End of summer, gold should break though $1,700

Tuesday, September 4, 2012 3:20:23 PM America/Toronto

After the long holiday weekend in the US, the precious metals have returned from the official end of summer to strong bids pushing the market higher.  Volume is surging once again indicating that investors have returned in force and are ready to reallocate funds after a typically lackluster summer of trading.  In the US this morning, the ISM’s (Institute for Supply Management) factory gauge declined to 49.6 in August from 49.8 the month before.  Economists had expected an August reading of 50, generally considered the fine line between expansion and contraction.  US equities sold off on this news and in a positive sign for the precious metals, they are distancing themselves from the broader market liquidation and are attracting investors in the wake of Bernanke’s hints at QE3 last week.

Gold is currently up $8 on the day but has found resistance so far at the psychological level of $1,700.  In the past three trading days, it has begun to form a base at the previous Fibonacci resistance of $1,689.75 which is a positive sign.  It seems that it is only a matter of time, and a short one at that, until $1,700 is decisively broken.  Silver has continued its ascent as well and in the last two days has formed a double top at $32.30.

Comments | Posted By Jamie Cohen

Job’s data triggers higher prices for gold and silver

Tuesday, September 11, 2012 3:15:37 PM America/Toronto

After a meteoric rise in the last few weeks, the precious metals were propelled even higher on Friday as employment figures, or rather, unemployment figures, jolted the markets.  Lower wages, less hours, and lower payrolls gave further credence to the market’s expectation of QE3.   Upon the release of the jobs’ data, the euro and gold both catapulted higher with the yellow metal finally ending its trading day up nearly $40.

In light of last week’s price action and participants already seemingly pricing in QE3 on Friday, the precious metals movements this week have been relatively muted.  Traders are taking a breather here and are eagerly awaiting the FOMC rate decision / statement this Thursday before adding or trimming positions.  Gold remains well bid above psychological support at $1,700 while overhead there is really no technical resistance until $1,790.

 

Comments | Posted By Jamie Cohen

Middle East unrest and precious metals investing

Thursday, September 13, 2012 3:10:07 PM America/Toronto

Even with unrest rippling through the Middle East in relation to the US, the precious metals are markedly quiet so far today as traders wait on the sidelines ahead of the FOMC statement.  Protesters, allegedly reacting to an obscure, amateur film critical of the Muslim Prophet Muhammad (although others allege it was an attack planned by Al Qaeda to coincide with 9/11), stormed the US embassy in Libya killing the US ambassador and three other American state department employees.   This event has subsequently caused a contagion in the broader region as protesters have gathered in droves around US embassies in Yemen and Cairo, Egypt.  Developments should be closely watched in regards to this story as political turmoil in the Middle East has traditionally been bullish for gold.

While political turmoil has kept gold trending around unchanged, it will be the FOMC statement out at 12:30 PM EST that really has the potential to rattle the markets.  Given that the market is already expecting dramatic remarks in regards to QE3 in the wake of last Friday’s job data, traders should be wary that anything less than a full-on commitment to quantitative easing has the capability to cause a short term sell off.

 

Comments | Posted By Jamie Cohen

Gold importers continue bargain buying

Tuesday, October 16, 2012 12:05:14 PM America/Toronto

Gold importers in India continued to pick up bargains as the yellow metal touched its lowest level in nearly two weeks, weighed by a firm rupee.

  • Festivals are underway in India, the world’s biggest buyer of the metal, and will peak with Diwali and Dhanteras next month. Weddings also take place during this period
  • “There is some demand as prices have come down,” said Haresh Acharya, head of bullion desk, Parker Bullion in Ahmedabad.
  • At 2:44 p.m., the most-active gold for December delivery on the Multi Commodity Exchange (MCX) was 0.03 percent lower at 30,969 rupees per 10 grams, after hitting a low of 30,862 rupees, a level last seen on October 5.
  • The rupee, which traded lower snapping two sessions of gains, plays an important role in determining the landed cost of the dollar-quoted yellow metal.
  • Silver recouped after hitting its lowest level in a month.
  • Silver for December delivery on the MCX was 0.07 percent higher at 59,999 rupees.

