Dow Jones news is carrying a report this morning from GFMS (formerly Gold Fields Mineral Services)detailing the amount of gold purchased last year by the world's Central Banks. It was indeed a formidable number.
The net purchases of the yellow metal came in near 430 tons, a more than 5-fold increase on the previous year. It was also the highest level recorded since 1964.
To give you a sense of the significance of these purchases - the amount of NET purchases by Central Banks in 2010 was a mere 77 tons!
Surprising to me was the fact that Mexico was the largest buyer as far as the official monetary sector goes. GFMS reports that they added almost 100 tons of gold to their reserves. I would have thought it would have been China to lead the pack.
The other surprising fact was that signatories to the Central Bank Gold Agreement ( this was set up to limit the amount of gold sold by European Central Banks ) sold less than 10 tons for 2011.
The summary - Central Banks are now absorbing a significant amount of world gold production. This should continue to provide very good downside support for the metal on price retracements lower as these banks do NOT CHASE PRICES HIGHER but are there to buy at levels they consider gold to have "value".
Tuesday, January 17, 2012
Saturday, January 14, 2012
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.
Friday, January 13, 2012
Gold retreating from chart resistance near $1650
The inability of the metal to secure a CLOSE above $1,650 in spite of yesterday's surge towards $1,660 has engendered profit taking by shorter-term oriented longs this morning. As noted the other day, the metal has had a strong rally off of a major double bottom on the chart near $1,535 since the last couple of trading days of 2011 to the present coming over $130 higher since then. Longs are wisely pulling some chips off of the table after watching the push higher in yesterday's session fail to attract enough momentum to keep it trading above that $1650 level.
The US Dollar surge to yet another 52 week high is proving to be a source of some rather stiff headwinds for the longs today as the equity markets are selling off and risk aversion trades are showing their usual signature once again.
Dip buying has been the order of the day since this rally began. We will now watch to see where this buying will resurface. There is some light support that should appear near $1625- $1620. If it does not hold there, $1,600 is the next stop.
Bulls will need to push this thing past $1650 again and KEEP IT ABOVE THAT LEVEL to have a legitimate shot at $1675 - $1680, where bullion bank selling can be expected to appear.
The trend on gold since August has been down on this shorter term chart. However, the inability of the bears to take the metal down below $1535 and start another leg lower resulted in a bout of short covering among the weaker hands in that category. Bulls have pressed hard using the strong physical offtake at the lower price levels as their ally and have managed to take the price over $1600 which is constructive. But they have a lot more work to do to turn this chart pattern decidedly bullish.
The US Dollar surge to yet another 52 week high is proving to be a source of some rather stiff headwinds for the longs today as the equity markets are selling off and risk aversion trades are showing their usual signature once again.
Dip buying has been the order of the day since this rally began. We will now watch to see where this buying will resurface. There is some light support that should appear near $1625- $1620. If it does not hold there, $1,600 is the next stop.
Bulls will need to push this thing past $1650 again and KEEP IT ABOVE THAT LEVEL to have a legitimate shot at $1675 - $1680, where bullion bank selling can be expected to appear.
The trend on gold since August has been down on this shorter term chart. However, the inability of the bears to take the metal down below $1535 and start another leg lower resulted in a bout of short covering among the weaker hands in that category. Bulls have pressed hard using the strong physical offtake at the lower price levels as their ally and have managed to take the price over $1600 which is constructive. But they have a lot more work to do to turn this chart pattern decidedly bullish.
Thursday, January 12, 2012
Gold, Silver and Copper responding to low interest rate environment
All three of the above commodities are responding to news today that inflation in China is supposedly slowing somewhat (one always has to read these numbers with a healthy dose of skepticism as the Chinese are becoming almost as adept as US official-sector statisticians). Also adding to the mix is news that the ECB will keep interest rates low and would not rule out additional rate cuts if necessary in their view.
This is music to the ears of gold as it thrives in environments when there is plenty of room for more liquidity. The thinking in regards to China is that they have room to back away from any rate hikes and actually ease credit restrictions which had been put in place over the last year as the authorities there grappled with inflation problems.
Copper liked the news very much as traders there are viewing the news as positive for future demand if credit stays easy.
Note that in this environment silver is outperforming gold. That will continue as long as traders adopt a psychology focusing on future inflation as a result of easy credit instead of the opinion that deflation is the evil genie to be focused upon.
