Gold & Precious Metals

Danger Zone or Launch Pad – Strong Analysis Below

Posted by Ira Epstein VIA

on Friday, 5 October 2012 15:29

The first Presidential Debate is out of the way.

President Obama didn’t come with his “A” game. In fact, he came with no game. Politicians are like cats in that they have many lives and the President clearly used one of his nine lives up last night.

Does this mean Mitt Romney is now favored? No, but he did a good job, one that was strong enough to most likely put him seriously back in the race, especially  in the key states that will determine the next President. He needs Ohio and Florida, so polls over the next few days will give an idea as to just how well Mr. Romney did in winning over some Ohioans and Floridians. Let’s not forget Colorado either.

Gold liked Romney’s performance as it is up sharply the morning after the debate. In fact it’s knocking on the door of fresh highs for 2012. Now don’t think this is solely because of one debate, it’s not. Today Turkey moved its forces to heightened alert and will be calling on NATO members to defend Turkey’s boarder with Syria after border towns in Turkey were bombed by Syria and Turkish citizens killed. Turkey can well defend itself, so Syria is crazy to be looking to start up with Syria unless Syria wants to drag Iran into this mess. Iran is reportedly moving soldiers to its border with Turkey so Middle East problems have clearly not gone away. They are simmering and will soon boil over.

Since my last report not a lot has changed on the world scene. The ECB is prepared to aid Spain. Spain hasn’t yet asked for help, since the open markets are still buying Spanish debt in bulk and at reasonable levels and Mr. Rajoy needs a better political correct time to ask for help. Spain is able to sell debt at reasonable levels because buyers of the bonds expect Spain to ask for help from the ECB very soon, which will increase the value of the bonds.

Greece has not reached a deal with the troika on releasing the next round of financing as the troika doesn’t think the plan proposed to save billions of Euros in 2013 and 2014 is credible. In fact there were reports today that Spain, the Netherlands and Finland want to postpone the decision on releasing the next 31.5 billion euro tranche of Greek bailout aid until the Nov 12 meeting of Eurozone finance ministers.

Israel said it won’t attack Iran until the spring. Syria attacked Turkey overnight and Iran is readying its army on the Turkish border. This is gold’s environment.

Pictures do better than words at times. This is one of those times. Look at the Seasonal Chart below. I haven’t changed it in months.

1

Prices continue to follow the historical picture of rising prices from August, now through September and possibly into year end. There’s little doubt that at this point in time, the above pattern is at work and the fundamentals at work support it.

In my last report, written about 3-weeks ago I wrote that; ”I have been looking for the 1775-1800 range to be the first resistance point, but never expected it to be hit this early into the seasonal cycle.” Here we are only in mid September and 1775 has already been hit, with the strongest seasonal part of the year ahead. To me this means there’s room for more gains on the horizon.”

What more can be said. Prices are trading against the $1800 price level now and I see more gains ahead, but ones that have to be fought stubbornly for. Not ones off of sudden soaring drives higher.

Monthly Chart

2

The above Monthly Chart pattern remains in a bullish mode with each high being higher than a previous high, each low higher than a previous lows and prices staying over the 18-Month Moving Average of Closing Prices.  Only getting back under 1554.4 would at this time negate the bullish chart pattern.

I labeled the Bollinger Band Top on the above chart. Its value currently comes in at 1843.9 at this time. Given that the Slow Stochastic Study is not overbought, this seems a reasonable upside target.

Keep in mind that Monthly Charts move very slowly as each line on the above chart represents about 22-business days. In order for gold to get under 1554.4., prices would have to drop nearly $245, not an event that seems likely in the intermediate term.

Weekly Chart

3

The Weekly Chart is very bullish as it has an embedded Slow Stochastic reading. This can be seen on the bottom graph on the above chart. When both the “red” K-line and the “gold” D-line are going sideways over an 80-reading for several weeks in a row, I say this study is locked in…embedded. To me this means that those bullish have control of the market and that prices should be pressured to move higher.