 

Comments | Posted By Jamie Cohen

Will silver see a major supply squeeze and massive price increase?

Friday, October 19, 2012 11:56:31 AM America/Toronto

A note by long term silver analyst (and silver bull), Israel Freidman published on Ted Butler’s internet site contains some true gems which will be manna to the ears (if you can have such a thing) of silver investors everywhere. Leading off with the comment that silver is, in Freidman’s view, the best raw material of all for the investor to hold, he says he held this opinion 30 years ago (when silver was under $5 an ounce) and holds the same view today (at $33) and that for the investor in bullion, silver remains one of the few commodities that the average person can actually hold in his possession (gold is another but the price precludes the ‘average’ investor holding all but a tiny amount in comparison).

And he waxes enthusiastic, particularly about the US Mint’s silver eagle coin which he describes as the most beautiful, and popular, coin in the world. He is convinced that it is so popular that one day the US Mint will not be able to keep up with demand (we have seen occasional times in the recent past when the Mint has had to ration sales) and that premiums on the coins will explode if, and when, the Mint has to stop producing them.

In part he bases this premise on what he sees as the hugely growing demand in the industrial usage of silver – notably in the electrical sector where silver is perhaps the best conductor of all – and with electrical power taking over the world, as Freidman sees it, demand growth for silver will expand dramatically along with global population and GDP growth. He adds in a huge global increase in solar panel manufacture and usage as another key new market for silver. There are, of course a host of other new uses too as we pointed out here in our recent article: New innovations boost silver demand.

This aside, silver has managed to maintain its price growth despite an enormous, seemingly adverse, change in its industrial usage. For most of the 20th Century silver’s industrial demand was dominated by its use in the photographic field – a usage that has been decimated in recent years by the virtual takeover in the general photographic sector by digital photography which does not require silver in film, or in general reproduction and processing. That the silver price has, for the most part, continued to rise strongly in the face of such a drastic fall in consumption in what used to be its most dominant industrial usage sector could be seen as indeed a sign of huge, and ever-growing, underlying strength in demand for the metal in other fields.

For the most part silver demand has been particularly strengthened over the past decade through investment growth – both in terms of physical bullion purchases (as with the U.S. Silver Eagles noted  above), purchases from specialists who organise vaulted holdings of allocated metal on an investor’s behalf and in the ever growing off take into silver ETFs. On the price front silver has largely tracked gold with the occasional wild short, but extremely sharp, differential – notably on the downside which some observers put down to price manipulation by some very large short position holders.

As with gold, while fundamental supply/demand factors tend to basically underpin the price, it is this investment interest which is currently holding the key. Freidman’s premise is that this investment demand “will compete long term with the silver users who must have silver as a raw material. This is a potential buying combination that is not present in any other commodity. That’s what makes silver so special.” he notes. With industrial demand in a major growth phase through the new technology uses and in medical usage too where silver is an important bactericide and also in water purification, Freidman’s long-held view is that at some stage silver will be seen to be in hugely short supply (a contrary position to many analysts who see it in potential surplus – at least at the moment).

Where perhaps Freidman’s views might really be considered a little over the top is his conviction that one day silver will be more valuable than gold based upon its importance as a raw material in industrial use as well as an investment metal. While few even of the most ardent silver bulls would anticipate such an enormous change in role, Freidman reckons that if shortages do occur and the big silver short positions on COMEX have to be unwound and thus put into a massive short squeeze situation – then the sky’s the limit, although this probably does not take into account the likely big fall in industrial usage if prices were seen to be rising this sharply. Perhaps such a day will come, but even so for silver to surpass gold in price does seem in the realms of fantasy to this writer. But stranger things have happened!

But overall Freidman’s views are indeed interesting and represent one end of the spectrum on likely silver price performance countering those who reckon the price will crash – with the most likely scenario being somewhere between the two – in other words the status quo. So will silver see massive price rises because of the industrial and investment demand combination?

