"There is a serious money flow from the equity market towards gold"
Even though gold fell 2% on the week after five straight weeks of gains, the yellow metal has finished January 2014up about 3.5% for its first monthly rise in five.
The metal pared earlier losses to settle near $1,246 late Friday, buoyed by the emerging-market currency crisis and the ongoing decline in the U.S. stock market. Silver, meanwhile, shed about 3.5% on the week to close near $19.17.
"There is a serious money flow from the equity market towards gold, and we think that this could continue for the next couple of weeks," said Naeem Aslam, chief market analyst at AvaTrade.
However, gold "is struggling to break above the $1,275 level or below $1,225, and I think we will stay around these levels again next week as market participants position themselves ahead of the U.S. nonfarm payroll numbers" for January, saidAfshin Nabavi, head of trading at MKS SA.
January barometer right 73% of the time
In contrast, U.S. stocks fell Friday, with the S&P 500 posting its first monthly loss since August, down 3.1% in January and 0.21% on the day. The Dow Jones lost 0.45%, while theNasdaq dropped 0.14%.
The dismal performance of stocks after a blazing 2013 has some many asking: "As January goes, so goes the year?" The question refers to the so-called "January effect," meaning that historically, the tone of stocks' annual performance often depends on how well they did in the first month of the year.
"The January barometer has been right in 62 of the last 85 years, or 73% of the time," CNBC noted." Since 1929, the index followed January's direction 80% of the time when it finished positive, and 60% of the time, when it finished negative. More recently, in the past 35 years, the S&P 500 followed January's direction 25 times, or 71% of the time (83% of the time for the Dow, and 74% of the time for the Nasdaq).
"Compared to other market-timing indicators that are out there, this one appears to be one of the most accurate," saidMichael Cooper, a finance professor at the University of Utah who has extensively studied the January indicator.
Like stocks? Root for Seattle
Investors won't know until December how the January effect will play out for stocks. But many will be watching another stock-performance indicator this Sunday. As Wall Street Cheat Sheet noted: "In the 47 Super Bowls since 1967, the S&P 500 has performed better when the NFC wins, according to research firm Bespoke Investment Group. When a team from the NFC wins, the S&P 500 has gained an average of 10.4% for the remainder of the year, more than double the 4.3% return when a team from the American Football Conference wins the Super Bowl. Furthermore, the stock market finishes in positive territory for the year 80% of the time with a NFC win compared to only 63.6% with an AFC win."
Whatever happens in the big game, investors will sleep easier Sunday night if their portfolios are properly diversified across a range of asset classes, including gold, silver, and rare coins. If the January effect does kick in this year, a Hail Mary pass might not even be enough for stocks to beat precious metals in 2014.
More information can be found online at http://www.goldbullionadvisors.com
"The more gold prices drop, the more Chinese aunties buy," one analyst notes
Jan. 31 marks the start of the Lunar New Year holiday in China and much of Asia. The strong gold-buying tradition attached to the holiday has helped give bullion prices a boost this year.
"Jewelry is always one of the favorite choices (in China), and this year is especially robust and busy, just because of how cheap gold prices have actually become over the past three or so months," Bloomberg's David Ingles noted in a Jan. 30 report.
The Chinese are undeterred by low prices. In fact, they are seasoned bargain hunters who look at any price drops as long-term buying opportunities.
According to Bloomberg, the top jewelers in China only saw their profits increase as prices fell. "An index of the share prices of Chow Tai Fook and four competitors from Hong Kong and the mainland -- Chow Sang Sang Holdings International Ltd., Luk Fook Holdings International Ltd.,Lao Feng Xiang Co. and Zhejiang Ming Jewelry Co. -- climbed 5.9% in the three months through December as gold dropped 9.3%. It fell 1.7% this month while bullion advanced 4.8%."
"Lower gold prices give an extra boost to demand," said Yang Chunyan at Orient Securities Co. in Shanghai. "The gold price and jewelry sales in China move in opposite directions. The more gold prices drop, the more Chinese aunties buy."
However, holiday buying is winding down as the Chinese settle in to mark the Year of the Horse. Unbeknownst to many Westerners, the celebration doesn't last for just one day. "Lunar New Year lasts 15 days," CNN reports, and "this year its last day falls on Valentine's Day."
