Gold Hits Fresh 4-month High Before Profit-Taking Dip - Wealth Managers

Strong New-Home Sales Data Take Steam Off Bullion’s Run

Gold hit a fresh four-month high above $1,345 before pulling back on profit taking Wednesday, but the roughly 1% dip followed a four-session winning streak.

The metal lost steam as the dollar strengthened after a strong report on new-home sales showing that purchases climbed in January to the highest level in more than five years.

“This correction is long overdue,” Phil Streible of RJ O’Brien said of gold, though given the rash of bad housing data recently, he might as well have been talking about the new-home sales report. Real estate has needed some good news lately, in contrast to gold, which is up about 10% on the year and trading above its 200-day moving average.

“The dollar is keeping gold down today,” Bill O’Neill of Logic Advisors told Bloomberg. “Also, physical demand is showing signs of slowdown.”

However, the crisis in the Ukraine continues to support gold, with signs of the Russian military flexing its muscles in the region and questions over whether the nation can avoid a sovereign default.

Uncertainty is running so high that bank runs have swept the Ukraine. “Ukraine is weighing measures to stem cash withdrawals after as much as 7% of deposits were taken from banks during last week’s bloody uprising, underscoring the need for action to fend off a default,” Bloomberg reported. “Withdrawals peaked with as much as 30 billion hryvnias ($3.1 billion) Feb. 18-20.”

“A default could have a destabilizing impact,” Koon Chow of Barclays Capital told the Financial Times. Ukraine could only be a trigger for a return of gloom to emerging markets — but with emerging markets still fragile after the last month’s sell-off, and political crises deepening from Venezuela to Thailand, “we didn’t need much.”

Even more disconcerting is that the situation could erupt into an even larger crisis: “a massive tug of war between the East and the West,” according to the Economic Collapse blog. “The violence in Ukraine is planting the seeds for a potentially much larger conflict down the road. The days of ‘friendly relations’ between the United States and Russia are now gone. Russia is absolutely furious that the U.S. has fueled a violent revolution on its own border, and it is something that Russian officials will not forget for a very long time. In return, U.S. officials are taking an increasingly harsh stance toward Russia. In the end, the seeds that are being planted right now could ultimately blossom into a full-blown conflict between the superpowers in the years to come.”

For now, though, attention is shifting (in the U.S., anyway) to Federal Reserve chief Janet Yellen’s testimony Thursday before the Senate Banking Committee. “The key focus on Thursday will be any and all comments around forward guidance,” Deutsche Bank economist Carl Riccadonna said.

And BK Asset Managements strategist Kathy Lien is looking for clues about the Fed’s stimulus tapering. “There is a lot of discussion in markets about whether the Fed is wise to continue the course of tapering, because we don’t know whether there’s an underlying slowdown after all this disappointing data,” Lien said. “If she downplays weather distortions (and their effect on recent poor economic reports), and reinforces the plan to stick to tapering, it’ll still lift the greenback.”

More information can be found online at http://www.goldbullionadvisors.com

Massive Gold Trades Show Someone Is “Betting Big on Gold” - Wealth Managers

Does “An Institutional Player with Seriously Deep Pockets” See $1,400 this Year?

Gold’s first loss in 10 trading sessions occurred Wednesday in the wake of the newly released minutes of the Federal Reserve’s January meeting, which showed the central bank still on a stimulus-tapering course.

Nonetheless, the yellow metal was trading above its recently reclaimed 200-day moving average, a key technical indicator, and well above $1,300.

Although the Fed indicated that tapering would continue, it clearly plans to keep interest rates near record lows for some time to come, and that’s the perfect environment for gold.

“Gold will continue to find support from the easy-money policy,” Michael Gayed of Pension Partners told Bloomberg.

Gold is “battling with the complexity of faltering U.S. economic data against the backdrop of a continued Federal Reserve taper,” said Jonathan Citrin of CitrinGroup. “So far this year, gold has rallied as growth has fallen off the expected pace. … The precious metal has shaken off much of its ubiquitous pessimism from 2013 — trading this year anew with more normality in relation to growth and inflation fears.”

One sign that pessimism over gold is fading came in a report from CNBC on Tuesday suggesting that the smart money is getting back into bullion, at least on the ETF side.

“Options traders are betting big on gold,” it reported. “Three massive trades in the gold ETF executed over the past three weeks imply a belief that gold will rise by 5 to 7 percent by the end of the year.”

