Friday, December 20, 2013
Gold faced selling pressure yesterday afternoon due to all the shorts in the market and investors re-balancing positions for year-end tax purposes.
Gold faced selling pressure yesterday afternoon due to all the shorts in the market and investors re-balancing positions for year-end tax purposes. Since equities are at all-time highs, traders sold off the AU to realize losses to offset their capital gains. AU continued to decline until the end of the day due to a stronger U.S. Dollar and the Fed’s decision to begin tapering in January. AU futures fell more than 3%- lowest level in over 3 years. Investor sentiment for the yellow metal remains bearish since its appeal as a hedge against inflation has waned. Buying into the AU during this downtrend is like catching a falling knife-there is a lot of risk involved in this type of scenario. If buying the dip is timed correctly it can be rewarding, but if gold prices fall faster than predictions you run the risk of cutting some fingers off!! Since gold broke below 1200, we can expect to see testing levels between 1200-1180. AU is down approximately 30% for the year while the S&P 500 is up more than 26% for the year. Looks like investors felt it was a better bet to flee from AU and put their money into equities. Third quarter GDP is up 4.1%. Have a wonderful weekend and Happy Holidays to those of you who are on vacation until next year.
Thursday, December 19, 2013
Yesterday the Fed announced to take baby steps and begin winding down its asset purchase program in January.
Yesterday the Fed announced to take baby steps and begin winding down its asset purchase program in January. The Fed will cut its QE pace next month to $75B on improved job market outlook reducing Treasury and MBS purchases by $5B each. Although this is a modest tapering, we knew the Fed would begin tapering, we just didn’t know when. Gold had a knee-jerk reaction once the minutes were released plunging to the 1220 level and bouncing back up to a high of 1244 just moments later. The Fed remains dovish on rates and wants to keep the federal funds target rate between 0-.25% as long as the unemployment rate remains above the 6.5% threshold and inflation doesn’t exceed more than a half percentage point above the 2% long run target range. The markets rallied by more than 290 points after absorbing the news with the DJIA closing at a new high of 16,167.97. Markets welcomed the tapering with open arms as they should since this cut back can stimulate confidence into the economy. Bernanke’s “timeline” is to continue having a systematic month to month tapering at increments of $10B/month as long as economic data meets expectations. Janet Yellen, the soon to be Federal Reserve Chairwoman, supports Bernanke’s decision of a modest cutback since the economic recovery still remains far from complete. Initial jobless claims for the week ending 12/14 are at 379,000 vs. last week’s claims of 369,000. Gold continues to head towards a downward path as we are currently watching it break under 1200!
Have a wonderful day.
Tuesday, December 17, 2013
Today the Fed begins its 2 day meeting. The overall market consensus is that the Fed will continue its quantitative easing program.
Today the Fed begins its 2 day meeting. The overall market consensus is that the Fed will continue its quantitative easing program. Currently, there are several speculative short positions in the market. If the tapering kick off doesn’t begin at the December meeting, analysts expect to see a short covering rally. The markets are under pressure this morning with AU, AG, PT, PD trading approximately 1%, 1.6%, .50%, and .40% on the downside respectively. Gold saw some selling pressure yesterday afternoon closing at 1245.50. The yellow metal continues to trade sideways and remain in a bear market with support levels at 1200. Other than traders adjusting their positions before the Fed meeting, it’s a relatively quiet day. Core CPI for the month of November is .2%. This figure is particularly important for the Fed to analyze during its meeting because it will tell members if inflation is maintained or if it’s something they need to pay closer attention to. Have a great day!
Monday, December 16, 2013
The precious complex continues to search for direction ahead of the final FOMC meeting of 2013 that will conclude on Wednesday.
The precious complex continues to search for direction ahead of the final FOMC meeting of 2013 that will conclude on Wednesday. Chairman Bernanke and his cohorts will gather one last time before year end to drink some eggnog, exchange Pollyanna gifts and discuss whether recent economic data would warrant a taper of current monetary stimulus. 203,000 jobs were added to the payrolls in November with unemployment falling to 7%. However, the labor force participation rate remain dismal and first time unemployment filings rose 68,000 in the first week of December. Q3 GDP came in at 3.6% but growing inventories are the proverbial wolves in sheep’s clothing as the more accurate number was closer to 1.9%. Some would also point to the recent budget deal as a positive sign for a December taper but in reality it does little to address the real issues that are plaguing this country and, with just a few months before another government shutdown/debt ceiling faceoff, baby steps just won’t cut it. The DJIA is up more than 100 points to start the week while gold is making another break for $1250 and currently trades $1248 after closing Friday’s session at $1234.60. Platinum and palladium have fought back some early losses this morning with platinum near flat to Friday’s close and palladium up $2 to $718. Have a great day!