A sign that the uptrend is going to correct would come when the red line closes under 80. I don’t see this current chart formation as being close to that occurring, so I remain bullish for that reason.

The 18-Day Moving Average of Closes, the red line running through the Weekly Chart Data, is well under the last break low of 1735.8. This means that this Moving Average is not going to provide an entry point if prices are going to continue moving higher now.

Anywhere you decide to enter, the number as I see it that you don’t want broken is 1735.8 as that would destroy the pattern of higher highs and higher lows. In fact, I am thinking that 1735.8 should not be seen again in 2012 if the bull case is going to hold through year end.

Daily Chart

4

I’ve placed an image of a bottle on this chart and no, it’s not due to a drinking issue.

I often mention how Bollinger Bands widen out and narrow in. If you look at the bands and the bottle, you can see somewhat similar shaping. As the Bands narrow in, market pressure builds up behind the bottleneck. The narrower the neck gets, the powerful the move when it break out. You might say when the pressure blasts out of the neck. At that time prices move to widen the bands out and the process enters a trend stage.

Gold is in an uptrend. The red low arrows and green high arrows show that the market is making higher highs and higher lows over the 18-Day Moving Average of Closes, shown as the red line. Next upside target is the Bollinger Band Top of 1798.8.

Whether this chart pattern runs out of pressure or “blasts” out of the neck of the bottle so to speak has to do with what the Slow Stochastic Reading does. If it embeds, I expect a move towards $1850 an ounce. If not, I expect prices to trade a bit more sideways and still resolve to higher prices.

What could hurt the Daily Chart is getting under 1773, the last break low. Bears might say that if 1773 were taken out, a pullback to the Bollinger Band, currently near 1739.6 would be a downside target.

Summary

I think you should get long or be looking to get long gold. I will be covering where in my Twice Daily Updates for my subscribers, as I see events unfold.

 

Please call you Ira Epstein Division of the Linn Group for more specifics.

You can subscribe to my recommendations by going to www.iraepstein.com. It is there that you will see on the right hand side of the page, Oral and Written Subscription Page. Simply click on and become a subscriber. It’s inexpensive by design, offers two oral and written updates a day, access to my private Webinars where I cover 35 charts three to four time and week and more.

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A look at the gold market over the last few months shows that the pattern of price movements has changed from the traditional patterns. If you take the time factor out of charts on the gold price, the pattern of behavior becomes simple. It is a strong rise followed by a narrow, short consolidation pattern before a further move forward. This is unlike the saw tooth pattern we are used to as buyers and sellers reassess price prospects constantly, giving rise to more extended consolidation patterns over longer periods.

Until June of this year, the gold and silver prices appeared to be following the more traditional pattern that tended lower. Then between $1,530 and $1,550, the price turned and headed upwards. It was then that the day-to-day pattern changed. A closer look at the long consolidation period that sent the gold price from $1,930 to $1,530 over the last year and more shows a changing pattern of large movements followed by narrower consolidations holding round a central price that held for a long time.

Quantity, Not Price

What’s clear is that there were buyers who came in on the fall and restrained those falls to a narrower trading range. These buyers did not simply say, “Buy at a certain price” but appeared to ask their dealers for offers of gold and probably large ones too. Then these buyers took all that was offered to them. Their interest lay in the quantity of gold and not the price to be paid. What sort of buyer would not be concerned at the price but only at the quantity?

Traditional Market Buyers

Traders are just a little longer-term buyers and sellers than dealers. Dealers are there to make money too, not just to sell or buy gold and not simply to represent clients.