We are basically back to the risk trade today as most commodities are higher (crude oil continues its Yo-Yo-like trade as it is now higher) as the US Dollar sinks back down while the Euro rallies a full point. Grains are dragging on the commodity indices however as a USDA report has sent corn limit down this morning with spillover being seen in the Soybean market. Wheat bulls were also kicked in the groin by the same report showing larger-than-expected supplies of wheat. That news is good for consumers but disappointing for many farmers who are probably looking at corn with a handle of "5" in front of it unless some sort of crop scare down in Argentina surfaces.
Gold has pushed through $1650 and run as high as $1663 but has fallen back from its best levels. The bulls are performing but need to keep it above $1650 to see it run to $1675- $1680.
If Silver, and this is a big "IF", can hold ABOVE $30, it has a very good shot at seeing $32 relatively quickly. It has been unable to hold gains above $30 for some time now so such an event would signal a shift towards the metal by large speculators and hedge funds. We will see how it fares the remainder of the session.
This is music to the ears of gold as it thrives in environments when there is plenty of room for more liquidity. The thinking in regards to China is that they have room to back away from any rate hikes and actually ease credit restrictions which had been put in place over the last year as the authorities there grappled with inflation problems.
Copper liked the news very much as traders there are viewing the news as positive for future demand if credit stays easy.
Note that in this environment silver is outperforming gold. That will continue as long as traders adopt a psychology focusing on future inflation as a result of easy credit instead of the opinion that deflation is the evil genie to be focused upon.
We are basically back to the risk trade today as most commodities are higher (crude oil continues its Yo-Yo-like trade as it is now higher) as the US Dollar sinks back down while the Euro rallies a full point. Grains are dragging on the commodity indices however as a USDA report has sent corn limit down this morning with spillover being seen in the Soybean market. Wheat bulls were also kicked in the groin by the same report showing larger-than-expected supplies of wheat. That news is good for consumers but disappointing for many farmers who are probably looking at corn with a handle of "5" in front of it unless some sort of crop scare down in Argentina surfaces.
Gold has pushed through $1650 and run as high as $1663 but has fallen back from its best levels. The bulls are performing but need to keep it above $1650 to see it run to $1675- $1680.
If Silver, and this is a big "IF", can hold ABOVE $30, it has a very good shot at seeing $32 relatively quickly. It has been unable to hold gains above $30 for some time now so such an event would signal a shift towards the metal by large speculators and hedge funds. We will see how it fares the remainder of the session.
Wednesday, January 11, 2012
Gold encountering resistance near $1650
Gold bulls have performed admirably since the last few trading days of 2011 having taken the gold price up over $100 since that time period. The rally has been very impressive, especially given the strength in the US Dollar and the move to a brand new 52 week low in the Euro. However, bulls are now at an inflection point technically and will need to drive it up through today's session high just shy of $1650 if they are going to be able to force a larger number of shorts out and take this thing to the next layer of heavy chart resistance near the $1,680 level.
The market has been encountering selling coming from both profit taking after that $100+ run in addition to fresh short selling by our favorite group (the bullion banks - who else?) That selling is showing up in the market's inability to extend and get a CLOSE above Monday's high. The market has probed that level twice since then and is thus far unable to push higher. If the bulls can perform tomorrow, then this thing should run rapidly towards $1,675 - $1,680 where the bears will make another stand. If not, and the longs get impatient instead, then expect prices to set back towards $1620 first followed by a test of $1600 if that does not uncover dip buying.
A break below $1535, the double bottom region noted on the chart, that does not quickly recover, would signify deeper losses are ahead.
The market has been encountering selling coming from both profit taking after that $100+ run in addition to fresh short selling by our favorite group (the bullion banks - who else?) That selling is showing up in the market's inability to extend and get a CLOSE above Monday's high. The market has probed that level twice since then and is thus far unable to push higher. If the bulls can perform tomorrow, then this thing should run rapidly towards $1,675 - $1,680 where the bears will make another stand. If not, and the longs get impatient instead, then expect prices to set back towards $1620 first followed by a test of $1600 if that does not uncover dip buying.
A break below $1535, the double bottom region noted on the chart, that does not quickly recover, would signify deeper losses are ahead.
Tuesday, January 10, 2012
Mining Shares lagging the broader equity markets since August of last year
The HUI has been lagging the broader US equity markets since August of last year but has found some good buying down near levels commensurate with valued based buying for nearly two years now.
What this tells us is that further rallies in the US equity markets should see corresponding support continuing in the mining sector.
Now if only the ratio trade employed by the hedge funds against the miners in relation to bullion would ever come to an end. For most of 2011, with brief exceptions, the miners lagged poorly against the price of gold. Note the trend has been down but the ratio is now at levels that have attracted a reversal in the spreads last year. The shares remained undervalued when compared to bullion but something will need to change in order to put the nail in the coffin of this spread trade which has gutted the value of so many quality mining companies.
