Friday, August 29, 2014

Gold bounces back: Bullion’s resiliency hailed as “tremendous”


Metal hits $1,290 and reclaims 200-day moving average Tuesday

Just when the bears think gold has capitulated, it comes fighting back. That’s what the yellow metal did Tuesday, rebounding from a two-month low of $1,273 to hit a session high of $1,290. Suddenly, $1,300 is back in the cards.
Festival buying in India helped bullion prices, as did simmering tensions in Ukraine as Russian President Vladimir Putin met with President Petro Poroshenko for trade talks in Minsk.
“Gold is getting a bid today because of the escalation in violence in Ukraine,” Frank Lesh of FuturePath told Bloomberg. “Some people are worried that this crisis will not end soon.”
Bullion also managed to retake its 200-day moving average near $1,280 in Tuesday’s surge. "Overall, it seems that gold is getting back into that range of $1,287 and $1,312 as it is clawing back some of the losses made last week and gaining on the back of technical strength," Mitsubishi analyst Jonathan Butler said.
What’s amazing is that gold has fought its way back higher even as the U.S. stock market has roared ahead, led by the S&P 500’s charge above 2,000 for the first time in its history. (However, trading veterans such as Art Cashin of UBS were quick to point out that the S&P record was achieved Monday on the lowest trading volumes of the year – not a healthy sign.)
Stocks have been advancing, but U.S. data continue to show a mixed recovery that could force the Federal Reserve to keep rates near record lows for longer than most onlookers are expecting – and that’s good news for gold.
Although durable-goods orders hit a record, the gains were largely fueled by Boeing orders. As Zero Hedge pointed out, minus the transportation sector, orders “collapsed from a 3% gain to a 0.8% drop -- the biggest drop in 2014, missing expectations by the most in 8 months.”
And on the housing front, the Case-Shiller home-price index showed that "for the first time since February 2008, all cities showed lower annual rates than the previous month." That report was preceded by Monday’s new-home sales number, which dropped to its lowest level since March.
Also on Monday, U.S. service-sector PMI also fell short of expectations, with Markit noting that its “latest survey suggests the recovery has lost some momentum since hitting a post-crisis peak in June.”
So despite all the razzle dazzle in the stock market, gold is hanging in there -- and then some, noted CNBC contributor Jeff Kilburg of KKM Financial, who told the network Tuesday: “The resiliency in gold has been tremendous. Look at every reason that the bears have had to sell it and they have not been victorious. We’re looking here at $1,285. We have not seen inflation, according to the government. We have not seen any type of movement from a kneejerk reaction on the stock market as it hits historic highs. Geopolitical tensions have subsided. So every reason they have had to sell it under $1,100, even under $1,000 like we’ve seen a lot of forecasts – it has not happened. So I like owning gold due to the fact that it’s kind of like the Rocky Balboa right now – it’s been going around the ring, it’s been knocked a bunch of times, but it will not go down. … Every reason that all these bears have had to sell the living life out of it – it hasn’t happened.”
And Axel Merk of Merk Funds made a similar observation in a recent interview with Greg Hunter of USA Watchdog. “I am spooked about the equity markets. The folks that buy stocks buy them because they have to keep up with the markets. The folks that buy gold buy it because they like gold. Just recently, you have a downturn, and you don’t have this rush to sell gold right now because the folks holding it are strong hands. Whereas in the stock market, if you have a wave of sellers, who says everybody is not going to rush for that same exit at the same time.”
It’s time to take some chips off the equities table, Merk argued. “I fear a crash. The reason I fear a crash is that when you have a market that goes up relentlessly, and volatility goes down and complacency is high, that means folks are buying equities that are not aware of the risks of the stock market. The moment the fear comes back to the market, for whatever reason, those guys are gone in a heartbeat.”
More information can be found online at http://www.goldbullionadvisors.com