06/26/2013

Gold Slips to 34-Month Low as Precious Metals Slide on Fed View
By Nicholas Larkin & Glenys Sim - Jun 26, 2013 8:13 AM ET
Gold plunged to a 34-month low, set for a record quarterly drop, as improving U.S. economic data strengthened the case for the Federal Reserve to reduce stimulus. Silver fell to the lowest since August 2010, platinum the cheapest since 2009 and palladium the lowest since November.
Gold dropped 23 percent this quarter, heading for its biggest loss since at least 1920 in
London. Fed Chairman Ben S. Bernanke said last week the central bank may slow its asset-purchase program this year if the economy continues to improve. U.S. durable-goods orders rose more than expected, home sales advanced to the highest in almost five years and consumer confidence climbed, data showed yesterday.

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Gold bars are stored in a vault at the United States Mint at West Point in West Point, New York. Photographer: Scott Eells/Bloomberg
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8:35
June 21 (Bloomberg) -- Marc Faber, publisher of the Gloom, Boom & Doom report, talks about the stock, bond and commodity markets. He speaks with Trish Regan and Tom Keene on Bloomberg Television's "Street Smart." (Source: Bloomberg)
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June 11 (Bloomberg) -- Billionaire John Paulson, the hedge-fund manager trying to recover from losses related to bullion this year, posted a 13 percent decline in his Gold Fund last month, according to a letter to investors. The drop brings losses in the strategy to 54 percent since the start of the year, the firm said in the letter, a copy of which was obtained by Bloomberg News. Kelly Bit reports on Bloomberg Television's "Money Moves." Deirdre Bolton also speaks. (Source: Bloomberg)
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June 4 (Bloomberg) -- Stephen Cucchiaro, chief investment officer at Windhaven Investment Management Inc., talks about the outlook for gold prices and investment strategy. He speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." Adam Parker, chief U.S. equity strategist at Morgan Stanley, also speaks. (Source: Bloomberg)
About $60 billion was wiped from the value of precious metals exchange-traded product holdings this year as some investors lost faith in them as a store of value and speculation grew that the Fed will taper debt-buying that helped gold cap a 12-year bull run last year. A lack of accelerating inflation and mounting concern about the strength of the global economy is hurting silver, platinum and palladium, which are used more in industry than gold.
“Gold and precious metals are out of favor,”
Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg,Germany, said today by phone. “If there’s something indicating an end to bond buying, then investors turn more negative. Some investors see the knife falling and think it might fall further, so may delay any purchases.”
Gold Price
Gold for immediate delivery fell as much as 4.2 percent to $1,224.18 an ounce, the lowest since Aug. 24, 2010, and was at $1,232.72 by 12:47 p.m. in London. Bullion for August delivery dropped 3.4 percent to $1,231.70 on the Comex inNew York. Futures trading volume was more than double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
Silver for immediate delivery slid as much as 6.1 percent to $18.4505 an ounce in London, the lowest since August 2010, and was last at $18.6726. Platinum, which entered a
bear market last week, dropped as much as 2.4 percent to $1,317.24 an ounce in London, the lowest since October 2009. It was last at $1,328.24. Palladium was down 2.7 percent at $648.43 an ounce. It reached $640.23, the lowest since Nov. 21.
Gold entered a bear market in April, extending the retreat from its all-time high of $1,921.15 in September 2011. Analysts from Morgan Stanley to Credit Suisse Group AG and Goldman Sachs Group Inc. trimmed gold forecasts this week, with Morgan Stanley saying that waning investor interest has turned more serious amid a clearer outlook for when the Fed may withdraw stimulus.
Technical Selling
“The fact that it has fallen below last week’s low is likely to have prompted follow-up selling for technical reasons,” analysts at Commerzbank AG wrote today in a report. Better-than-expected U.S. data “makes it all the more likely that the U.S. Federal Reserve will prematurely scale back its bond purchasing program.”
Gold’s 14-day relative strength index was at 22.5 today. That’s below the level of 30 that indicates to some analysts who study technical charts that a rebound may be imminent. The metal’s 60-day historical volatility reached 32.4 percent, the highest since October 2011.
An ounce of gold bought as many as 66.5 ounces of silver in London today, the most since August 2010. Silver is 34 percent lower this quarter, set for the biggest such drop since the start of 1980. It’s the worst performer this year on the Standard & Poor GSCI gauge of 24 commodities. The index is down 5.5 percent this year, partly on concern that growth may slow in
China.
ETP Holdings
Assets in the SPDR Gold Trust, the largest bullion-backed ETP, fell 16.2 metric tons to 969.5 tons yesterday, the lowest since February 2009, according to its website. Global holdings are at their lowest since June 2010, data compiled by Bloomberg show. The number of hedge fundsinvesting in bullion dropped to the lowest since 2010 and assets slumped on losses and redemptions, according to EurekaHedge Pte Ltd., a Singapore-based fund-research company.
The dollar reached a three-week high against six major currencies today, after gaining the previous five days.
“The raft of figures that came out of the U.S. all pointed to a stronger growth pattern, which pushed the
U.S. dollar higher,” David Lennox, an analyst at Fat Prophets, said from Sydney. “That’s two nails in the coffin for gold: a stronger U.S. dollar and expectations that quantitative easing will be scaled back.”
Platinum and palladium are used in jewelry and pollution-control devices in cars. European car sales fell to a 20-year low in May as rising joblessness caused by a recession in the euro region reduced demand, the Brussels-based European Automobile Manufacturers’ Association said June 18.
To contact the reporters on this story: Nicholas Larkin in London at
nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at
ccarpenter2@bloomberg.net