What this tells us is that further rallies in the US equity markets should see corresponding support continuing in the mining sector.
Now if only the ratio trade employed by the hedge funds against the miners in relation to bullion would ever come to an end. For most of 2011, with brief exceptions, the miners lagged poorly against the price of gold. Note the trend has been down but the ratio is now at levels that have attracted a reversal in the spreads last year. The shares remained undervalued when compared to bullion but something will need to change in order to put the nail in the coffin of this spread trade which has gutted the value of so many quality mining companies.
Gold clears initial resistance hurdle
There has been a band of overhead chart resistance centered between $1630 - $1620 that has been keeping gold in check for the last few weeks. Gold has been probing this level for the last couple of days and has been unable to convincingly push past it. Today that all changed as gold charged higher in the very early hours of European trading. While it has been stymied in New York from furthering its overnight gains (no surprise there), it has also been attracting additional buying above $1630. As long as this buying continues, gold will have sufficient momentum to launch an attack on the $1650 level.
A large number of traders are watching the 200 day moving average to see how the metal handles itself here. The longer it holds ABOVE this level, the more nervous the shorts are going to become. From a technical perspective, a market in a bearish mode should not be able to push through this level but should fail near or at that level and then begin retreating in price. This average comes in near the $1629 level which reinforces the horizontal resistance levels noted on the chart. You will note that gold is trading above both these levels as of this hour.
If this market can continue higher tomorrow and take out $1650, we will see $1680 in very short order as shorts begin exiting more earnestly while buyers sitting on the sideline observing its performance will grow emboldened. That will bring the open interest up as hedge fund money returns more strongly.
Downside probes should meet up with valued-based buying above and just slightly below the $1600 level. Only a failure there will see the metal retreat deeper back towards $1575.
The Dollar is setting back a bit from its recent 52 week high but remains above both its 10 day and 20 day moving averages. The weekly chart is positive but does show a level of chart resistance just shy of the 82 level which is exactly where it is currently stalling a bit. Dollar bulls need to clear this level before the week is out if they hope to take the Dollar up towards 83.50 - 84.00.
The HUI is rising alongside of both gold and silver today as there is a general bid into equities across the board. The equity guys are anticipating better economic numbers coming out of the US and seem to be dismissing any concerns related to European sovereign debt issues for the time being. That will help keep the miners moving higher but I am noting the fact that they not been able to extend their gains from the opening hour of trading today. Sellers are emerging but the buyers have still been continuing so both sides are currently stalemated heading into the last hour of trading. We will see which side blinks first.
Note that the index still remains below the 50 day moving average although it is well above the bottom of the 15 month long trading range down near 500 - 490.
A large number of traders are watching the 200 day moving average to see how the metal handles itself here. The longer it holds ABOVE this level, the more nervous the shorts are going to become. From a technical perspective, a market in a bearish mode should not be able to push through this level but should fail near or at that level and then begin retreating in price. This average comes in near the $1629 level which reinforces the horizontal resistance levels noted on the chart. You will note that gold is trading above both these levels as of this hour.
If this market can continue higher tomorrow and take out $1650, we will see $1680 in very short order as shorts begin exiting more earnestly while buyers sitting on the sideline observing its performance will grow emboldened. That will bring the open interest up as hedge fund money returns more strongly.
Downside probes should meet up with valued-based buying above and just slightly below the $1600 level. Only a failure there will see the metal retreat deeper back towards $1575.
The Dollar is setting back a bit from its recent 52 week high but remains above both its 10 day and 20 day moving averages. The weekly chart is positive but does show a level of chart resistance just shy of the 82 level which is exactly where it is currently stalling a bit. Dollar bulls need to clear this level before the week is out if they hope to take the Dollar up towards 83.50 - 84.00.
The HUI is rising alongside of both gold and silver today as there is a general bid into equities across the board. The equity guys are anticipating better economic numbers coming out of the US and seem to be dismissing any concerns related to European sovereign debt issues for the time being. That will help keep the miners moving higher but I am noting the fact that they not been able to extend their gains from the opening hour of trading today. Sellers are emerging but the buyers have still been continuing so both sides are currently stalemated heading into the last hour of trading. We will see which side blinks first.
Note that the index still remains below the 50 day moving average although it is well above the bottom of the 15 month long trading range down near 500 - 490.
Saturday, January 7, 2012
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.
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