The details of the ETF moves “seem to indicate that the trades are being made by an institutional player with seriously deep pockets.”

“Either they're getting out of stock, or they think gold is going significantly higher,” said Brian Stutland of the Stutland Volatility Group. “But they would have to be thinking that gold’s going to $1,400 sometime soon.”

Whether gold will return to $1,400 this year remains to be seen, but with the price up about 10% so far in 2014, the prospects definitely seem brighter, with bullion’s technicals recovering and aligning with the metal’s undeniably strong long-term fundamentals.

More information can be found online at http://www.goldbullionadvisors.com

Gold Hits $1,320, “Taking Out One Key Resistance Level After the Other” - Wealth Managers

Bullion Reclaims 200-Day Moving Average as ETF Inflows Gain Steam

Gold didn’t rest long after taking out the psychologically key $1,300 level on Thursday. Early Friday the momentum continued as bullion roared past $1,320.

Gold has now steamrolled over two major technical levels: its 100-day moving average of $1,270, and now its 200-day moving average around $1,306.

“Gold continues to trade extremely well and it is basically taking out one key resistance level after the other,” BofA Merrill Lynch analyst Michael Widmer said. The metal has finished the week up about 4% and in a price range unseen since early November.

A major reason for this resurgence has been positive inflows into gold ETFs. “The world’s largest gold-backed exchange-traded fund saw a spike in holdings of the metal this week,” MarketWatch reported, hitting “its highest total level since Dec. 20.”

Silver’s performance was even stronger than gold’s, with the white metal finishing the week up about 7.5%, at $21.42 — its highest price since early November.

“Silver has caught up with gold after it finally managed to break the key $20.20 mark on Friday,” said Fawad Razaqzada at FOREX.com.

A succession of poor economic data also has boosted precious metals by pressuring the Federal Reserve to reconsider the pace of its stimulus-tapering program. On Thursday it was revealed that January retail sales plunged, while initial weekly jobless claims also rose. And on Friday, another report showed that factory production fell in January by the most since May 2009.

“Gold bulls are taking advantage of (Federal Reserve chief Janet) Yellen’s comment that the taper is not on a fixed path,” said Jason Rotman, president of Lido Isle Advisors.

“The deterioration in the job market is becoming increasingly evident,” said Jeff Sica of Sica Wealth Management. “People are realizing that the economy still needs stimulus to grow, and that is keeping gold supported. Yellen sounded dovish. Today’s key economic numbers makes it clear that all is not well.”

“The economic data today helped reaffirm the idea that the Fed is tapering too fast,” said Dan Denbow of the USAA Precious Metals & Minerals Fund. “There is a shift in sentiment, which is helping prices move up. The emerging-market situation and physical demand continues to remain supportive.”

Heading into next week, the next target for gold is the $1,350-60 level. “We said once it moves past the 200-day moving average, we would easily see $1,324, and moving toward $1,361. There are certainly technical factors behind these moves,” said Bart Melek at TD Securities. And RBC Capital George Gero is calling for $1,350. “I think the bears are temporarily hibernating,” he said. “You’ve got momentum traders in here. Over $1300, they come in.”

More information can be found online at http://www.goldbullionadvisors.com

Gold Targets $1,300 as Yellen Vows Unrelenting Easy Money - Wealth Managers

“There Will Be No Tightening Any Time Soon,” Notes One Analyst

Gold surged higher by more than 1% on Tuesday, running up almost to $1,295, as new Federal Reserve chief Janet Yellen delivered her first official testimony to Congress since taking the reins from Ben Bernanke.

Continuing Monday’s momentum, gold enjoyed its biggest one-day gain in three weeks and hit its highest price since Nov. 14. Silver also rose by about 1% to $20.21.

Yellen’s message? She is staying the course. Though tapering of the Fed’s massive bond-buying stimulus program known as quantitative easing will continue, she plans to keep benchmark short-term interest rates at zero “well past” the time the jobless rate falls below 6.5%. That’s what gold investors wanted to hear, since the metal thrives in low-rate environments.

“Let me emphasize that I expect a great deal of continuity in the Federal Open Market Committee’s approach to monetary policy,” Yellen told the House Financial Services Committee, referring to the Fed’s policy board (the FOMC). And like Bernanke, she also emphasized that tapering is very much data-dependent and not on a “preset course.”

