04/15/2013

Gold, Silver Slammed to 2-Year Lows on Panic Selling
Monday April 15, 2013 2:10 PM
(Kitco News) - Gold and silver prices careened lower on massive panic selling pressure Monday that drove both market to more-than-two-year lows. Fear is pervasive in the raw commodity sector early this week as the two-session, $175-plus drop in gold prices also sent crude oil prices sharply lower and has spooked the entire market place. Silver has shed more than $4.00 an ounce since last Thursday’s closing levels in New York. June Comex gold last traded down $133.70 at $1,368.00 an ounce. Spot gold was last quoted down $109.20 at $1,368.25.  May Comex silver last traded down $2.811 at $23.525 an ounce.
Veteran traders and market watchers know that when panic sets in and markets start moving rapidly, trading and investing becomes a “money game.” Any other logic goes out the window because money in a trader’s trading account, or lack thereof, is paramount. A money game in markets occurs when there are huge money flows in one direction—in this case out of long gold and silver positions— and that begets even more selling as the pain of being so far “under water” becomes too great and traders have to liquidate their positions. Margin calls occur in the futures markets and traders are forced to abandon their already weak long positions. And then there is blood in the street, such as is the case now. The light at the end of the tunnel for gold and silver market bulls, as far away as it may now seem, is that “blood in the street” is usually a value-buying opportunity that occurs only a few times in a decade, if that much.
Those analysts proclaiming that there has been a radical shift in investor sentiment for gold are correct only on a short-term basis. Certainly, the near-term investor sentiment has turned bearish for gold. But all market prices go up and then go down—sometimes in volatile fashion like gold and silver the past two days. Importantly, investor sentiment is ever-changing and at some point down the road gold will be back in vogue as an investment asset—especially a safe-haven asset. History proves this to be true.
There has been no single fundamental catalyst for the panic selling in the gold and silver markets the past two trading sessions. Worries about demand for physical gold from China and India are getting some of the blame for the mass exodus of longs out of the gold and silver markets. Overnight, China reported its economy grew slower than expected during the first quarter, at 7.7% versus the expected rate of 8% annual growth. There are also worries about troubled European Union countries selling their gold reserves to help finance their financial bailouts from the European Central Bank and the International Monetary Fund. Cyprus government officials last week said selling part of that financially imperiled country’s gold reserves was on the table. Last week’s Federal Reserve FOMC meeting that signaled Fed members are divided on when to end the Fed’s quantitative easing of monetary policy also spooked the raw commodity market bulls.
Exchange traded funds (ETFs) for gold are also reportedly seeing very heavy outflows as investors cash out losing positions and are seeking other investment assets.
The U.S. dollar index traded near steady Monday. The greenback bulls have faded a bit recently but still have the overall technical advantage. Meantime, Nymex crude oil futures prices were sharply lower Monday and hit a four-month low.
The London P.M. gold fix is $1,395.00 versus the previous P.M. fixing of $1,535.50.
Technically, June gold futures closed nearer the session low Monday and careened to a fresh two-plus year low. Major near-term and longer-term chart damage has been inflicted the past two trading sessions. The only thing the bulls have going for them, technically, at present, is that the market is way oversold on a short-term technical basis. Gold prices are in a six-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,500.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at $1,300.00. First resistance is seen at $1,400.00 and then at $1,425.00. First support is seen at Monday’s low of $1,355.30 and then at $1,530.00. Wyckoff’s Market Rating: 1.0
May silver futures prices closed nearer the session low and careened to a fresh 2.5-year low Monday. Major near-term and longer-term technical damage has been inflicted in silver and the bears are in full command, overall. However, the market is short-term oversold, technically. Prices are in a six-month-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $25.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $22.50. First resistance is seen at $24.00 and then at $24.50. Next support is seen at Monday’s low of $22.92 and then at $22.50. Wyckoff's Market Rating: 1.0.
May N.Y. copper closed down 610 points at 328.90 cents Monday. Prices closed near mid-range and dropped to an 18-month low early on Monday. More serious chart damage occurred Monday. Copper bears have the solid overall near-term technical advantage and gained more power Monday. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 340.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at Monday’s low of 319.35 cents. First resistance is seen at 330.00 cents and then at 332.50 cents. First support is seen at 325.00 cents and then at today’s low of 319.35 cents. Wyckoff's Market Rating: 1.0.