Sometimes a dealer can’t avoid, at the end of the day, finding he has some stock on the books that must be held overnight. This will always make a dealer concerned with his ‘book’ as well as his profits. By his very nature a dealer is not particularly concerned with fundamentals, apart from knowing, at times, when he would prefer to be caught ‘long’ and when to be caught ‘short’ overnight. So a dealer will respond to the news he sees daily and move his prices in line with how he feels the news should affect his prices. It’s only when the market reacts differently that he will change his direction. That’s why we often see pieces of news that appear irrelevant to the gold price being labelled as price drivers.

Traders are unlike dealers in that they take positions for themselves and don’t have an on-going ‘book’ to maintain. The trader, likewise, isn’t too concerned with the fundamentals over the longer term, but adopts a similar attitude to the dealer. They are both working for profits, to be taken away from the market.

Both are following prices and very short-term trends with making a profit at the heart of their dealing. The fact that they are dealing in gold or silver makes little difference to their thinking except the relevance of short-term information. Both are therefore buying or selling constantly; opening positions and closing them as soon as they have their targeted profit. If they felt other markets, such as pork bellies, were profitable they would go in there too.

A dealer friend of ours told us that the best traders are successful on 52% of their trades. This can wear a man out quickly. Certainly, he’s relying on his skill as a trader and not on the longer-term move of precious metal prices. He is not an investor. He is primarily concerned with price leaving quantity an indicator of profit potential.

The buyers who have been targeting quantity and not price are not in these categories. For them, we have to look elsewhere.

Investors

If a buyer is unconcerned about price but only quantity, he must by his dealing method, be a long-term, large buyer.

But institutions, whether they are Pension Fund Managers or Wealth funds and the like, do target profits. Many hedge funds too, aim to achieve a certain percentage profits return, per month, per quarter or per annum to earn their management fees and profit bonuses. This implies taking profits and using trading methods. Even the long-term Pension funds sometimes place part of their fund into a trading portfolio to get more income for their contributors. Some of these institutions may have a yearly view or take a position for the long-term, but always with a dollar profit in mind. They have to for the sake of their future Pensioners. Again to these type of investors price is important, critically so.

Yes, there are some investors who are prepared to hold for the very long-term until conditions change and make gold investments poor ones. Only then will they sell, but again, price is important to them. For instance, many of the buyers of the shares of gold ETF’s have held them since the funds were formed and intend on holding them for as long as the economic and monetary future remains dark. But they don’t have a pattern of buying that repetitively goes into the market to buy quantity irrespective of the price. That Takes us to Asian Buyers…

India

Indian investors are thought to hold in the region of 20,000 tonnes and keep returning to the market to buy more annually. Driven by religion and family financial security, they will continue to buy gold in line with their disposable income. Right now they’re holding back outside of the festivals, such a Diwali, the Festival of Lights, that happens in October. This is when religion and family overrule price. But where they can, they make sure that they don’t buy when they believe the Rupee gold price is likely to fall. They like to enter the market when the Rupee price has dropped substantially or held at a particular level forming a ‘floor’ price, reassuring them that the next move will be either sideways or up.

What has complicated their lives is the performance of the currency they measure gold’s price in. The Indian Rupee has been extremely weak over the last few months. It was not much more than a year ago that the Indian Rupee traded at Rs.42 to the USD. It fell heavily since then to a low of over Rs.57 to the USD. This changed the Rupee price of gold significantly giving the appearance of a rising gold price. This deterred their buying.

In the last month the Indian Rupee has strengthened to Rs.52 giving the appearance of a falling gold price when in fact the dollar gold price was rising. This has turned Indian buyers, ahead of Diwali, back into the gold market to buy.

But Indian buyers are price- and quantity-conscious, limited by their available disposable income. As the gold price rises, so the quantity of gold they are able to buy falls, unless their income is rising at the same pace.