“The overall tone of Yellen’s comment is a carbon copy of the Fed’s existing policy under Bernanke, so the market is relieved that there will be no tightening any time soon,” said Bill O’Neill of LOGIC Advisors.

“Yellen’s comments have been right down the middle of the road,” added Gold Newsletter publisher Brien Lundin. “All the gold market needed was an absence of damaging remarks from Yellen, as the price continued to strengthen as she talked. This indicates that underlying bullish posture for gold is strong.”

Yellen also dismissed concerns about a bubble in the stock market, which also posted a strong Tuesday performance based on her remarks, as well as the emerging-market currency crisis.

“Our ability to detect bubbles is not perfect, but looking at a range of traditional valuation measures doesn’t suggest that asset prices broadly speaking are in bubble territory,” she said in response to a question. As for emerging markets, she noted: “Our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook.”

However, investors shouldn’t take solace in Yellen’s benign view of U.S. equities and the global economic backdrop. One need only reflect on her predecessor Bernanke’s assessment of the U.S. housing market in 2005:

“Unquestionably, housing prices are up quite a bit,” he said. “I think it’s important to note that fundamentals are also very strong. We’ve got a growing economy, jobs, incomes. We’ve got very low mortgage rates. We’ve got demographics supporting housing growth. We’ve got restricted supply in some places. So it’s certainly understandable that prices would go up some. I don’t know whether prices are exactly where they should be, but I think it’s fair to say that much of what’s happened is supported by the strength of the economy. … We’ve never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.”

When it comes to the emerging-markets crisis, we could well be in the eye of the storm. Meanwhile, many market watchers are noting a disturbing similarity between the Dow Jones’ performance now and in 1929. Given the fallibility of the Fed so many times before, the safest course of action remains portfolio diversification.

More information can be found online at http://www.goldbullionadvisors.com

Gold’s One-Two Punch from China Reaffirmed - Wealth Managers

Asian Nation Reports Both Record Mining Output and Metal Consumption

It should come as no surprise, given the constant reports streaming out of Asia, but China once again confirmed its No. 1 standing as both the world’s top gold miner and the biggest consumer of the yellow metal.

“China’s output and consumption of gold rose to record levels last year, entrenching the country’s position as the world’s largest producer and an opportunistic buyer of bargain-price commodities,” The Wall Street Journal reported.

“Chinese consumers bought 1,176.4 metric tons of gold in 2013, a 41% rise from a year earlier, the China Gold Association said in a statement Monday. It is the first time Chinese consumption has crossed 1,000 tons.”

On the mining front: “China also notched a record for gold output in 2013, with production increasing 6.2% from 2012 to 428.16 tons, the association said. China has been the world’s largest gold producer for the past seven years.”

Jewelry remains the biggest source of demand, hitting more than 716 tons in a 43% year-over-year increase. Purchases of gold bars increased by more than 375 tons for a 57% gain.

“This was a large magnitude of increase for gold bars, and it might show the Chinese people’s strong desire for gold as an investment,” noted Hu Yanyan of Everbright Futures. …

“The surge in Chinese gold consumption has helped to limit price declines,” Shanghai Leading Investment Management Co.’s Duan Shihua told Bloomberg. “If Chinese demand is sustained, it will be a long-term bullish factor.”

Capital Futures analyst Liu Xu added: “As the domestic market offers little alternative choices — the equity market underperformed while the government discouraged investments in the real-estate sector — more of the growing wealth is looking to gold as a means to store value.”

Much of this gold has to come from somewhere, and as has been previously documented, much of it has flowed out of Western gold exchange-traded funds and into Swiss refineries, where it has been melted down to 99% purity and shipped to China. A potential supply bottleneck could come when and if Western investors turn away from stocks. “Keep an eye on the ‘gold holdings’ of the GLD and other U.S. paper gold ETFs, whose drop in holdings for now has offset Chinese accumulation on the margin,” Zero Hedge noted. “Once GLD gold holdings solidly resume their climb higher, that will be the key upward gold price inflection point.”

Another key issue that gold investors should be watching is China’s official gold holdings, which don’t factor into the latest statistics. Its official reserves reportedly stand at 1,054 metric tons, but here’s the rub: “China last announced a rise in its gold reserves in April 2009 and has not revised the figure since, though there had been recent market speculation that the bank had been accumulating gold reserves and would announce a new figure,” Reuters reported.