Probably not in the writer’s view, although some improvement (from the silver investor’s point of view) in the gold:silver ratio is certainly not outside the bounds of probability in a rising gold price scenario. This would see silver rise faster than gold in percentage terms – that does tend to be the general pattern. But even the ultra-bullish Freidman warns “..it is clear that there are some big shorts that do nothing but try to knock the price down. Try to be prepared for sharp sell offs and use them to add positions at times when the price is down.”

 

Comments | Posted By Jamie Cohen

Time To Buy Gold And Silver: November Shows Historical Strength

Sunday, October 21, 2012 11:49:25 AM America/Toronto

What does gold and silver hold in store for us in November? Using historical analysis of commodities can often show seasonal patterns that can be used to understand market trends. The following article will examine if there are any significant historical trends to pay attention to in gold and silver that would be key to traders and investors while understanding how these trends can play a part in the fundamental landscape of commodities. At the end of the article, we will try to gather the information into some trade-able plays.

Right now, the main driver of gold has been currencies rather than safe haven hedging. With that said, when the dollar strengthens it hurts gold, so what the market needs is something to drop the dollar or some type of “free money” incentive like QE. We don’t expect any more QE any time soon, but what could be a driver would be the Euro strengthening on a European bailout of Spain or other major action. Something like that could be around the corner and seems likely by the end of November, which would drive up gold prices.

 

Comments | Posted By Jamie Cohen

Gold And Silver Correction Will End Over The Next 2 Weeks

Monday, October 22, 2012 7:24:11 AM America/Toronto

Gold and silver closed on Friday at their lowest levels in more than a month, part of a broad market sell-off that favored safe haven assets as hedge funds in futures markets were more inclined to take profits than add to long gold positions after the impressive summer run-up. Look for even lower prices for both metals in the week or two ahead since, absent an early-bailout request by Spain, there are no other obvious catalysts to push prices higher over the near-term.

But, the good news for precious metals investors is that, in the weeks ahead, institutional investors and central banks are sure to step in and make purchases to provide price support and, more importantly, the month of October will soon be over. Beginning in November, a plethora of positive market forces will develop that should push gold and silver prices sharply higher, the most important being renewed focus on the massive U.S. debt after the election.

For the week, the gold price fell 1.9 percent, from $1,754.30 an ounce to $1,720.50, and silver fell 4.2 percent, from $33.48 an ounce to $32.07. Gold is now up 9.8 percent for the year, down 10.5 percent from its high last summer, and silver is 15.1 percent higher in 2012, down 35.2 percent from its high 18 months ago.

After the big move higher that began in early-August amid a wave of money printing announcements by central banks – during which time the gold price jumped $200 an ounce and silver surged more than 25 percent – precious metals were due for a correction/consolidation and, lest there be any doubt about this developing earlier in the month, the events of the last week should have made clear that this is exactly what is now happening. Traders are booking profits and, after last week’s dismal U.S. earnings reports that sent equity markets lower, plunging gold and silver prices should not have come as a real surprise.

As shown below, a negative short-term outlook was confirmed on Friday in Kitco’s weekly gold survey in which more than half of the respondents said they think the recent selling will continue.

This collection of 24 bullion dealers, investment banks, futures traders, money managers, and technical analysts cited such things as the failed breakout above $1,800 an ounce for gold and bearish short-term momentum that began in mid-September for their views.

Aside from the very contrarian thinking that, if so many analysts think one thing maybe investors should do the opposite, there is little reason to think gold and silver prices will do anything but move lower in the weeks ahead and some analysts now predict we’ll soon see gold prices back in the $1,600s with silver prices threatening the sub-$30 level.

Perhaps the best thing that long-term investors can do right now is stop watching websites like Kitco for the rest of the month and, maybe, they’ve already decided to do just that as precious metal ETF holdings and premiums were little changed during the recent sell-off. After dropping 7 tonnes from a record high last Monday, holdings at the SPRDR Gold Shares ETF (GLD) were steady for the rest of the week, actually adding 0.3 tonnes on Friday as the gold price plunged.