China

The retail buyer out of China has often come into money for the first time in his life. Before that he was toiling in the countryside hoping to just get by. With China’s phenomenal growth, he has been lifted up financially to the point where he can now save considerably more than he could before. The second type of retail buyer reached that level much earlier and has long past covering his needs and some savings. He is growing wealthy, so able to buy much more gold. His own government is encouraging him to do so. By nature, the Chinese man is a saver, saving up to as much as 40% of his income. Seven per cent of his income is targeting gold investments. Inflation is high in China and eats into the income he can gain from any fixed deposits that he has at the bank. By matching the total return on deposits to the total return on gold, he is seeing gold’s performance continue to recommend itself to him.

Nevertheless he is limited by his disposable income and is concerned that the price he pays is one that he feels will not fall back after he has bought.

The buyer we’re looking to identify is unconcerned at the price and is not limited by it and has sufficient money to spend to buy all that is offered to him.

Central Bankers

A central banker is the one gold buyer that fits the bill of the gold investor, unconcerned at the price he pays and interested in acquiring quantity.

After all, he’s diversifying the foreign exchange reserves of the nation when he buys. Gold has been pushed to one side for over forty years and has been always considered as a very important reserve asset. That’s why the top four wealthiest nations hold more than 70% of their reserves in gold. But they’re not current buyers. It’s those central bankers who have too little gold as a percentage of their reserves in gold that are buying now. They don’t want to have to depend entirely on the currencies they hold in the national portfolio when hard times hit.

Gold acts as a ‘counter’ to these currencies and has done so throughout history. But for the last forty years, it has not been recognized as such despite the fact that since the late sixties, it has risen in price over 50 times.

Central bankers are wiser than that. They have always known that gold is money that will act to measure the real value of currencies. It is currencies that are the weakening link in the money system. So when a central bank is buying gold, it knows that it’s simply changing one form of money for another. And that’s why, relative to the available quantities of gold in the market place, he has endless funds. That’s why he wants quantity. He has far too little so wants as much as he can get without upsetting the market.

To get the rest of article which addresses:

  • Why Does He Buy as He Does?
  • Critical Policy

you’d have to subscribe @ www.GoldForecaster.com / www.SilverForecaster.com

JULIAN PHILLIPS – one half of the highly respected team at GoldForecaster.com – began his career in the financial markets back in 1970, when he left the British Army after serving as an Officer in the Light Infantry in Malaya, Mauritius, and Belfast.

First he worked in Timber Management and then joined the London Stock Exchange, qualifying as a member and specializing from the beginning in currencies, gold and the “Dollar Premium”. On moving to South Africa, Julian was appointed a macro-economist for the Electricity Supply Commission – guiding currency decisions on the multi-billion foreign Loan Portfolio – before joining Chase Manhattan and the UK Merchant Bank, Hill Samuel, in Johannesburg.

There he specialized in gold, before moving to Capetown, where he established the Fund Management department of the Board of Executors. Julian returned to the “Gold World” over two years ago, contributing his exceptional experience and insights toGlobal Watch: The Gold Forecaster.

Potential Intermediate Term Targets for Gold & Gold Stocks

Posted by Jordan Roy Byrne - Daily Gold

on Wednesday, 3 October 2012 18:51

The precious metals complex rebounded strongly in August and September, which is typical when the larger trend is bullish. We believe the larger trend turned bullish with the bottom in May. However, weeks ago we noted targets of $1800 for Gold and 57 for GDX as resistance points. The market has begun a corrective period which should last deep into October. Nevertheless, such a correction would provide an excellent entry point before the market makes its next move higher. Today we examine potential medium term and intermediate term targets for Gold and the gold stocks.

