Any forays by gold below $1,800 an ounce may well prompt renewed buying, says Credit Agricole CIB. In a weekly report on positioning by speculators, senior metals analyst Robin Bhar notes that investors have been seeking refuge from global currency instability, volatile stock markets and an uncertain economic outlook. “Also, they are worried about monetary reflation and (the) sovereign-debt crisis,” he says. “Europe’s bank balance sheets are becoming increasingly impaired, which is bullish for gold. In the short term, corrective probes below USD1,800/oz should uncover good buying opportunities.”
Gold Rises As Buyers Add To Positions When Recent Selling Abates
Gold posted a “relief rally” as investors continued to eye eurozone debt problems and added to positions after the recent selling abated, says George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures. Overall open interest declined for Monday, suggesting some liquidation as the market fell. At the time, investors were said to be selling gold to raise cash to cover losses in other markets. However, the open-interest data also shows longer-term participants entering the market, Gero adds. CME Group data shows that while overall open interest fell Monday, it rose for the April and June 2012 contracts. As of 1:40 p.m. EDT Tuesday, Comex December gold was $23.70 higher at $1,837 an ounce.
AREQUIPA, Peru Sept 13 (Reuters) - Barrick Gold (ABX.TO: Quote), the world's largest gold producer, plans to invest $550 million in Peru by 2013, said Darrell Wagner, general manager for Barrick Misquichilca, Barrick's Peruvian subsidiary on Tuesday.
Comex December gold futures are ended the U.S. day session solidly higher and near the daily high on safe-haven and bargain-hunting buying interest following selling pressure Monday. A lower U.S. dollar index and higher crude oil prices Tuesday also supported buying interest in the precious metals. December gold last traded up $29.60 at $1,843.00 an ounce. Spot gold last traded up $25.80 an ounce at $1,840.75. December Comex silver last traded up $1.128 at $41.345 an ounce.
Like a broken record, value hunting traders and investors yet again stepped in to "buy the dip" in gold prices Tuesday, following solid losses posted on Monday. It can be argued this phenomenon has occurred for the past 10 years, on a longer-term basis, but it has become more pronounced in recent months.
The U.S. dollar index traded lower Tuesday, on a corrective pullback after hitting a fresh six-month high Monday. This also supported fresh buying interest in the precious metals. However, the greenback bulls still have some upside near-term technical momentum to suggest a price uptrend can be sustained. If the U.S. dollar index continues to trade sideways to higher, that would be a bearish underlying factor for the precious metals markets.
Crude oil futures prices traded solidly higher Tuesday, which was also bullish for gold and silver. Crude oil prices hit a fresh five-week high Tuesday, which did give the crude bulls some fresh upside near-term technical momentum. Crude oil will remain an important "outside market" that will influence the precious metals markets.
The European Union sovereign debt crisis was still in the headlines Tuesday. Worries about default on debt payments by Greece and rising Italian bond yields are the EU debt crisis worries of the moment on this day. There are unconfirmed reports that China is thinking about stepping in to buy some Italian debt, and that Germany and France may soon make a joint statement regarding Greece's debt. But still, there has been no major breakthrough regarding effectively dealing with Greece's debt. The Euro currency has been hammered and the U.S. dollar index has rallied recently as investors fleed European Union assets. The EU debt crisis is still a major underlying bullish factor for gold and is prompting safe-haven demand for the metal.
Here's an important element for all gold traders to monitor closely: If the U.S. stock indexes drop below their August price lows, that would be extremely bearish for U.S. stocks and very likely significantly bullish for safe-haven gold.
The London P.M. gold fixing was $1,820.00 versus the previous P.M. fixing of $1,834.00.
Technically, December gold futures prices closed near the session high Monday. The gold market bulls have the solid overall technical advantage. Bulls' next upside technical objective is to produce a close above solid technical resistance at the all-time high of $1,923.70. Bears' next near-term downside price objective is closing prices below solid technical support at last week's low of $1,793.80. First resistance is seen at $1,850.00 and then at this week's high of 1,865.20. First support is seen at $1,825.00 and then at $1,800.00. Wyckoff's Market Rating: 8.0.
December silver futures prices closed near the session high Monday. Silver prices were supported by bullish "outside markets" today that included a weaker U.S. dollar index and higher crude oil prices. The silver bulls still have the overall near-term technical advantage, amid choppy trading. Prices are in a choppy, 10-week-old uptrend on the daily bar chart. Bulls' next upside price objective is producing a close above strong technical resistance at the September high of $43.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at this week's low of $39.75. First resistance is seen at $41.50 and then at $42.00. Next support is seen at $41.00 and then at $40.50. Wyckoff's Market Rating: 6.5.