Meanwhile, holdings at the iShares Silver Trust ETF (SLV) fell by only 6 tonnes last week, dropping 24 tonnes on Tuesday then adding back 27 tonnes on Thursday, and the premium for the Sprott Physical Silver Trust (PSLV) remains near its recent highs at just below five percent.

Though even lower gold and silver prices are probably dead ahead, these ETF owners should soon be rewarded as November has been the very best month of the year for metal prices over the last decade as shown below.

More importantly, the combination of a bailout request from Spain and the start of bickering in Washington over the “fiscal cliff” that begins immediately after the election are sure to drive the trade-weighted dollar lower which should help to push gold and silver prices higher.

The monthly labor report on November 2nd is another potential catalyst for precious metals, however, given the odd job market data reported lately, it’s impossible to predict what sort of impact this could have.

If the jobless rate jumps from 7.8 percent to back over 8 percent, gold and silver prices will surely jump higher in anticipation of more Federal Reserve largess, but, a move lower would have the opposite effect.

Gold demand in India and China remains relatively weak, however, based on the latest round of price predictions, investment banks don’t seem to think this is going to be a major factor in how gold and silver prices end the year.

Last week, Danish investment bank Saxo Bank cited a weaker dollar as the driver for a possible new record high gold price in December above last year’s $1,921 an ounce. Also pointing to a weaker U.S. currency along with the impact of recent central bank policy measures, analysts at HSBC said last week they expect the gold price to reach $1,900 before year-end and analysts at CIBC World Markets think the gold price will rise sharply during the last two months of the year, averaging $2,000 in 2013, up nearly 20 percent from the 2012 average of about $1,700.

Lastly, another billionaire has stepped forward to call gold a bubble, but not in the same way that others have. According to this report in Mining.com, at the Canaccord Global Resource Conference last week in Miami, investor/author Frank Giustra said that gold is the ultimate bubble:

I don’t know when and I don’t know how high. But gold is going a lot higher. Gold is the bubble of all bubbles. It’s the mother of all bubbles. It’s the bubble people will go to when they’ve exhausted all other bubbles.

Here’s why: It is movable. It is easily transferable across borders in times of crisis. It’s a currency. It’s liquid. It’s easily tradeable. I’m a fan of all hard assets, but particularly gold. It’s the largest part of my portfolio and it will continue to be until this cycle is over.

That’s some pretty good asset allocation advice if you ask me…

 

Comments | Posted in Blog By Jamie Cohen

Gold price sheds $75 in 2 weeks: Will we see $1,600-levels again?

Monday, October 22, 2012 11:40:41 AM America/Toronto

Spot gold prices closed at $1,720.50 per ounce on Friday, October 19 – a decline of about $74 on $1,794 that the bullion made two weeks ago, on October 4, 2012.

After threatening – and giving up – to breach the $1,800-mark for a handful of sessions this month, the yellow metal is now in serious danger of plunging back into the $1,600s domain, the impending festive season (Eid, Dussehra and Diwali) notwithstanding.

Experts maintain that the recent decline in precious metal prices is a direct result of the dollar strengthening due to a mix of good news emanating from the US and continuing bad news from the Euro Zone.

In addition, experts maintain that short-term speculators have been taking profits at every little spike of the yellow metal, which is something that has kept the lid on prices moving onto the $1,800-territory and beyond.

“A lot of the speculators with weak longs have liquidated, which when combined with the sheer volume of commercial shorts on the market have helped this decline from the psychological $1,800 barrier,” Nayson Rohipour, Senior Bullion Broker, Gold.ae, a Dubai-based online trading platform of deliverable gold and silver, told Emirates 24/7 this morning.

“Physical demand is up both from India ahead of Diwali and here in Dubai with the current prices being an attractive point. Whilst an increase in physical demand won’t alone stop this downward trend, it may induce a reversal once the technical selling is exhausted,” he said.

Another Dubai-based expert Gerhard Schubert, Head of Precious Metals at Emirates NBD bank, agrees with Rouhipour’s analysis on the increased physical demand, and how such demand is not yet strong enough to reverse the trend in declining prices.

