At the end of the (Wednes)day, gold could not only not hang on to its promising intra-day gains seen in the morning, but ended up closing beneath Tuesday afternoon's settlement level. The $1128.10 print basis spot bid, recorded at 5:15 NY time may have been $13 off the lows recorded on the session, but did not bode particularly well for the yellow metal in the near-term. This, at a time when contrarian analysis showed that the gold bulls to remain stubbornly unfazed by the rather swift $100 haircut the metal received since late last week. Euphoria, like hangovers, lingers - evidently.
Overnight price action brought the yellow metal back to near the $1130 level, and, as GoldEssential.com over in Belgium observed, There has been some bargain hunting late on Wednesday in NY during electronic trading, with also some buying from Asia seen overnight on Thursday, said Carl Johansson, Senior Precious Metals analyst at Goldessential.com, although he added that nearly all of the dip-buying was seen on the back of the EUR/USD pair undoing some of its Tuesday's drop below 1.47. For the money, (roughly $10 per day) the daily analysis offered by GoldEssential is, well,...essential to anyone who follows these markets closely. Data on ETF developments, market technicals, or COT trends, as well as polished-looking charts are not found in abundance elsewhere.
The market continues to search for a comfortable range ahead of the inevitable slowdown in activity that will be precipitated by the nearing of the holiday period, now just two weeks away. As such, we cannot discount strong bouts of selling - or, surprise buying sprees for that matter, as participants either unwind still profitable positions or buy on more significant dips with the expectation that they can make a go of it again in January. Seasonal weakness following the end of Chinese New Year-related gold buying could change the picture in more substantive ways for the longs. But that's a story for another...month.
Thursday's initial price action was confined to basically the same $1120-$1130 range and was reflective of a steady (at 76 on the index) US dollar and only marginally higher crude oil (at $71 per barrel). Gold would have to move decisively above $1160/80 to diminish the risks of a potential dip towards the $1070 area. The greenback was quoted at 1.474 against the European common currency.
The US Labor Department reported this morning that the number of individuals who filed claims for unemployment benefits rose by 17,000 persons. This brought the totals for a seasonally adjusted number to 474,000 in the week ending Dec. 5. Meanwhile, the total number of people claiming benefits of any kind topped 10 million, and analysts say that this shows signs of sluggish hiring patterns. It is also, however, the time when a lot of construction and other outdoor jobs are phased out for the duration of the winter season. Mall Santas can only go so far in filling the jobs vacuum. The dollar did not initially react to the jobs figures. Later on, however, the dollar slipped a tad, but gold also headed lower. Another one of 'those days' in the making?
Gold remains defined largely by action in the dollar -albeit we had a couple of instances over the past two sessions, where the metal fell under its own weight (ETF liquidations) and was doing so during times when the US currency was also under selling pressure. GoldEssential observed that:
The correlation between the dollar and gold is very high, which shouldn't be that supportive, as things have already come back off this morning. Johansson added as long as some more profound bargain hunting remains out - apart from opportunistic short-dollar, long-gold plays on eventual renewed U.S. currency weakness, technical selling could retain the upper hand. Charts don't look too optimistic, with recovery attempts having thus far been used as better opportunities to sell, rather than to accumulate, said Matthias Detremmerie, founder at Goldessential.com.
Further, a bit more gold came out of the ETFs during yesterday's decline that followed a stab at higher price levels. The decrease in joint holdings was the consequence of a 39,233 ounces or 1.22 tonnes outflow in the COMEX Ishares Gold Trust and a 6,041 ounces or 0.188 tonnes decline in the by ETF Securities marketed ETFS Metal Securities trust.
Meanwhile, Elliott Wave analysis issued on Monday evening alludes to the fact that: The U.S. Dollar Index is at the forefront of a long rally. Monday night we said that based on the developing patterns in gold, the euro and the Aussie Dollar, we expected the U.S. Dollar's rise to morph into an impulse pattern. And that is exactly what is happening. Therefore, as long as the 74.17 low on November 26 remains intact, our stance remains unchanged: the dollar should rally for months and carry well above the March high at 89.62.