December N.Y. copper closed up 145 points 398.00 cents Tuesday. Prices closed near mid-range and saw short covering in a bear market. Copper prices were supported by bullish "outside markets" today that included a weaker U.S. dollar index and higher crude oil prices. Copper bears have the slight overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 415.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the August low of 384.20 cents. First resistance is seen at 400.00 cents and then at Tuesday's high of 402.45 cents. First support is seen at today's low of 395.50 cents and then at this week's low of 390.50 cents. Wyckoff's Market Rating: 4.5.
Some sell stops have already been triggered in Comex gold, and more could be hit if the market were to fall through the $1,825- and $1,800-per-ounce areas, says George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures. If so, this conceivably could pull gold down as far as $1,750. Gero attributes the selling pressure largely to efforts by money managers to raise extra cash because of losses in their portfolios. “The inability again of the G-7 (Group of Seven nations) to come up with anything is disturbing some of the markets,” especially equities, Gero says. As of 9:19 a.m. EDT, Comex December gold was $19.30, or 1%, lower at $1,840.20 an ounce.
Comex December gold futures are trading lower Monday, on some profit-taking pressure from recent gains and amid a stronger U.S. dollar index. However, losses in gold are being limited by the festering European Union debt crisis that is back on the front burner of the market place Monday morning. December gold last traded down $14.30 at $1,845.10 an ounce. Spot gold last traded down $18.00 an ounce at $1,841.75. December Comex silver last traded down $0.667 at $40.95 an ounce.
The European Union sovereign debt crisis is back in the headlines to start the trading week. There has been no major breakthrough regarding dealing with what is now the EU debt-strapped nation in the spotlight: Greece. There is growing belief Greece is a sinking ship within the EU that cannot be righted. Italian bond yields are also rising, which is another indication of lack of confidence in the EU financial system. The Euro currency has plunged and the U.S. dollar index has rallied as investors flee European Union assets. While gold is seeing some selling pressure Monday, the EU debt crisis is still a major underlying bullish factor for gold.
The U.S. dollar index is trading higher again Monday and hit a fresh six-month high overnight. The greenback bulls have gained good upside near-term technical momentum recently, to now suggest a price uptrend can be sustained. If the U.S. dollar index continues to trade sideways to higher, that would be a bearish underlying factor for the precious metals markets.
Crude oil futures prices are trading weaker Monday, which is also somewhat bearish for gold and silver. Crude oil's recent price action hints prices will trade in a choppy range between $80 and $90 a barrel for the near term. Crude oil will remain an important "outside market" that will influence the precious metals markets.
There were reports overnight coming from some brokers that part of gold's weakness Monday is due to margin calls in other weak markets pulling some money out of the gold market.
If recent history repeats itself, bargain hunters will once again step in to "buy the dip" on perceived bargain hunting in gold.
Here's an important element for all gold traders to monitor closely: If the U.S. stock indexes drop below their August price lows, that would be extremely bearish for U.S. stocks and very likely significantly bullish for safe-haven gold. The U.S. stock indexes are starting off the week on very shaky ground as prices are now hovering not that far above the August lows.
There is no U.S. economic data due for release Monday.
The London A.M. gold fixing was $1,843.00 versus the previous P.M. fixing of $1,851.00.
Technically, December gold futures bulls still have the solid overall technical advantage. Bulls' next upside technical objective is to produce a close above solid technical resistance at the all-time high of $1,923.70. Bears' next near-term downside price objective is closing prices below solid technical support at last week's low of $1,793.80. First resistance is seen at $1,850.00 and then at the overnight high of 1,865.20. First support is seen at the overnight low of $1,828.80 and then at $1,816.20.
December silver futures bulls still have the overall near-term technical advantage. Prices are still in a choppy, nine-week-old uptrend on the daily bar chart. Bulls' next upside price objective is producing a close above strong technical resistance at the September high of $43.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $40.00. First resistance is seen at the overnight high of $41.60 and then at $42.00. Next support is seen at the overnight low of $40.83 and then at last week's low of $40.385.
Survey participants in Kitco News’ Gold Survey are split over the direction for gold prices for next week, but there is a slight bias for higher prices as the worries about Europe and general concerns about the U.S. economy and political uncertainty there give investors reasons to buy the metal.
Still, not everyone is convinced, given the big volatility in the market and gold’s difficulty in sustaining moves over $1,900 an ounce.