“Physical [gold] buying has been evident during the second half of last week, but physical buying can never stop a trend; it can slow it down and might force a turnaround situation once the technical selling is exhausted,” Schubert wrote in his latest weekly report on precious markets.

According to Schubert, the first level of defence at $1,740 was breached and the selling continued unabated last Friday. “A lot of the weak longs have been liquidating their positions and that is in itself a positive sign,” he says, but stops short of claiming that gold will see its fortunes turn around in the short term.

On the last trading day of the week, gold prices slumped to a mid-day low of $1,716 per ounce before recovering a tad and closing at $1,720 or thereabouts.

Schubert says that savvy investors – including those in Dubai and India – have started accumulating gold once again at these levels. “Purchases from India have been reportedly good, and we have also seen good buying, at these current levels in Dubai. The inability of gold to breach the $1,800 level has led to this $70 sell-off, but this has cleared the air from the heavily overbought positioning,” says Schubert.

But despite the increase in demand, current prices may not prove attractive enough to sustain short-term prices, and a continuing sell-off might just see prices roll back to the $1,600-levels.

“The performance has been disappointing and there is a danger that positive price drivers are pushed into the background and lose on relevance, at least in the short term,” says Schubert.

“The dollar also gained against most major currencies toward the end of the week, with the euro also finishing the week stronger due to an agreement being reached on an inter-state banking union. In my opinion we may well see weak performance this week but are near or at the bottom of this decline,” adds Rouhipour, suggesting that any short-term movement from here on will at best be temporary.

“We [might] soon see another surge, which may well break through the psychological barrier of $1,800,” reckons Rouhipour. “Still, we await the US elections, and this week will see a raft of country-specific data being released globally; so the beginning of the week may well show little movement with a surge toward the end,” he concludes.

 

Comments | Posted By Jamie Cohen

Ben Bernanke and buying gold in Canada

Thursday, October 25, 2012 10:24:00 AM America/Toronto

After a three week spiral south, the precious metals are stemming, at least temporarily, the recent downward pressure.  Gold was able to catch bids yesterday at the psychological level of $1,700.  It closed right above this level and the Asian market took it higher as value physical buyers came in to lift the market.  Silver was buoyed by gold’s ascent as well and is being capped so far today at the 7 day moving average of $32.25.  Decent short term support for silver should come in at the double bottom from yesterday and the day before at $31.50.

Yesterday, Federal Chairman Ben Bernanke’s testimony was not particularly noteworthy.  Of mild interest for gold was his commentary that inflation has picked up somewhat.  The US economy has been growing moderately and the Fed did not make any changes to its third round of asset purchases of $40 billion a month.  During the Asian session, Japanese stocks moved up on the back of a weaker yen and expectations of additional support for asset prices from the Bank of Japan.   The contagion from higher bourses in Asia has caught on in Europe and as of now, it looks like US equities will open positively as well.

Comments | Posted By Jamie Cohen

Heading lower or an opportunity to buy precious metals?

Thursday, October 25, 2012 11:54:37 AM America/Toronto

The markets are a sea of red today as assets ranging from commodities to equities sell off on the back of concerns regarding the global economy.  Gold has steadily trended down for three weeks now after failing multiple times between key resistance at $1,790 and $1,800.  For the time being it has managed to find bids to keep it above $1,700.  Without further QE headlines to galvanize the market though, it seems like the risk remains to the downside for the yellow metal.  A break below $1,700 would project down to the convergence of the 100 and 200 day moving averages at $1,660.

While the precious metals have garnered some overnight attention, equities have largely stolen the show today thus far.   Asian bourses were a mixed bag but the pressure lower gained steam in Europe and has resulted in an even bigger sell off in the US.  The Dow Jones is currently down almost 250 points (approximately 1.75%) and heading closer to psychological support at 13,000.  Weaker quarterly earnings from companies such as DuPont and 3M have highlighted broader concerns for the global economy.  Moody’s also downgraded the credit-rating on Catalonia and four other Spanish regions which rattled European bourses and the euro currency.

Be sure to look out for the commentary from ECB President Draghi’s speech tomorrow at 7:45 EST.

 

Comments | Posted By Jamie Cohen