Friday, December 13, 2013
Gold has been down over 25% this year. YTD AU has not seen such negative performance since 1981. Bears feel that AU will slip below $1,200 and bulls predict that AU has the possibility to reach as high as $2,000. We expect to see a continuation of short covering in the markets until the Fed meets on Dec 17-18, which is when investors will re-evaluate their positions. The strong retail figures from yesterday increase the likelihood that the Fed can begin tapering at its next meeting, however market consensus is that a reduction in monetary stimulus will be seen in March 2014. In 2013, PD saw some gains primarily for 2 reasons: strengthening auto markets in U.S. and China and South Africa supply concerns. PD is expected to continue to remain in deficit in 2014. This is good news for PD because a decrease in supply means higher prices! November’s PPI (MoM) met expectations of -.1% so no surprises there. It’s Friday the 13th so be sure not to walk under any ladders J
Thursday, December 12, 2013
Official (1/4 oz.) Sochi Olympic Games gold coins authorized by the Central Bank of Russia and the XX11 Olympic Games. Limited edition of 20,000 coins.
Denomination 50 Rubles
Metal: 999 Gold
Weight: 7,89 gram
Diameter: 22,6 mm
Looks like we will continue to see gold bouncing around until we get a better answer of when tapering will occur.
Looks like we will continue to see gold bouncing around until we get a better answer of when tapering will occur. What could possibly stop the Fed from tapering between now-March? The job numbers released last week exceeded expectations, the auto industry is doing well, and if Congress passes a budget deal the Fed has no reason not to taper! Gold is trading on the downside this morning as a possible U.S. budget deal means that there will not be another government shutdown and thus, increases the likelihood of an early stimulus reduction. AG, PT, & PD are following the AU leader and trading in the negative territory this morning. Lately, we have seen bullish moves in AU due to a weakening U.S. Dollar. The USD will see gains from current levels if the Fed trims back on its monetary stimulus. If the Fed shows signals that the economy is strengthening and doesn’t need help from the central bank, the US Dollar should see some upward movement. Retail Sales (MoM) are up .7% for the month of November and the number of people who filed for unemployment last week increased by 68,000 to a seasonally adjusted 368,000. Have a great day!
Wednesday, December 11, 2013
Gold saw a spike yesterday due to a weaker dollar and a short covering rally. Funds wanted to cover their short positions before the Fed’s policy meeting on Dec 17-18th. Stops went through AU at the 1250 level. We still expect to see some downward pressure on the yellow metal as there are talks about tapering happening as early as this month. Labor tensions continue in South Africa, the world’s largest producer of Platinum. The AMCU already received permission to strike at Anglo and Impala, but now they even got permission from a government mediator to strike at Lonmin. The precious metals market was able to hold its momentum yesterday as AU, PT, PD, AG futures settled at 1261.10, 1388.70, 738.45, 20.315 respectively. Financial regulators have finally approved the long awaited Volker rule! The purpose of the Volker rule is to restrict banks from engaging in risky investments with the firm’s money for their own benefit (proprietary trading). Have a wonderful day
Tuesday, December 10, 2013
If we see any drastic movement in gold from now until Dec 17-18, it is most likely because investors are getting signals of when tapering will occur.
If we see any drastic movement in gold from now until Dec 17-18, it is most likely because investors are getting signals of when tapering will occur. James Bullard, President of the Federal Reserve Bank of St. Louis, discussed that the Fed is likely to scale back its asset purchase program sometime soon given the positive economic data released last week. According to Bullard, a small possible tapering could be seen in the next meeting. Let’s face it, the Fed can’t inject money into the economy forever! By initiating a small taper, the Fed acknowledges an improvement in the labor market and still has a chance to monitor inflation. Bullard believes a small taper is a good idea because if inflation doesn’t meet target levels then the Fed can simply put tapering on pause. The Fed promises to keep interest rates near zero even when quantitative easing is over as long as the unemployment rate falls to 6.5% and inflation doesn’t climb above 2.5%. Richard Fisher, President of the Federal Reserve Bank of Dallas thinks that the Fed should begin tapering ASAP accompanied by a timeline of when markets can expect see an end to the asset-purchase program. Despite all the taper chatter, we see gold still manages to hold its gains from yesterday! This suggests that perhaps traders aren’t as nervous about what the Fed’s next move could be. PT seems to be following AU’s upward momentum and broke through $1400 this morning. Have a great day!
