Sideways action continued to remain the main feature in overnight metals markets, as the lack of fresh news took its toll. Buyers and sellers pulled on opposite ends of the market string and thus gold was basically stuck near $885 and no breaks of any significance emerged in the wee hours. Now, if one were to look at the LBMA gold and silver clearing statistics, one would note a dramatic decline in figures vis a vis one year ago. At that time, all of the tracked metrics had reached four-year highs.
March of 2009 saw 35.3% fewer transfers taking place at the LBMA. Perhaps those who opine that the intense levels of interest in buying/selling gold are clearly ebbing are on to something...If there was a month and a day when gold should have risen more like $270 in lieu of $70, well, that should have been March. And the 18th to be sure. If the watershed statement that the US will commence buying its own debt back did not do the 'trick' - the trick being $1200 gold- then, what exactly will?
With two weeks to go before G-Day in India (Akshaya Tritiya), the locals did make their presence felt in various bazaars, but not in numbers justifying too much enthusiasm. When polled, most indicated that they were likely to hold out for values under $870 per ounce. European central banks sold less than 100 tonnes of gold since the start of the fifth year of the CBGA last September. As we mentioned yesterday, just one fund, in just one day, sold 62.2 tonnes of the same.
Well, the CBs now have four months or so left to match the 497 tonnes they disposed of in 2008. Will they? Will they not? Will it make a difference? Gold ETF holdings are stalled, money continues to leak over into the equities sector despite calls for a 'sucker's rally' emerging from various quarters, and most other impact factors (the dollar, oil) are also glued to pivot points (85 on the index for the greenback, and $50 for crude). Perhaps the good news is that gold has managed to tread water very near its 100-day MA at $886 an ounce. Thus far. The once-again developing congestion could soon usher in a break. Our guess? To the downside. The Bloomberg weekly survey and week-ahead forecast has the task of finding the tally of such guesses after sounding a bunch of sources. Results, tomorrow. The survey normally bats about 60% correct, on average.
Today's New York spot dealings offered more of the same, with gold opening at $891 per ounce (a gain of $0.40), silver slipping a dime to $12.66 and platinum and palladium virtually unchanged, at $1217 and $234 per ounce, respectively. Participants continue to fret about deflation, in the wake of yesterday's industrial production and wholesale inflation data. The Dow will be wagged by items such as JP Morgan beating earnings estimates, and the bankruptcy of General Growth (a US mall owner) - the biggest such failure in the US R.E, industry, ever. Once again, a hot one and a cold one. China's economy recorded its slowest growth in a decade last quarter, falling to a 6.1% GDP pace. Still, some see 'green shoots' (the new term du jour and a strong contender for the title previously held by 'subprime mess' and 'toxic assets') in China. And not just in the Beijing Zoo's panda cages.
And now, for something completely different. Burn those shoots. $1200 gold is coming. By the fall. Or, so says one fellow in Germany. Who are we to disagree? Although, as you will note, the dire scenario he depicts is only good for $1100 to $1200 bullion. Roll those dice. Mineweb's Marc Davis fills us in on this Teutonic Tale of Terror:
Something wicked this way comes! So, be afraid. Be very afraid. (Unless you're a gold bug).
The recent rally in American and Canadian equity markets is soon to give way to a gut-wrenching collapse that will push equities to shocking new lows, with gold prices reacting by rallying to new highs. After having correctly anticipated the timing and extent of the March 9th to April 3rd market rally, this is the latest dire warning from Heiko Seibel, a leading German stock market strategist. The Director of Research for Munich-based CM-Equity AG now believes that the U.S. benchmark S&P 500 Index will dramatically drop to an ultimate low of around 450 points in late June or in July. The odds favour him being proven right - that is if his talent for correctly anticipating market moves continues.
Within a few weeks, we will see the stock lows of our lifetimes, he nonchalantly declares.
Indeed, he was right on the money when he told BNW Business Newswire on March 2nd that the S&P 500 Index was about to reverse a pronounced downward trend. He suggested at the time that it would rally to a high of not much more than 850 points during April before it begins an orderly retreat that soon turns into a panic-stricken rout. The S&P 500 closed at 856.56 on April 9th - the culmination of a very impressive five-week gain of 26% over its March 09th low. However, this rebound cannot gloss over the fact that the bellwether index's had lost 58% of its value by the time it ended its slide in early March. And now the S&P 500 is likely destined to trade in an uninspiring sideways pattern for the balance of the month, Seibel suggests.
Seibel believes that a growing sense of economic optimism shared by many U.S. investors and the Obama Administration, alike, is completely misplaced. He suggests that the rally during March and early April (with the Dow Jones Industrial Average closing at 8,018 points on April 3rd after enjoying the best four-week run since 1933) is merely a false dawn. Soon enough investors will be seriously rattled yet again - this time by a devastating after-shock to October's global financial earthquake. One that will see the S&P 500 Index nose-dive up to 40% before it hits rock bottom at around the 450 points level. This bleak scenario contrasts starkly to the S&P's heady high of over 1,550 points in October of 2007.
A proponent of quantitative analysis, Seibel says this pending nightmarish sell-off will cause plenty of already shell-shocked investors to relinquish their remaining equity holdings. However, investors in gold bullion and gold-backed Exchange Traded Funds (ETFs) will likely be spared the widespread misery, Seibel believes.
When there is a total loss in confidence in the stock market, then gold will rally. Gold bullion is historically an inverse proxy to the stock market. So, it's only logical that this will happen, he says. We should see a culmination of massive price weakness in stocks within weeks, which will cause gold to reverse its current trend to establish new highs beyond $1,000 early in the third quarter of this year - maybe even testing the $1,200 mark, he adds.
Interestingly, gold equities will not be immune to the market meltdown because investors will engage in panic selling, to preserve whatever capital they have left, he predicts. Meanwhile, the catalyst to the stock market's final capitulation during the coming months will be a combination of the collapse of more landmark U.S. companies, a renewed banking crisis, and other forms of major economic upheaval, Seibel explains.
However, it is always darkest before dawn. And Seibel reasons that a gradual rebound in equities will finally assert itself during the last quarter of 2009 in anticipation of a spring economic revitalization. One that is already being germinated by massive government-backed infusions of money into the U.S. economy. History shows that economic recoveries typically get underway about six to nine months after the markets hit their ultimate lows. So a spring economic recovery appears very probable, he says. And gold stocks will lead the way during the market recovery as they're already ridiculously cheap and will get cheaper. But as gold prices begin to push higher, then gold producing companies will become attractive because they will offer investors leveraged exposure to these rising prices, he adds.
So, there you have it. One more chance to fulfill the $1200 dream. Perhaps. And, also, ample time to think what to do with your stash/stack/monster boxes when/if those values knock on your doorstep. That's the part that not too many are willing to think about. Same as the part where Mr. Seibel sees that stocks will recover, that mining shares will rise, and that such a short-term spike in gold may be the last one for a long time to come. If it has not done so already.
Happy Financial Planning. Or, card reading.