06/26/2013

A.M. Kitco Metals Roundup: Gold, Silver Pounded to Near 3-Year Lows on Weak Long Liquidation, Technical Selling
Wednesday June 26, 2013 8:15 AM
(Kitco News) - Gold and silver prices sank to nearly three-year lows in overnight trading. Both markets have seen weak-handed long liquidation and technical short-selling in the futures markets due to several factors, including ideas the U.S. economy is getting strong enough that the Federal Reserve will begin to scale back its monetary stimulus program. Comex August gold was last down $39.10 at $1,236.00 an ounce. Spot gold was last quoted down $39.90 at $1,238.25. July Comex silver last traded down $0.866 at $18.66 an ounce.
A strong batch of U.S. economic data on Tuesday further bolstered notions the Fed will begin to wean the U.S. economy from its easy-money policies, which for several years have been a bullish underlying factor for the raw commodity sector, including the precious metals.
A cash crunch in China recently has also worked to reduce demand for physical gold in that nation. Also, major gold consumer India is also seeing slack demand for physical gold after the Indian government slapped additional duties on the import of gold in order to reduce its trade deficit. Other raw commodity markets are also seeing selling pressure because of worries about China’s economy, which is the second-largest in the world.
Asian stock markets were mixed overnight as the credit crunch in China appeared to ease just a bit Wednesday following reports Tuesday that the People’s Bank of China said the liquidity tightness was only temporary and would be dealt with effectively. European stocks were mostly higher on a much better consumer sentiment report from Germany.
European Central Bank President Mario Draghi said Wednesday the ECB will keep its monetary policy accommodative for the foreseeable future. Draghi’s statement echoed other major central bank officials who earlier this week made more dovish remarks. There is some speculation in the market place that Fed Chairman Ben Bernanke believes the market place misinterpreted the results of last week’s FOMC meeting as too hawkish.
There’s an old trading adage that says a market is the most bearish at the very bottom in price--just before the market starts to turn up. The market place’s general attitude toward gold is presently the most bearish I’ve seen it in a very, very long time. There’s also an old trading adage that rings very true: The majority of traders are wrong most of the time. As the majority of the market place appears to be very bearish the gold market, it can be argued from a market psychology perspective that the bottom must be close at hand for the gold market.
The U.S. dollar index is higher Wednesday morning and hit a three-week high overnight. The greenback bulls have technical momentum on their side. Nymex crude oil prices are slightly lower Wednesday. These two key “outside markets” are in a bearish posture for the precious metals Wednesday morning.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the third-quarter GDP estimate, and the weekly DOE liquid energy stocks report.
Technically, the gold market bears are in strong near-term technical command. Prices Wednesday saw a downside “breakout” from a bearish pennant pattern on the daily bar chart, which I pointed out to you on Tuesday. The next major, longer-term downside price targets are $1,100 and then at $1,027 for nearby Comex futures. August gold futures prices are in an eight-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price objective is to produce a close above psychological resistance at $1,300.00. Bears' next near-term downside breakout price objective is closing prices below psychological support at $1,200.00. First resistance is seen at $1,250.00 and then at last week’s low of $1,268.70. First support is seen at the overnight low of $1,223.20 and then at $1,200.00.
Silver bears have the strong overall near-term technical advantage. Major chart damage has been inflicted, including more Wednesdsay. Prices are in an overall eight-month-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above major psychological resistance at $20.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $17.50. First resistance is seen at $19.00 and then at Wednesday’s high of $19.58. Next support is seen at the overnight low of $18.36 and then at $18.00.