Starting with Gold, we find it correcting and consolidating after reaching resistance at $1800, which was an obvious short-term target. Upon a break past $1800, the initial target would be $1900. Since $1800 is stronger resistance than $1900 we can apply its distance from the bottom ($1550) and that projects to another target of $2050.  Upon a breakout past $1900, the market could be setting up for a potential cup and handle pattern which projects to a minimum of $2250.

oct1goldtgt

Next we analyze Gold in terms of its trend channels. Note that trendline A defined resistance from 1999 to 2010 and has defined support in 2011 to 2012. The next trendline resistance comes into play at $2350 in Q3 2013 and $2550 in Q4 2013.

oct1goldtl

Moving to the shares, we note that GDX faces its next major resistance at $65. A potential cup and handle pattern projects to the $90-$93 zone.

oct1edgdx

The GDX vs. Gold ratio shows 0.40 to 0.45 as a potential future target zone. Figures of $2250 for Gold and 90 for GDX equate to a ratio of 0.40.

oct1edgdxvgold

The precious metals complex is correcting in the near-term and we expect that to continue for the next several weeks. Following the correction we see immediate upside targets of $1900 for Gold and 63-65 for GDX. Essentially, the next breakout should result in a retest of the former highs. Moving beyond the medium term, we see a target zone for Gold of $2300 to $2500 and GDX to 90-93. The timetable for such is in the next 15 months. In the meantime, the sector is correcting and we expect that to continue for the majority of October. Thus, be advised that the coming weeks will be an opportunity to accumulate your favorite positions at lower prices. If you’d be interested in professional guidance in uncovering the producers and explorers poised for big gains then we invite you to learn more about our service.

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

 

 

 

 

MARC FABER: I’m Bearish On Stocks, Gold And Everything Else

Posted by Marc Faber via Business Insider

on Tuesday, 2 October 2012 15:11

That said, Marc posted on his blog today that “I WILL NEVER SELL MY GOLD”.

gold picture

Marc Faber is still convinced that there’s a 100 percent chance of a global recession and that stocks are due for a big sell-off.

While Faber favors gold, he thinks that it too is due for a correction after staging a huge rally.

He spoke with Fox Business News on Friday:

…….read more and watch the entire interview HERE

About Marc Faber

Dr Marc Faber was born in Zurich, Switzerland. He went to school in Geneva and Zurich and finished high school with the Matura. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics magna cum laude. Between 1970 and 1978, Dr Faber worked for White Weld & Company Limited in New York, Zurich and Hong Kong. Since 1973, he has lived in Hong Kong. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, which acts as an investment advisor and fund manager.

 

“Bull Trend Intact” for Gold – 3 Views on Silver

Posted by Mark Leibovit Ben Traynor & Theodore Butler

on Monday, 1 October 2012 14:15

LEIBOVIT VR GOLD LETTER – BULLETIN

SEPEMBER 29, 2012 – WATCH THIS VIDEO  Ed Note: It is on Silver Manipulation & Mark is bullish as you can see: “Theoretical retracement levels for silver are 31.27, 30.05, 29.63, 28.96 and 28.50. We traded down to only 33.24 on Wednesday. If you don’t own the precious metals, anytime is a good time to buy them. The expression goes: ‘Don’t wait to buy gold – buy gold and wait’! – The VIDEO HERE

The Arguments Against a Silver Manipulation

No matter how convinced I may be that silver has been manipulated downward in price by JPMorgan’s concentrated and rapidly increasing short position in COMEX futures contracts 

….read more by Theodore Butler via Silver Seek HERE

“Bull Trend Intact” for Gold, But “Zero Silver Demand” Seen in India 

by Ben Traynor Bullion Vault

SPOT MARKET gold bullion prices dipped below $1770 an ounce during Monday morning London trading, though they remained in line with the last fortnight’s price action, while European stock markets rallied along with the Euro following news late last week that the capital needs of Spain’s banks are within existing provisions.

“On the monthly chart, the bull trend remains intact, with uptrend support at $1594 and resistance at $1790, the previous high,” says technical analyst Russell Browne at Scotia Mocatta.

“[Gold seems] to have established a base now down at $1740,” adds Dave Govett, head of precious metals at brokerage Marex-Spectron.

“But we also seem to have a ceiling in place between $1785 and $1790…I think it will take some help from other markets to break us one way or the other…[but I] think that before long we will see a renewed assault on $1800.”