Monday, December 9, 2013
Friday’s strong job report was good news for the market. The DJIA closed at 16020.20 and the S&P 500 at 1805.09. We saw a decline in the unemployment rate on Friday and this time it was due to people actually finding jobs and not discouraged workers exiting the labor force because they are tired of looking for a job! The overall sentiment is that the economy is doing better, but is not completely out of the hole just yet. Approximately 1 million jobs were created in low wage sectors such as retail, leisure, hospitality, and certain healthcare sectors (home health care & nursing homes). Investors will continue to keep a close eye on economic data for any signals of the Fed pulling back on its stimulus. Economists expect the Fed to begin tapering in March 2014. The dollar is currently down ~.1% vs. basket of currencies. Gold along with AG,PT & PD are all trading on the upside this fine Monday morning. Have a great day!!
Thursday, December 5, 2013
It was an interesting day yesterday as stocks were trading on the downside and precious metals rallied.
It was an interesting day yesterday as stocks were trading on the downside and precious metals rallied. We saw conflicting economic reports- ADP Payrolls Report showed that 215,000 private-sector jobs were added, but the ISM Non-Manufacturing PMI of 53.9 had the weakest reading since July. The ADP report signifies that a strong job report is likely to be seen on Friday, but the ISM indicates that businesses and consumers are cautious about their spending habits. Gold had a knee jerk reaction yesterday in response to the ADP report and fell 5 bucks but reversed losses due to a short covering rally and greater global physical demand. The PGMS found support as money came out of stocks and went straight into gold. According to the Federal Reserve’s Beige Book Report, the economy is expanding at a “modest to moderate pace”. If Friday’s job numbers are sturdy, the Fed could begin tapering as early as December. This week’s initial jobless claims fell to 298,000 vs. 325,000 forecast. Gold is back to trading on the downside as the short covering rally is over and tapering fears are kicking in. The Fed’s policy-setting meeting is set to take place on Dec 17-18th and the National Union of Mineworkers and Northam PT are having their meeting on Dec 5th to settle their ongoing minimum wage dispute. Have a wonderful, wonderful day J
Wednesday, December 4, 2013
U.S. car sales increased by 9% in November compared to last year, due to their promotional tactics. Detroit’s Big 3 reported better than expected U.S. auto sales for the month of November. Sales for GM, Ford, and Chrysler (a unit of Fiat) rose by approximately 14%, 7%, and 16% respectively. As a result, PT & PD saw a boost in prices. If the auto industry continues to do well, PD should see some significant support. Gold hit a new five month low this week and continues to lose its ground even though it was able to break through its $1,220 resistance level. Silver seemed to follow gold’s path yesterday since it failed to see an uptick despite news of an increase in Indian AG imports. If gold trades below the $1,200 support level, it could hit a new yearly low and probably spur some physical buying. Economists believe the shiny yellow metal could test this level if Friday’s job number hits the 200,000 mark since positive economic data triggers tapering fears. There is a good chance we could see this happen since the U.S. Economy added 215,000 private-sector jobs in November, according to the ADP National Employment Report. Stay tuned for the New Home Sales at 10:00 a.m.
Tuesday, December 3, 2013
The precious metals are all trading slightly on the downside today. Yesterday’s ISM Manufacturing PMI for November was better than October’s results. The ISM Manufacturing PMI for November was 57.3 compared to October’s figure of 56.4. Gold broke new trend support levels after this positive economic data was released. The overall sentiment for gold remains to be bearish as investors expect a further decline in the yellow metal. Any positive economic data released from now until Friday signals that tapering is bound to occur putting pressure on gold prices. Economists believe the strong ISM number is due to better housing and construction data along with stronger exports data. Physical demand for AU has been very light due to expectations of a further price drop. Let’s see what tomorrow’s ADP Nonfarm Employment Change is as this is a good predictor of what Friday’s Nonfarm Payrolls will look like. Have a great day!
Monday, December 2, 2013
If you turn on the TV or pick up the paper, all you see is headlines about Black Friday. Wal-Mart, Macy’s and J.C. Penney saw decent store traffic by opening up on Turkey Day, but perhaps doing so may have cut into Black Friday sales! Total Online Sales (YoY) grew about 19.7% on Thanksgiving Day and ~19% on Black Friday. According to an IBM survey, purchases via mobile devices increased by 40% compared to last year. The overall sentiment is that it is supposed to be a good year for retailers as there are still 23 more shopping days left for Christmas! The stock market had a great November with the DJIA and S&P 500 near record highs. Bulls expect stocks to perform even better in December. Precious metals are currently trading on the downside this morning. Gold saw a drop on speculation a stronger U.S. economy could signal tapering to occur as early as December. I guess we will have to wait until Friday when the Nonfarm Payrolls data comes out to determine if the Fed will begin paring its asset purchase program. For those of you who didn’t get to do any shopping this weekend, stay close by your computers for Cyber Monday J Have a great day!