With all the moves China has been making to increase its role in the global gold market, not to mention internationalize its currency, no one really believes that Beijing’s reserves have been static since 2009. Analysts such as Jim Rickards say China’s next update on its holdings — which he projects could run as high as 5,000 tons — will be a metaphorical shot heard ’round the world, thereby forcing many investors into bullion who hitherto have stayed away from it.

Nonetheless, South China Morning Post writer Tom Holland dismisses that notion as fantasy. “China’s huge appetite for gold has inspired dozens of conspiracy theories. They are all nonsense,” he wrote. He argues that China simply doesn’t have anywhere near enough gold to provide a backing for the yuan.

Rickards’ response? “People say there is not enough gold in the world. The answer is there is always enough gold in the world. It’s just a question of the price. Now, at $1,300 an ounce, there is not enough gold to support world trade and finance. But at $10,000 per ounce, there is enough gold. It’s not about gold, it’s about the price.”

Holland, perhaps naively, concludes: “Far from plotting to corner gold markets and take over the world’s monetary system, it looks as if China may be doing nothing more than maintaining a constant allocation to the stuff.”

Yes, Mr. Holland, and if you believe that, we hear there’s a Great Wall in China you might be interested in buying.

More information can be found online at http://www.goldbullionadvisors.com

Gold Rips Past $1,270 Before Retreating on Solid ISM Report - Wealth Managers

But Poor ADP Number Could Be Precursor to January Jobs Bust

In a seesaw day of trading, gold zoomed above $1,270 on a mediocre jobs report, then lost ground after more positive data on the U.S. services sector. Still, bullion ended higher Wednesday as the market awaits Friday’s crucial nonfarm-payrolls report from the Bureau of Labor Statistics, the result of which could greatly influence the Federal Reserve’s stimulus policy — and therefore gold and stocks.

Automatic Data Processing’s private-sector jobs report for January, seen as a precursor to Friday’s payrolls number, fells short of expectations, while December’s ADP report also was downgraded.

“A lower ADP employment number immediately translated into a fall in the dollar and a spike in gold,” said Bernard Sin, an MKS SA senior vice president.

However, the push to $1,273 lost steam after a somewhat-contradictory Markit report found that growth in the U.S. services sector hit a four-month high in January and hiring remained robust.

Fed under pressure to taper “taper”

“The ADP number puts a lot of pressure on the official U.S. employment number,” said Jeffrey Wright of H.C. Wainwright. “If this data point does not meet expectations, there is speculation the FOMC could examine the rate of ‘tapering’ or delay the next step down of $10 billion” to the Federal Reserve’s bond-buying program. “Any delay or reduced impact of tapering would be a positive for gold in the coming weeks.”

“It certainly feels as though the markets believe this is foreshadowing a disappointing payrolls number on Friday,” TD Securities said in a note to clients.

Gold up, stocks down in 2014

Stocks, meanwhile, finished in the red again, and the weakness there continues to support gold. “Any significant drop in equities could trigger renewed gold purchases. This is gold’s best chance for a near-term rally,” said HSBC’s James Steel.

Sumit Roy of Hard Assets Investor agreed, writing: “By now, the inverse correlation between gold and stocks is well established. It’s no coincidence that in 2013, gold fell by 29% while the S&P 500 rose by 29%. Since the start of this year, we’ve seen those trends reverse, as gold is up 4% year-to-date while the S&P 500 is down by more than 5%. … 2014 is shaping up to be a much more challenging environment for equities, which will lend support to gold. In our view, the $1,275 resistance level will eventually give way and prices will make a run for $1,400 later this year.”

Gold going “straight up like a moonshot”?

Euro Pacific Capital Peter Schiff is even more bullish. “At some point, gold’s going to go straight up like a moonshot,” Schiff told CNBC. “Maybe it’s going to take Janet Yellen to come out and call off the taper. Or maybe she’s going to have to say, ‘We’re doing more of it, we’re going to start increasing it.’ I don’t know what that magic moment is going to be.”

Overall, though, Schiff sees Yellen as “an even bigger money printer than Ben Bernanke, who was an even bigger money printer than Alan Greenspan.” The eventual result will be massive inflation. “This is what’s coming,” he predicted. “And when everybody figures it out, there’s only one place to hide — and that’s gold.”

More information can be found online at http://www.goldbullionadvisors.com