"Mainland China will virtually shut down for the next seven days," according to CNBC. Thus, with China's markets closed and much of the holiday gold buying already done, the price could see some weakness over the next few days. And that presents the perfect buying opportunity for Westerners who aren't celebrating the Lunar New Year but instead are looking at Feb. 14, Valentine's Day. Why not shower your loved ones with a truly lasting gift: not candy or baubles, but investment-grade gold? Should the price drop beforehand, all the better for the buyer, whether Chinese or American.
More information can be found online at http://www.goldbullionadvisors.com
3 experts on CNBC detail bullish forecasts as metal logs strong January
With gold showing surprising strength in the first month of 2014, some investment pros are predicting a reversal of fortune for the precious metal this year. With turmoil in the emerging markets, uncertainty from the Federal Reserve's tapering, and volatility in the stock market, this year looks a whole lot better for gold than 2013:
Barratt's Bulletin: "When you look at last year's very disappointing performance of the precious metal, it's nice to see that we've come into 2014 with a bit of bark," said commodities expert Jonathan Barratt in a Jan. 29 appearance. "So I'd like to think that all of the weak longs are out of the market and we should see a little bit of a trend higher, so $1,280 is what we're looking at at the moment. A break though that and we'll consolidate some gains and see it trade a little bit higher."
JJ Burns & Company: What's working so far in 2014? "Gold, gold miners, precious metals -- what was unloved in 2013," President and Chief Investment Officer JJ Burns said on Jan. 29. "Gold going down, miners have hit a bottom. And those stocks which you can play by individual, you can go look atGDX, which is an ETF, you can look at those and they're up 9% to 13% so far this year. The No. 1 performing asset class. ... I think it will continue."
Peak Theories Research: "The charts right now are suggesting asset class confusion and conflict," noted founderAbigail Doolittle in a Jan. 29 commentary. "On the one hand, gold and bonds look ready to rally. I think we will see the 10-year (Treasury bond's yield) move down to 2.5% and I think we could see gold rally up significantly. On the other hand, stocks look like they're about to sell off. I think we are really seeing a repricing of risk this year which suggests further volatility ahead. ... We are seeing a repricing of risk, seeing investors re-evaluate where they were in 2013, coming back off the risk curve. We are seeing some of the repercussions, the volatility from the Fed's highly accommodative policy, the other central banks. As a result, we are seeing stocks sell off and gold and bonds rally. And I think that we probably see that dynamic continuing."
More information can be found online at http://www.goldbullionadvisors.com
Top refiner MKS in overdrive as Brink's expands vault space in Singapore
Reuters market analyst Clyde Russell has come out with skeptical take on gold's strong 2014 performance so far. "Gold's positive start to the year seems to be based more on hope than any real change to the factors that saw the precious metal shed 28% last year," he wrote. "The optimistic view for gold is that top buyer China will continue to buy record amounts. ... At best, gold demand in China will hold up, but it's unlikely that it will accelerate by much this year."
But tune into Reuters' rival Bloomberg, and you get a completely different picture of Asian gold demand. Following on the heels of its report on global coin mints working overtime, the Jan. 28 article "Gold flows East as bar recast for Chinese defying slump" focuses on that giant gold-sucking sound coming out of China:
"Gold's biggest slump in three decades has been a boon forMKS (Switzerland) SA's PAMP refinery near the Italian border in Castel San Pietro, whose bullion sales to China surged to a record as demand rose for coins, bars and jewelry.
"As prices plunged 28% in 2013, investors dumped a record 869.1 metric tons from gold-backed funds traded mostly in the U.S. and Europe. Much of that metal is ending up in Asia, where companies such as The Brink's Co., UBS AG andDeutsche Bank AG are opening new vaults. China's expanding wealth has made the country the world's largest buyer, surpassing India, as imports reached an all-time high."
Calling China's demand "insatiable," PAMP exec Mehdi Barkhordar noted: "The demand in China is off its peak, but still respectable," he said last week. The refinery is adding shifts to keep up with demand.
Meanwhile, "Brink's, the largest provider of precious-metals logistics and storage, is adding room on top of a vault the company opened in 2012 at the Singapore Freeport building next to Changi International Airport." The firm also is opening its fifth vault in Singapore by March, as well as expanding in Hong Kong and mainland China.
"We need additional capacity, so we have to take further space," said Baskaran Narayanan, Brink's point person in Singapore. "There's a surge in demand for precious metals in Asia, and one can see the focus and movement from the west to the east."