04/11/2013

  • 2013-04-11T005929Z_1_CDEE93A02R900_RTROPTP_3_MARKETS-GOLD_original

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    Reuters - Gold bars are displayed at Mitsubishi Materials Corporation in Tokyo March 17, 2008. REUTERS/Issei Kato/Files


By Frank Tang and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold posted its biggest one-day drop in nearly 2 months on Wednesday after Cyprus was forced to sell most of its gold reserves, but analysts said strong bullion buying by other central banks should underpin the price of the metal.
Investor fears over more gold sales by other debt-stricken euro zone members such as Portugal and Greece sent spot bullion prices down 1.7 percent on Wednesday, within striking distance of a 10-month low.
Renewed gold interest by emerging economies and gold sales limitations stipulated by Europe'sCentral Bank Gold Agreement (CBGA) are positive factors that should put a floor under the market, analysts said.
"The bigger concern for the bullion market may be the potential for other distressed euro zone nations to liquidate a portion of their gold reserves," said James Steel, chief precious metals analyst at HSBC.
"We do not believe this will be the case, however, and we expect the official sector to remain standout buyers of bullion," Steel said.
Cyprus, one of euro zone's smallest economies, has to sell excess gold reserves to raise around 400 million euros to help finance its part of its bailout, an assessment of Cypriot financing needs prepared by the European Commission showed.
It was the first major gold disposal by a euro area central bank since France sold 17.4 tonnes in the first half of 2009.
At current prices, 400 million euros' worth of gold amounts to 10.36 tonnes of metal, representing just a small fraction of gold liquidated by gold exchange-traded funds since the beginning of the year, analysts said.
Cyprus' total bullion reserves stood at 13.9 tonnes at end-February, according to data from the World Gold Council.
CENTRAL BANK GOLD AGREEMENT
Macquarie metals analyst Matthew Turner said that it would be very bearish for the gold market if other countries like Spain and Italy with large gold reserves became sellers, but that there are good reasons to believe Cyprus is a special case.
Portugal holds 382.5 tonnes of gold, worth some 14.76 billion euros at current prices, in its reserves, while Spain's holdings stand at 281.6 tonnes, worth 10.8 billion.
Italy is the world's fourth largest gold holder, with 2,451.8 tonnes of gold in its reserves, worth 94.6 billion euros.
The third Central Bank Gold Agreement inked in 2009 states that gold sales by signatories will not exceed a collective ceiling of 400 tonnes per year over a five-year period.
The agreement covers gold sales by the European Central Bank and around 20 European countries that have adopted the euro including Portugal, Greece and Spain.
Despite the Cypriot gold sales, emerging economic powers will remain strong buyers of gold and that should underpin prices in the long term, said Michael Cuggino, portfolio manager of the $16 billion Permanent Portfolio Funds.
Russia, Turkey, South Korea and other smaller but fast-growing economies have been adding gold to their reserves, data by the International Monetary Fund has shown.
Central banks have been keen buyers of gold since the advent of the financial crisis, acquiring a net 532 tonnes of gold last year, a 48-year high, according to metals consultancy GFMS.
As a group, central banks had turned into buyers in 2010, as the 2008 economic crisis highlighted the importance of gold as a hedge against currency and credit risk.
(Additional reporting by Clara Denina in London; Editing by Veronica Brown, William Hardy and Joseph Radford)