The possible US dollar U-turn argument is also reinforced by analysis from other sources: Andrew Chaveriat, a technical analyst at BNP Paribas, says that euro-dollar is close to completing its March rally. A drop below $1.4625 would confirm a major top is in place and that euro-dollar is at the early stages of a long-term, multi-month decline, potentially re-testing or breaking the $1.2330 October 2008 cycle low.
City AM also found that: For almost all of 2009, the dollar has been the whipping boy of the currency market. There is a multitude of reasons for the greenback's weak performance, but ultimately it boils down to one factor - ultra low interest rates. The Fed's policy decision allowed speculators to sell the buck with impunity and buy higher-yielding currencies, such as the Aussie dollar. [and/or gold, oil, copper, etc.]
As for gold, the Elliott Wave analysts opined that: After a brief bounce Monday that lasted several hours only, gold resumed its near-term slide that started at the $1227.20 peak on December 3. An extended last rally leg in precious metals, actually in all commodities for that matter, oftentimes results in an even more violent decline once the trend reverses. Gold's rise to last week's peak was extended, if nothing else.
Yes, not unlike the great arc that crude oil prices traced during the course of last year. Extended was the operative word in that market, too. Complete with assurances and fresh warnings about 'peak oil' and a plethora of books being released on 'how to make a killing trading oil' at the same time. Such publications had numbered less than half a dozen a couple of years prior to 2008, but had mushroomed to nearly 40 by last summer. The mythology being propagated at the height of the oil frenzy now appears to be the work of speculators with vested interests in that market. Sound familiar? The latest research offered by British investment site City AM concluded that:
Throughout the great oil price bubble of 2008 - which saw black gold first touch $100 per barrel on 2 January, soar to $150 by July but then collapse to $30 by Christmas - those who argued financial sector speculators rather than physical supply and demand fundamentals were responsible were hamstrung by one thing. The weekly data on Nymex oil trading released by the CFTC, the US commodity futures regulator, was simply not up to the job of proving the case one way or another. Belatedly, the CFTC has responded. In late October, Nymex published oil trading data in a disaggregated format, showing distinct commitments for genuinely commercial market participants, swap dealers and hedge funds. The CFTC has also released historical data in the same format stretching back three years, including the 2008 price bubble. This clearly shows that speculation primarily fuelled oil's rollercoaster ride.
Ah, yes. Mythology is wonderful. Especially when it serves a purpose for some. Take, for example, the nebula of statistics and interpretations surrounding the US deficit and the role the Obama administration has putatively had in ballooning it. Cut away from Glenn Beck for a nano-second, if you can, and consult some other sources. What do you find? That the blame game is politically charged, while numbers reveal another reality. Writes the AIER:
The question [is], how much of the widening deficit can be attributed to Obama's new programs? Only about 20 percent, according to New York Times estimates using data from the nonpartisan Congressional Budget Office (June 10, 2009). Of the $1.1 trillion increase in estimates for the deficit since August 2007, 44 percent stems from the recession, 17 percent from bailouts, 21 percent from Bush programs continued by Obama, and 18 percent from such new Obama programs as the stimulus package.
Finally today, a couple of oft-quoted famous names have once again been heard from, as regards gold. First up, Jim Rogers, who promises us $2K gold...by 2019 (!). While buying dollars today. Next, George Soros, the Hungarian-born billionaire, who suggests some other uses for a portion of the remaining 2800 or so tonnes of IMF gold (after the 403 tonnes of same are finally sold):
George Soros, the billionaire investor, has suggested that the International Monetary Fund should use $100bn (£62bn) of gold reserves to back green loans from rich to poor nations. Mr. Soros believes that developed countries should hand over their special drawing rights - international foreign currency assets distributed by the IMF - as loans to help poorer nations tackle climate change. Developing countries would pay interest and eventually the whole loan, but in the event of a default, the sum would be backed by the IMF's gold reserves.
It is a different approach to the current proposals, which primarily rely on contributions from the balance sheets of developed countries. Developed countries' governments are laboring under the misapprehension that funding has to come from the national budgets but that is not the case, Mr. Soros said. They have it already. It is lying idle in their reserves accounts and in the vaults of the IMF.
Yes, that's the same George Soros who was reportedly buying gold in massive amounts. In 20082009. Friend? Or foe? How about a realist and a humanist all wrapped into one? and, once again, into one?
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