A slew of Western investment banks in storage firms either have opened or are opening vaults in Singapore, Shanghai, and other Asian gold hot spots, including Deutsche Bank,UBS, and Malca-Amit Global Ltd.
Does this sound like cooling Chinese gold demand to you? And even if Chinese gold demand this year falls short of 2013's record levels, it's unlikely to drop off by too much. These major firms' long-term infrastructural investments are betting big on continuing, long-term gold consumption in the increasingly wealthy Asian-Pacific region.
More information can be found online at http://www.goldbullionadvisors.com
Turkey, Kazakhstan, Azerbaijan, Ukraine, and Belarus among buyers in December
Large-scale gold purchases by central banks has been a key driver of bullion prices in the past few years by taking significant quantities off the market. Though the pace of buying has perhaps slackened in recent months, the multiple currency crises erupting across the globe in locales such as Turkey and Argentina could make gold an even more sought-after safe-haven asset.
The central-bank purchases continued in December, according to new data from the International Monetary Fund. "Turkey's central bank reported an increase of more than 430,000 ounces to the IMF, taking its official reserves to 16.7 million ounces," The Wall Street Journal reported.
Kazakhstan raised its gold reserves by 77,000 troy ounces last month, to 4.6 million ounces, while Azerbaijan added 32,000 ounces to hit 644,000 ounces. Belarus bought 28,000 ounces, and Ukraine acquired 20,000 ounces.
"The IMF figures suggest emerging markets remain committed to bolstering their gold reserves," The WSJ noted. "Some analysts say a central-bank decision to start accepting gold as collateral from commercial banks in late 2011 has been the main cause of a sustained rise in the country's precious-metal holdings."
More information can be found online at http://www.goldbullionadvisors.com
Meanwhile, top-200 Russian bank reportedly freezes cash withdrawals
Capital controls, currency devaluations, and wealth confiscation are some of the last refuges of bankrupt nations and institutions, as evidenced by the Cyprus bail-ins and pension seizures by Poland last year. And just this week, fears of bank runs have erupted as HSBC limited cash withdrawals by its customers and Lloyds-owned ATMs went down. All this amid Argentina's currency devaluation and other turbulence in emerging markets.
The shocking reports just keep coming -- the latest from Germany. According to Reuters, on Monday its Bundesbank said nations facing bankruptcy should impose a one-off capital levy on its wealthy citizens before asking other states for assistance. This proposal follows a suggestion by theInternational Monetary Fund in October recommending a 10% tax rate on households with positive net wealth.
"(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government's obligations before solidarity of other states is required," the Bundesbank said in a monthly report.
And that's not the only trouble on the horizon. According to Zero Hedge: "Bloomberg reports that 'My Bank' -- one of Russia's top 200 lenders by assets -- has introduced a complete ban on cash withdrawals until next week. While the ruble has been losing ground rapidly recently, we suspect few have been expecting bank runs in Russia."
"To anyone paying attention, the warning signs are all flashing red," writes Simon Black at the Sovereign Man blog:
"The days when you could simply assume that your bank is healthy, and a safe custodian of your money, are long gone ... and people need to be aware of this.
"There are consequences to keeping funds in overstretched and starved-out banking systems. When push comes to shove, those banks will either go under and take your deposits with them (Cyprus), or they'll make it incredibly difficult for you to access your own money. This is what HSBC is doing in the UK."
One solution to this turn of events is simple -- and timeless: Own gold and silver stored outside the banking system, stored safely and securely and accessible to you when you need it.
More information can be found online at http://www.goldbullionadvisors.com
"Amid the recent panic, it's one of the few things that's going up"
The Federal Reserve is convening Tuesday and Wednesday for its first meeting of the year and the last one ever led byBen Bernanke before Janet Yellen takes over as chair. The question on everyone's minds is: Will the central bank continue tapering its massive stimulus program?
What's different since the Fed announced the launch of its first round of stimulus tapering? That horrible December jobs report, for one, as well as an emerging-market currency crisisand a suddenly teetering U.S. stock market.
The Fed "has created a truly global problem," Michael Snyderof the Economic Collapse blog wrote. "A big chunk of the trillions of dollars that it pumped into the financial system over the past several years has flowed into emerging markets. But now that the Fed has decided to begin 'the taper,' investors see it as a sign to pull the 'hot money' out of emerging markets as rapidly as possible. This is causing currencies to collapse and interest rates to soar all over the planet. Argentina, Turkey, South Africa, Ukraine, Chile, Indonesia, Venezuela, India, Brazil, Taiwan and Malaysia are just some of the emerging markets that have been hit hard so far. In fact, last week emerging market currencies experienced the biggest decline that we have seen since the financial crisis of 2008. And all of this chaos in emerging markets is seriously spooking Wall Street as well. ... If the Federal Reserve opts to taper even more in the coming days, this currency crisis could rapidly turn into a complete and total currency collapse."