04/07/2013

By Debbie Carlson of Kitco News Friday April 05, 2013 2:01 PM
METALS OUTLOOK: Gold Bounces From Lows, May Continue Higher Next Week
(Kitco News) - A lower-than-expected monthly U.S. jobs report facilitated gold’s bounce from a 21-month low on Friday and several gold market watchers said the yellow metal might see buying continue into next week.
June gold futures rose Friday, settling at $1,575.90 an ounce on the Comex division of the New York Mercantile Exchange, and were down 1.24% on the week. Most-active May silver rose on the day and fell the week, settling at $27.220, down 5.15% on the week.
In the Kitco News
Gold Survey, out of 34 participants, 29 responded this week. Of those 29 participants, 19 see prices up, while six see prices down, and four see prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.
A stronger U.S. dollar, stronger equities and less interest in gold as a safe haven have pressured the metal in recent weeks, with intense selling this week taking the market through this year’s low of $1,556.40, based on the June Comex contract. The contract fell as low as $1,539.40 on Thursday, its weakest level since July 2011.
That changed after the release of a surprisingly soft U.S. jobs report from the Labor Department Friday. The dismal employment report showed that the U.S. economy created only 88,000 jobs in March, the smallest gain in 10 months, versus the 190,000 expected to be made. While the unemployment rate fell to 7.6% from 7.7%, it came from fewer people looking for work. Several analysts said that’s a sign the pace of hiring in the U.S. is slowing. The participation rate, a measure of health in the labor market, slid again to 63.3%, marking the lowest level since 1979.
Also in the report, the Labor Department revised higher the payrolls for February and January.  February’s jobs number was revised to 268,000 from 236,000, and January's figure was revised up to 148,000 from 119,000.
Gold prices, which were flat ahead of the data, rallied sharply in the first few minutes after the report and held the majority of its gains.
Several market watchers said the rebound wasn’t entirely surprising, given how negative market participants turned on gold in the short term.
“The push under $1,555 to (about) $1,540 got people extraordinarily bearish. But now we’ve had some poor jobs figures, today’s report was the third poor one. So we saw a lot of short covering after the numbers,” said Afshin Nabvi, head of trading at trading house MKS (Switzerland) SA.
In addition to the Labor Department data Friday, private payrolls firm ADP released softer March payrolls data on Thursday and earlier in the week, outplacement firm Challenger, Gray and Christmas said layoffs in March were 30% higher a year ago, although down from February.
For next week, watch Chinese consumer inflation and export data, due out Tuesday and Wednesday, respectively, analysts said, to get a sense on the health of the Asian nation’s economic health. Additionally, analysts said they’re going to keep an eye on the release of the March meeting minutes of the Federal Open Market Committee.
Prior to the jobs data, some financial market analysts spoke about the Fed perhaps easing off its quantitative easing program and said they’ll look for signs of that in the FOMC meeting minutes. There are thoughts now that considering the weak jobs number, the Fed governors’ views on bond-buying might change.
“People will watch the FOMC minutes for their views on QE, but I don’t see that changing, especially with that jobs number. They can’t pull back on stimulus,” Nabavi said
The market will also be watching for any further clues on monetary policy in Europe and Japan, said Charles Nedoss, senior market strategist with Kingsview Financial. The Bank of Japan, under a new governor, announced an ambitious quantitative-easing plan this week that exceeded market expectations.
Rich DeFalco, principal, 76Partners, said he’s “screaming bullish” on gold and said that the metal will likely benefit from a possible stock market correction that he expects will occur this month. Stocks fell sharply Friday after the jobs data.
Gold prices were lower recently after investors sought higher returns in equities in the first quarter, especially as the major indexes like the S&P 500 and Dow Jones Industrial Average set record highs.
DeFalco said corporate earnings will come out soon, now that the first quarter is over, and he expects those earnings to be lackluster, which might take a toll on the indexes.
Nabavi said for next week he is watching how gold actions around the $1,580 area, which he calls “really good resistance… If we can go through it, then we could test $1,600. I think prices can go higher next week. Politically there’s support for gold with the concerns about North Korea, and the BOJ is ramping up its stimulus – that’s what also helped the dollar earlier this week.”
North Korea will be a “wild card” for the gold market as traders watch to see if tensions escalate further, Nedoss said. If so, at some point a safe-haven bid could emerge in gold. North Korea has issued threatening statements in recent days and news reports say the country has moved missiles to its eastern coast. The U.S. has responded with increased preparedness, including deployment of ballistic missile defenses closer to North Korea.
“Does anything happen over there or is this just a bunch of senseless posturing,” Nedoss said
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