have been most reluctant to chase prices higher and have simply waited for the inevitable dips in the market price that they expected. Now with the USD much weaker, and the USD/Gold price at one month lows, I fully expect their interest to greatly expand. For example, gold in Euros has fallen from the recent highs of about 350 Euros to the ounce of gold to well under E320 at present. And, with the USD still falling, we should also see some reemerging interests from global investors at these price levels. And, if we see the equity markets follow common thought, and decline due to the loss of confidence engendered by the recent trend toward fraud and financial misrepresentations, this should also be supportive. I see little chance of sharply lower prices for the precious metals on the horizon. For the past week, silver prices remained in the rather tight consolidation pattern envisioned and forecast by this commentary, and closed only about 2 cents lower. Gold was down in excess of $11 while the platinum group metals were hammered as negative fundamental news emerged in an economic environment that now questions the vibrancy of a global economic recovery. Platinum was down over $26 and now represents fair, or perhaps less than fair, value at these prices. For some discretionary accounts of the firm, I was a small buyer on Friday. Palladium closed down $9 in rather quiet trading conditions. As Russia continues its economic liberalization, gold production continues to rise. In the first five months of the year, almost 35 tons were produced, up about 40% from last year. As production is continuing to decline in most production centers of the world, Russia is ramping up. But, it is highly unlikely that their production will offset the expected declines in global production levels forecast for the next 5 or so years. Earlier in the year, some of the most rabid bulls in gold were simply screaming that gold would explode due to demand emerging from Japan. Changes in the deposit insurance on bank accounts offered by the government and the moribund economic conditions were supposed to ignite the "mother of all" bull markets with Japanese investors piling their assets into gold in a frenzy like has never been seen. Please remember that this commentary was one of the greatest skeptics of such bull market fantasy. Well, in March of 2002, TOTAL gold demand, and imports, into Japan totaled (drum roll.... please) 3.06 tons, a grand total of about $32 Million USD, or about as much as Bill Gates keeps in his household checking account. The rapid decline of platinum over the past week has much to do with the release of a report by the CPM Group, who estimated that platinum supply is expected to rise 10.5% this year, after rising 10.3% last year. With expectations of platinum demand at 5.3 million ounces, against a production of 5.95 million ounces, a considerable structural surplus of 650,000 ounces will exist, for the first time in years. Such statistics immediately engendered rapid and sizable selling from investors in the Far East. Now, the numbers in palladium are far worse, but in line with current industry estimates. Total palladium supply will be 6.68 million ounces with demand at 4.95 million ounces, for a structural surplus of about 1.7 million ounces. But palladium prices were already down over 70% from its highs last year, while platinum prices were still rather lofty. Both platinum and palladium prices will depend mightily upon the fragility or the strength of the global economy over the next few months. But all in all, large rallies should be sold, as there is going to be more metal than the market can ever hope to use. On to the Commitment of Traders reports, both futures and options, as of June 25th GOLD Long Speculative Short Speculative Long Commercial Short Commercial 67,214 19,599 69,014 158,463 -681 +2,188 +3,444 +6,155 Small Long Specs Small Short Specs 60,830 18,997 +6,623 +1,042 Please remember that the period referenced by the above statistics was before the declines in prices seen during the later part of the week, and such information will greatly explain the actions of the market. As open interest surged during the week, by over 12,000 contracts, it was primarily the small speculator who was a buyer, and the commercial shorts accommodated their purchases. The VERY definition of "weak hands" is the small speculator and they are the ones who were punished on Friday. Give the professionals an easy target, and the right conditions, and they will usually score. I find it most interesting, and quite long term bullish, that the professional speculative interests were resolute in maintaining their long positions. This is just as has occurred recently. In the past, the = professionals were easy to shake out of the market, now it has become impossible. But, the small specs are, and have been, another matter entirely. I still maintain my overall bullishness on the gold market, and see the recent market action as perhaps just the exaggeration of a needed retracement. The gold market has only rarely in history been a "run-away", it tends to "back and fill", to consolidate, before moving higher. With the USD in a confirmed downtrend, with stock markets likely to move lower rather than higher, with the gold producers still either repurchasing their forward sales or refusing to add new ones, I am still friendly. But bull markets don't go up every day. I see prices under $318 an ounce as a buy and prices approaching $330 an ounce as a short term sell, where it makes sense to moderate long positions by either selling futures or by selling short term call options. SILVER Long Speculative Short Speculative Long Commercial Short Commercial 46,058 5,986 23,800 90,578 -4,909 +941 -92 -6,209 Contrary to what occurred in gold, open interest declined by 3,760 contracts during the reporting period and I must remark, that I, being both bullish and currently long this market, love what the statistics above illustrate. Long speculative interests were sellers, giving up hope of higher prices, while the commercials were aggressive buyers. Now, since the commercials know the market much better than the speculators, and since the commercials are almost always right, the numbers above shout the probability that silver is going higher, and that lower prices remain an outside chance. I still see silver in a well defined, and well traveled, trading range of perhaps $4.78 to $4.82 on the downside, and $4.92 to $4.95 on the upside. It will take a lot to move us out of this range at present and traders should simply be trading accordingly, buying the dips and selling the rallies. PLATINUM Long Speculative Short Speculative Long Commercial Short Commercial 3,732 611 1,653 5,916 [phone] +50 Even though prices declined during the trading period, there was very little movement in the ownership of contracts on the exchange in this commodity. It seems a bit untrustworthy to ascribe anything of merit from such meager changes. GOLD RECOMMENDATIONS:(positions and recommendations are available to clients and subscribers only) SILVER RECOMMENDATIONS: (positions and recommendations are available to clients and subscribers only) PLATINUM RECOMMENDATIONS: (positions and recommendations are available to clients and subscribers only) CONTACT: Email: Leonard Kaplan Tel: [phone] Fax: [phone] Futures Trading is for individuals willing to accept a higher level of risk for the opportunity of greater returns. This information is obtained from sources considered reliable, but its accuracy is not guaranteed by Prospector Asset Management. The recommendations reflected are those of Prospector Asset Mgmt. and are based upon circumstances it believes merit such recommendations. It is possible that other brokers or analysts may disagree with our opinions based upon their current commodity research or the analysis of commodity trading advisors. 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