Gold Broke The Descending Trendline
Gold broke above the descending trendline on Tuesday, Wednesday and continued higher Thursday and Friday.
Gold Outlook for 2012–James Turk
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Gold ETF Mass Exodus
Adam Hamilton
Gold is enjoying an awesome January, rallying strongly out of its oversold late-December lows. But last month’s hyper-pessimistic sentiment deserves some reflection before it totally fades from memory. One of the core theses of the bears resolutely predicting sub-$1400 gold prices soon was the notion that there would be widespread liquidations in the flagship GLD gold ETF, a mass exodus of capital.
If it indeed came to pass, gold would almost certainly be considerably lower than we’ve seen in recent weeks. But it didn’t, the stock traders owning GLD didn’t panic and rush for the exits as feared. Instead they boldly stood their ground, continuing the long tradition of GLD shares being held in strong hands. GLD’s entire history shows its owners largely want gold exposure for the long haul, they aren’t flighty.
Just as mass-GLD-liquidation fears captured mindshare in past gold corrections, they are certain to once again become popular bearish centerpieces in future ones. So gold investors and speculators alike, whether they own GLD or not, need to understand this mighty ETF’s track record during gold corrections. This critical knowledge will mitigate mass-exodus fears in future gold corrections, reducing the odds of getting suckered into selling low by the bears.
Thanks to wacky conspiracy theorists never ceasing to irresponsibly spout utter nonsense about GLD, it still isn’t as well understood as it ought to be by now. Holding a staggering 1259.6 metric tons of physical gold bullion in trust for its owners these days, worth a colossal $69.3b, GLD is a massive force in the gold market. Its price impact on gold since its birth 7 years ago in November 2004 has been enormous!
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Registered Silver Ounces At the Comex
There are 49,436 contracts currently open for the next delivery month which is March 2012. Each contract represents 5,000 ounces. That is 247.18 million ounces of silver being traded for March delivery against a registered 36.56 million ounces. This is a subset of all the contracts going out over the year.
The is leverage of about 6.8 to 1. It ‘works’ because most contracts are speculative and settled for cash. Comex is not where one goes for the delivery of a large amount of silver. I think that over time the US markets will become increasingly less relevant as a price-setting mechanism for a number of commodity prices including the metals. The failure of MF Global and the blatant cheating of the customers, both before and after the fact, will accelerate the process of failure. It really is shocking, all the more so because so few people see it and understand its significance in the coming crisis of confidence in the US markets.
Great leaders see the big changes coming and harness them. There is no one on the horizon that fits that prescription. What I see is failure repeated, but as history indicates, not endlessly.
Silver Wedge Chart
Morris Hubbartt
Weekly Market Update Excerpt
- My commentary here for several weeks has been, “silver is my asset of choice under $30”. The opportunity has been there to get more silver at a great price. Price has started to move above $30. I am now targeting $36 in the shorter term. Longer term I’m looking for $60 by the end of the year, and at least $90 within 18-24 months.
- Silver has a long way to go. I see $36 in the short term, where you should take some profits. I expect a pullback from that price area. I am projecting the completion of an inverse head and shoulders formation that will take silver straight back up to the $44 area, where you should do some more profit taking.
Biggest Week For Gold In 3 Months
via zerohedge
While Silver had a better week than Gold (+5.4% vs 4.3%), Gold managed its biggest gain in three months as the Fed’s QE-ness seemed to separate the precious metals from other asset classes. Oil underperformed relative to the USD’s weakness (-2% on the week in DXY) managing only a 1.3% gain (and ending below $100). Silver and Gold have no managed four weeks in a row of gains as the latter has more than retraced half of the all-time high sell-off range. With 5 minutes to go, NYSE volume was -32% from yesterday, by the close of the cash markets it was only down 2.5% leaving the week -10% from last week (so 32% of the day’s NYSE volume was done in the last 1.3% of the day). In credit, HYG underperformed stocks, HY credit stayed synced with stocks and IG outperformed (touching 100bps as we closed). Treasuries ended the day (and week) at their low yields with 5s to 10s all lower by around 14bps on the week and 30Y rallying to -4bps on the week by the close. FX markets were a little odd as EURUSD squeezed higher and higher all day (largely ignored until a late ramp) by stocks as JPY’s strength kept EURJPY (carry driver) relatively flat. EURUSD ended at 1.3227 (up around 300pips on the week) at its highest in 7 weeks as CFTC net shorts rose once again to new record highs at 171k. Broadly speaking risk assets and ES (the e-mini S&P 500 futures contract) have been highly correlated all week. This afternoon saw CONTEXT pull ES higher (mainly on EURJPY strength, and Oil stability versus TSY/Curve compression) but after the cash market close, ES limped back down to its VWAP to end its worst-performing week of the year (+0.15%) though not down (which we are sure would scare investors away) as stocks handily underperformed credit on the week as high beta starts to unwind.
Weekly change in the major economically sensitive commodities.
Intraday changes on the week in commodities – Silver putting in an incredible rise of more than 7% off its lows on Wednesday.
VWAP played an important part in today’s ES price action in stocks (as it always tends to) but the reversion and rejection has the smell of institutional sell orders need to grind the market up to sell into and each time we touched VWAP, average trade size increased and selling immediately occurred. The afternoon surge seemed more about catching up to EURJPY (more EUR) strength but once we hit unchanged, sellers came back in size once again.
Financials managed to surge up in the last hour to save their week (ending the week practically unch – though some of the majors looked very different and CDS has started to widen). Materials outperformed (QE?) and Staples underperformed on the week.