06/13/2013

All eyes are firmly focused on the U.S. Federal Reserve regarding when and by how much the central bank will decide to "taper" its monthly asset purchases, which currently total $85 billion.
Central bank officials are beginning to drop hints that this is under serious consideration and are laying the groundwork that a shift could occur sooner rather than later. Nomura currently expects the U.S. Federal Reserve to reduce the pace of its asset purchases at its September meeting.
The Fed action, however, may not really reflect overall solid improvement in underlying U.S. fundamentals, but rather a reaction to the on-going huge financial costs of quantitative easing balanced against the risks, which include asset bubbles.
In a June 6, research note to clients called: Conspiracy Theory, Scott Wren, senior equity strategist at Wells Fargo Advisors noted, "As Chairman Bernanke looked back over the last 15 years of monetary policy decisions, he certainly had to think the Fed contributed, at least to some extent, to the technology stock bubble in the late 1990s and the housing bubble in the middle of the last decade by leaving interest rates too low for too long."
"Each of those episodes ended badly for the economy and the stock market. When one looks back in history, easy money policies have frequently led to asset bubbles. And the Chairman does not want a repeat anytime soon," according to Wren.
With a reduction in Fed asset purchases possible right around the corner, the financial markets will respond and begin to price in the so-called "tapering trade," which may ultimately be bullish for the U.S. dollar, bearish for U.S. bonds and pressure the gold market.
Let's take a look at the daily chart of the Comex August gold futures action. Since plunging to the mid August low, the gold market has corrected higher and consolidated in what could ultimately be a triangle pattern. Triangles are generally a continuation pattern, which suggests gold remains vulnerable on the downside.
If a bearish "tapering" trade gets underway for gold, traders should prepare for the potential for additional near term weakness.
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However, while a tapering trade could support the U.S. dollar; recent action has been bearish and broken a rising bullish trendline. Near term rallies in the U.S. dollar will look corrective and the bulls will have to claw their way back sharply higher to put the early June sell-off in the rear-view mirror.
If the U.S. dollar index struggles to reclaim the trendline, currently around 82.35 that could provide support for the gold market and help keep the mid April lows around $1,323 intact. However, a sustained resurgence in U.S. dollar strength could weigh on gold further if that were to unfold in the days or weeks ahead. See Figure 2 below.
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However, as always when it comes to the gold market, investors need to hold a long-term view. As suggested before, the gold market may be in transition from so-called "weaker hands" from speculative ETF players in the West to "stronger hands" in the form of physical buyers from the East. This is a transition phase and it takes time to "shake out weak longs."
Long-term gold investors need to have patience and be prepared for the potential for additional weakness in the days ahead as this process continues to unfold.
Take a look at the bottom below, which reveals a weekly continuation chart of Comex gold futures. A measured move target from the November 2011-April 2013 sideways trading range projects losses down to the $1,250 zone. (Simply take the difference from the top of that trading range at about $1,800 and the bottom at $1,525 = $275. Subtract that from the breakout point ($1,525 - $275 = $1,250.)
At that level active physical buying from strong hands in the East would likely emerge and that could mark a bottom or lower level of a new trading range for gold.
Gold investors need to think for the long-term. Debasement of global paper currencies continues and an economic, political and monetary power shift could be underway, also transitioning from the West to the East. These transitions are measured not in days or weeks, but years and decades.
In a presentation prepared by CPM Group managing director Jeffrey Christian, he highlights GDP levels of key countries throughout time. In the year 1820, China's economy represented 32.9% of the major world economies share of global gross domestic product. In 1820, India's percent of total global GDP stood at 16%. In 1820, the United States percent of total global GDP was 1.8%.
Let's compare that to 2008, when China's percent of total global GDP was 6.3%, India's was 2.0% and the United States was 26.7%, according to the CPM Group presentation.
Fast forward to projections for 2030, which put China's percent of total GDP at 15.5%, India at 4.2% and the U.S. at 22.8%.
The winds are shifting from West to East. Near term gold may see pressure from the "tapering trade" and liquidation from weak hands. But, gold investors think long term.
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By Kira Brecht, Kitco.com, follow her on Twitter @KiraBrecht