Silver bullion traded around $34.50 an ounce, in line with recent weeks, before easing  towards lunchtime, while other commodities were also flat.

Demand in India is “zero for silver”, one dealer told newswire Reuters this morning, adding that “demand is there in gold as it is the season”.

US Treasury bond prices gained during this morning’s trading, while prices for UK Gilts and German bunds fell after manufacturing data showed ongoing contraction in the Eurozone.

Sales of American Eagle gold investment coins by the US Mint rose by 75% last month compared to August. Last month’s sales were however the lowest for September since 2007, and were down nearly 25% from September 2011.

On the gold futures and options market meantime, the speculative net long position of Comex traders – measured as the difference between bullish and bearish contracts – rose to its highest recorded level since 6 September 2011 last Tuesday, weekly Commodity Futures Trading Commission data show.

“There has been a considerable slowing down in long positions added,” note the commodities team at Standard Bank.”

“As we’ve seen in the price behavior of gold over the past weeks, it takes very little to spur liquidation.”

The results of stress tests published Friday show seven of Spain’s banks need to be recapitalized, while another seven lenders passed. Several of those deemed to have inadequate capital to withstand severe market stress have already been nationalized. 

In June, Spain’s government agreed a €100 billion credit line from Eurozone rescue funds to fund the recapitalizations, which the stress tests suggest will cost around €60 billion.

Spanish manufacturing activity shrank at an accelerated rate last month, according to purchasing managers index data published Monday. Manufacturing across the Eurozone as a whole also contracted, although less sharply than a month earlier, PMI data show.

The Eurozone unemployment rate remained at 11.4% for the second month in a row in August, its highest level since the financial crisis began in 2007, figures published this morning show.

“There is simply not enough growth in the Euro region to create sufficient jobs and the unemployment rate still has not reached its peak,” says Thomas Costerg, economist at Standard Chartered, speaking before the unemployment figures were released.

“A worrying trend is that the number of unemployed is now also expanding in core countries like Germany, which had been rather sheltered up to now.”

Here in the UK, manufacturing continued to contract last month, and at a slightly accelerated rate, PMI data published Monday show.

Figures from the Bank of England meantime show a drop in mortgage lending and consumer credit during August, while M4 money supply, the Bank’s preferred measure, rose 4.1% in the year to July.

US manufacturing PMI data are published later today.

Over in China, which is today celebrating National Day, manufacturing continued to contract last month, but less sharply than in August, official PMI data show.

China’s central bank has twice cut interest rates this year, and has also reduced the amount of reserves banks are required to hold. In addition, Beijing announced a 1 trillion Yuan infrastructure program last month.

“The policies implemented so far have failed to arrest a cyclical economic downturn,” says ANZ economist Liu Ligang, adding that “monetary easing and fiscal policy could accelerate” after the Communist Party congress next month, which will see a change of leadership.

“[The Party will want] to maintain social stability and a stable political transition.”

“With the political dust finally settled,” adds Bank of America Merrill Lynch economist Ting Lu, 

“Chinese leaders will be forced to shift some efforts to counter the growth slowdown and deteriorating employment.”

India, traditionally the world’s biggest gold buying nation, is seeing a “booming” trade in recycled gold bullion, after drought forced some in rural areas to sell some of their gold, Reuters reports.

“There won’t be new demand from farmers and scrap will flow into the market,” says Prithviraj Kothari, president of the Bombay Bullion Association.

Recycled gold accounted for 57 tonnes of India’s gold supply last year, equivalent to 6.1% of total 2011 Indian gold demand, data published by the World Gold Council show. The bulk of supply, 969 tonnes, came in the form of imports. Authorities have twice raised the level of duty on gold imports since the start of the year.

“In coming years, 50% of the requirements will be met through scrap,” reckons Kothari.

Ben Traynor
BullionVault

Physical gold and Silver Bullion – once complex and expensive, now simple, secure and cost-effective with world #1 online, BullionVault…

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service  BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.