Charts: Bloomberg and Capital Context
Long Term Trend Up In Gold and Silver Is Intact, Look For High Quality Exploration Companies
At the end of 2011, Merkel and Sarkozy got together for an unusual emergency meeting. They pledged to come up with economic salvation. Immediately the equity markets mounted a year end “Halleluyah” rally. Bernanke followed Europe’s footsteps in 2012 and expanded the horizon of record low interest rates from Mid-2013 until Late 2014.
We respond judiciously to this euphoria. Politician’s promises are usually a thin blanket for an upcoming cold night. We have concluded since October that a surprisingly potent rise may occur which would be in reaction to the application of the stimulative paddles.
The European resolution was a response to the Franco-Belgium travails of the widely held Dexia Bank, which has tentacles into France and Germany’s economic foundations. If this were not enough, the chronic Greek malaise indicated that Zorba was in need of another oxygen mask to rouse him from his hedonistically induced torpor.
A potent upward move in gold and silver in addition to the oversold miners (GDX) is just beginning to occur. Our scenario was to maintain our long term core precious metal positions even though such a posture was temporarily painful as many analysts concluded wrongly that deflation, bonds and the U.S. dollar were the only safe harbors.
What about the U.S. dollar now? Note all the media hoopla that regaled us with strength of the dollar recently. News from Europe and Washington appears to be melting the U.S. Dollar under the cover of all of this stimulative warming. We have called for this surprise rally we are observing in the face of all this dollar and treasury hoopla. How uneasy must be the shorts who have been caught by this recent rise. Short sellers went into October’s market with the largest short position since 2008. Such a one-sided posture is often punished as the shorts run to cover and thereby add to the upward move.
Technically there have been gaps from 2011 that need to be filled on the upside in precious metals and miners. We note that institutions have been hit hard by the gold’s price decline. Hedge funds must’ve been selling stocks that they held in common in order to meet margin calls. Additionally this consideration may have influenced collateral damage among investors. Perhaps the current rise may indicate the recent downtrend has been broken to the upside.
Silver (SLV) appears to have found support at its 2011 lows. There are downside gaps that should be filled to the upside. Silver will encounter resistance around $38. Silver has reached a record oversold level indicated by the RSI and MACD in 2011. This indicated an interim bottom in silver. Monitor the bullish crossover on the MACD which confirmed the already constructive reversal on the stochastic and RSI.
Gold appears to be making a reversal at oversold and long term support levels breaking a 5 month downtrend. Notice the strong volume accumulation as The Fed announces negative interest rates until late 2014. This is bullish for precious metals. In early August through October we advised a hold and urged caution. Since it pulled back it provided two secondary buypoints where we said it is buying time while others preached that the gold and silver market bull market had ended. Now gold appears to be bouncing off our buypoints similar to January 2011 and regaining its 50 and 200 day to the upside. Now the weak hands will come back at much higher prices.
Gold “Has Foundation to Build Next Move Higher” Following FOMC “Catalyst”, Slow Physical Demand “Explains Gold’s Resistance at $1730″
By: Ben Traynor, BullionVault
Posted Friday, 27 January 2012
London Gold Market Report
WHOLESALE MARKET gold prices were headed for their biggest one-week rise since the start of December Friday lunchtime in London, climbing back through $1720 an ounce – a weekly gain of over 3%.
Silver prices meantime hovered around $33.60 per ounce – 4.2% up on last week’s close – while other stocks and commodities were broadly flat and US Treasury bond prices slipped.
A day earlier, gold prices hit a 7-week high at $1730 per ounce before easing in Friday’s Asian session.
“Lack of physical demand partly explains the inability of gold to make a sustained move beyond the $1730 level,” says Standard bank commodities strategist Marc Ground, citing this week’s Chinese Lunar New Year holiday as impacting demand from China, Singapore, Malaysia and Indonesia.
“[But] while slowing physical demand might provide some resistance during price rallies, we do not feel that it would be the cause of prices moving significantly lower.”
“The [physical] market has been like a yo-yo,” one Singapore dealer tells newswire Reuters.
“I think it’s a good time to buy gold…but clients are all cautious. They are doing enough to roll their money but keeping it all for the possibility of buying back.”
“Maybe it’s better to wait until Monday,” reckons another Singapore dealer.
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“The Chinese market reopens and [we will] see whether they will buy some more gold or they will take profits.”
Silver Will Knock Repeatedly on $50/oz. This Year Before Breaking On Through
Posted by David Morgan on January 26, 2012
The Morgan Report publisher says a tightly held silver supply putting pressure on prices as the macroeconomic climate fails to improve.
David Morgan, publisher of The Morgan Report, a monthly newsletter that covers economic news, currency and precious metals, believes that silver will be persistent this year in trying to break through its resistance of $50 an ounce. A tightly held silver supply, continued sovereign debt concerns in Europe and a strong appetite for the white metal at the start of the year are factors that he says will make silver a leader in the commodity sector in 2012. HAI Managing Editor Drew Voros recently caught up with Morgan to discuss what’s in store for the silver market this year.
Hard Assets Investor: Silver is starting out 2012 strongly. Is it following gold or is it blazing its own path?
David Morgan: Silver is following gold, but if you study silver carefully, there are times when silver leads and gold lags.
A quick example was last year. We saw silver basically double from around the $25level to $48, in a matter of months. That ended about May 1. Gold did a similar parabolic move, but not quite the percentage gain that silver outlined, but it did it later in the year. So who went parabolic first, silver or gold? Well, in this case, silver did.
HAI: Why do you think silver’s volatility was more intense last year than gold? Was it the drop-off in industrial demand?
Morgan: No it wasn’t. It was purely the momentum players, the guys that sit in front of computer screens all day who see a momentum move. They know it’s a small market. They know they can get extreme leverage in the market and they can use derivatives. And that, of course, causes the price to continue further down.
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