USA Today also weighed in on the turbulence of the past few days: "Indeed, the great bull market on Wall Street has suddenly run into a stumbling block that few investment strategists were even talking about at the start of the year: swooning currencies and capital flight out of vulnerable emerging markets like Turkey and Argentina. The financial turbulence, which is being greatly exacerbated by a slowdown in growth-engine China, has raised fears of a potential crisis that could inflict damage on these developing countries' economies and perhaps infect other nations as well. That lethal combination could ultimately crimp earnings of U.S. multinationals. It could also prompt investors to dump risky assets, a response that already seems to be underway."
Indeed, the U.S. stock market "is among the most overvalued in the world," John Stepek of MoneyWeek wrote. "That makes it more vulnerable than most developed markets to a knock-on impact from emerging markets. Particularly if economic data disappoints for any reason. ... This is also a useful illustration of why you should hold gold in your portfolio as insurance. Amid the recent panic, it's one of the few things that's going up."
More information can be found online at http://www.goldbullionadvisors.com
Stocks tank on poor Chinese PMI data and corporate earnings reports
In its biggest one-day rally in three months, gold galloped through the $1,260 level -- and more -- in a 2% surge Thursday, fueled by growing speculation that India could ease its draconian import duties on the yellow metal. That's huge news because those restrictions are largely to blame for gold's steep losses in 2013.
Gold also shrugged off poor PMI manufacturing data in China that suggest its economy is slowing down. Normally, that kind of a report mind hurt gold because it implies fewer people might be buying gold. What that report did instead was help hurt U.S. stocks, which fell across the board, led by the Dow Jones' 200-point loss. Likewise, a similarly strong manufacturing report in the eurozone slammed the U.S. dollar.
"Market participants were ready to sell their equities holdings and to add to their gold positions on the weaker-than-expected Chinese data," said Carlos Sanchez at CPM Group.
U.S. still feels like recession, poll finds
And despite December homes sales hitting seven-year highs, 74% of Americans believe that the nation is still in a recession. In a new Fox News poll, when asked "For you and your family, does it feel like the recession is over, or does it feel like the country is still in a recession?" only 22% said they believed the downturn had ended. The 74% is better than the 86% from the poll in September 2010, but only barely, if the "improvements" in gross domestic product and unemployment rates are taken into account.
Meanwhlle, with gold breaking through key resistance at $1,260, Bank of America's head technician MacNeil Curryissued this note:
"Gold gets explosive above 1270. Watch out. With the US $ coming under pressure, the potential further gold gains is high and rising. 1270 IS KEY. A break of the 1270 pivot should be the catalyst for short squeeze higher, exposing the confluence of resistance between 1362/1399."
Indian reforms could fuel "explosion of pent-up demand"
But the biggest news for the gold market Thursday came from India, where Congress party chief Sonia Gandhi reportedly asked the government to review tough import restrictions on gold, which include a record 10% import duty.
"Her intervention is likely to create pressure for an easing of rules that have hammered the bullion industry and brought a surge in smuggling," Reuters reported.
However, Finance Minister P. Chidambaram, in an interview with CNBC on Thursday in Davos, Switzerland, ruled out any change in restrictions until the current-account deficit was under control: "Until we have a firm grip on the current-account deficit, I do not contemplate any roll back in any measure. We will have a full idea of the current-account deficit only when the budget is presented and when the year comes to an end."
Nevertheless, the idea that India's gold restrictions are not set in stone is gathering momentum. Gold is simply too ingrained in India's culture, and smuggling is on the rise.
"This is an indication that the government will ease the gold import rule soon," Chintan Karnani of Insignia Consultantssaid of the news. "India allowing gold imports will be bullish for gold and silver in the short term."
Jan Skoyles at The Real Asset Co. added: "Should restrictions be lifted, then gold demand won't just return to previous levels, but there will be an explosion of pent-up demand to begin with."
Stay tuned for developments in the matter, which has huge implications for world gold demand and the resumption of the bull market after 2013's down year.
More information can be found online at http://www.goldbullionadvisors.com