In the Kitco News Gold Survey, out of 34 participants, 21 responded this week. Of those 21 participants, nine see prices up, while six see prices down, and six see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.
Sterling Smith, commodity trading adviser and market analyst with Country Hedging, said he’s bullish because of the mounting problems in Greece, which is teetering on default. He said credit default swaps on Greek debt are at 91% chance of a default and one-year yields are now near 93%.
“I think it is not out of the question that an actual default from Greece occurs next week. The market has basically defaulted them already,” Smith said.
President Obama laid out a speech on Thursday outlining a roughly $450 billion plan to boost jobs, but faces stiff Republican opposition, so the U.S. political tensions also remain supportive for gold’s price, several said.
Yet not everyone is convinced gold is going up. Some said the negative sentiment toward the U.S. economy may have been priced in at current levels. Several added the market needs to build a base after two attempts to stay over $1,900, plus the Federal Open Market Committee meeting on Sept. 21-22 could keep traders sidelined. That doesn’t mean that volatility is going away, however.
Those who see weaker prices near-term point out that despite gold’s moves to new highs, the rally hasn’t been accompanied by rising open interest in the futures market nor a significant increase in ownership in the physically backed exchange-traded funds. Further, others said, the dollar has moved up, putting pressure on dollar-denominated gold.
Volatility will likely continue in the gold market next week, with headline news driving price direction, but traders’ biases favor higher prices for the metal.
The outlook for higher gold prices certainly is not unanimous and underscores the why values have likely swung so much lately.
The most-active December gold contract on the Comex division of the New York Mercantile Exchange settled at $1,859.50, up 0.9% on the week. December silver settled at $41.624, down 3.4% on the week.
In the Kitco News Gold Survey, out of 34 participants, 21 responded this week. Of those 21 participants, nine see prices up, while six see prices down, and six see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.
Richard Baker, editor of the Eureka Miner and president of CP Analytics, said the direction for gold prices next week is a “tough call” but he leans toward firmer prices. He said there are several factors that could result in a push-pull on values.
“U.S. dollar dynamics will cloud the movements of gold next week as it strengthens against the euro (six-month high this morning). Falling global markets on growth concerns and Western economy uncertainty may also cause liquidations in the precious metals.
Nonetheless, this is a headline-driven market and gold will continue to benefit on the margin until there is improvement in near-term expectations for Europe and to a lesser extent, the United States. Key gold-referenced commodity ratios (e.g., oil, copper) remain at recession levels,” Baker said.
Those who expect higher prices said the persistent worries over European sovereign debt issues, especially regarding Greece, present strong support for prices. Greece is drawing closer to a default as bond yields there reach record highs. The euro currency fell to a six-month low against the dollar.
In Europe, several media reports said the European Central Bank confirmed the resignation of Governing Council member Juergen Stark. The reports said Stark is leaving due to personal reasons, but the reports said it was well known he was against the resumption of bond purchases last month. Also, Bloomberg News reported that Germany is preparing a way to recapitalize German banks should their Greek debt holdings swamp their balance sheets.
Gijsbert Groenewegen, managing partner of Silver Arrow Capital Management, said the news about Germany seeking to protect its banks shows how murky the European debt situation is, which makes investors seek the transparency of hard assets like gold and silver.
“The problem is the untransparency of the market. We just don’t know what the banks are holding,” he said.
He said the broader markets are also “tired” and could break easily on negative headline news, whether it is related to Europe or dismal U.S. economic news. How gold reacts maybe difficult to judge, though, he said.
If equity markets fall sharply, fund managers may be forced to sell gold holding to raise money to meet margin calls, so gold could fall if stocks do, too. But if that happens, Groenewegen said this would be an opportunity to buy gold.
Barclays Capital technical analysts said while they are bullish on gold prices, they’d rather buy the metal on dips “toward $1,750 against the $1,700 low. Our upside targets are at $1,930 and then $1,970.”
Several market watchers said that gold prices may just end the week little changed from Monday to Friday, but that wide price swings are likely. They noted that gold prices have had trouble staying over $1,900 and have met selling resistance there. Plus, despite the moves to new highs recently, it hasn’t been accompanied by a rise in open interest in the futures or greater buying of the physically backed exchange-traded funds.
In silver, Groenewegen said for that market to rally, it needs to push decisively through $43. Above there it could break out and retest $50. If silver can break through $50, then he expects a big rally that could take it to $100 very quickly.
Barclays Capital analysts said support for December silver is near $39.75, with resistance at $44.23.
