Gold & Silver Digest: 2/20/13

Adam Taggart
By Adam Taggart on Wed, Feb 20, 2013 - 6:20pm

The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.

If you have articles to submit for the next digest, please email them to me by clicking here.

2/20/13 6:10 PM EST US close metals price quotes from Finviz

Forbes: Gold Hammered to 7.5-Mo. Low on Technical Selling, Bearish FOMC Minutes

(Kitco News) - Gold prices ended the U.S. day session sharply lower Wednesday, and then extended those losses in the afternoon following a bearish FOMC minutes report. Prices hit a fresh
7.5-month low as the precious yellow metals bulls are presently reeling. April gold last traded down $43.50 at $1,560.90 an ounce. Spot gold was last quoted down $44.90 at $1,560.50.  March Comex silver last traded down $1.017 at $28.405 an ounce.

The Federal Reserve’s Open Market Committee in early January said U.S. economic conditions are improving to the point that its massive asset purchasing program (quantitative easing) may have to be changed. The FOMC will further address the issue at its next meeting in March. Worries the FOMC minutes would indeed be bearish added to the technical selling pressure Wednesday morning. These minutes in the past few months have been market-movers, just like Wednesday’s. The U.S. Treasury markets, with their recent rising bond yields, are also hinting that the Fed’s very accommodative monetary policy of the past few years will start to wind down in the not-too-distant future. That’s yet another underlying bearish factor for the raw commodity sector, including gold and silver.

ZeroHedge: Stocks Drop Most In 2013 As Gold Is Crucified On The Death Cross

A strange sea of red inhabits the screens of many traders and investors across the USA this evening, and all it took was for the FOMC to hint that the punchbowl will have to be taken away at some point in the future. Biggest jump in VIX in 2013; biggest plunge in Homebuilders in 8 months (as TOL misses and Starts were ugly); biggest dump in stocks in 2013; Gold plunges to $1565 and suffers Death Cross; USD soars and crosses above its 200DMA; and oil has frantic flash crash early on. Not a pretty day as stocks drop below the lower edge of their up-trend channel for the year and test critical support amid the highest volume of the year. The four words on everyone's lips this evening: Where is Kevin Henry?

S&P 500 futures uptrend is broken...

MarketWatch: Gold’s so-called death cross is not its only problem

The week is not going well for gold, again, and that’s after some had predicted China might start jumping in after leaving gold on its own last week during the Lunar New Year celebrations. (See Could China ride to gold’s rescue?).

Gold  GCJ3 -1.56%  was down $24.10, or 1.5%, at $1,580.10 an ounce on the Comex division of the New York Mercantile Exchange, adding to losses as the session progressed. Read more on gold trading.

YahooFinance: Forget the Death Cross, Gold Is a Buy: Pento

Rates are rising, and lawmakers are brawling over budget cuts. Fear is in retreat, and gold is getting kicked to the curb. Even the chartists are piling on the precious metal today, noting the occurrence of gold's first death cross in over a year, as the spot price dips below $1600 an ounce. As ominous as all of this seems, at least one gold bug says he is undeterred.

"I'm a fundamental guy. I care nothing about golden crosses or death crosses or anything of the kind," says Michael Pento, founder and president of Pento Portfolio Strategies. While he currently holds about 15% of his portfolio in gold and admits he's "not happy," he's confident his bullish call will vindicate him in the near future.

Jesse's Café Américain: Intermediate Gold Chart Revisited - Range Trade in the Currency War

"There is not a crime, there is not a dodge, there is not a trick, there is not a swindle, there is not a vice, that does not live by secrecy."

Joseph Pulitzer

I think that gold is caught in a range trade since its big run up to a record high.

The range is roughly between 1550/1570 and 1800.

I do not think the government is funding this directly, but indirectly the funds are coming from the Fed and its cronies, and well as de facto policy endorsement from the government, so that the regulatory bodies turn a blind eye to the massive shorting at opportune times.

Barron's: ‘Long-Cycle’ Gold, Silver Have Peaked: Citigroup Analysis

Gold bulls’ reason to look favorably on precious-metal investments today: They’re cheaper. This is especially true regarding closed-end funds, whose premiums about net assets have evaporated.

Now here’s an argument for the bears from Citigroup’s Jon H. Bergtheil and colleagues. The analysts have been arguing for a few months now that it’s time to get out of precious metals mining stocks and into industrial metals.

Forbes: Soros Still Sharp In Currencies And Gold

Gold dipped below $1,600 last week, falling to a six-month low, much to the chagrin of gold investors. I find the timing of the correction peculiar, given the G20 Finance Ministers Meeting taking place over the weekend. There’s been a growing debate over Japan’s move to devalue its currency to stimulate growth, with reaction from the G-7 leaders stating that “domestic economic policies must not be used to target currencies,” reports Reuters.

While the G-7 tried to legitimize the currency debasement with this statement, in reality, investors seem to be able to see through to the real motivations.

CNBC: Gold Poised for a Bounce: Rick Rule

After gold plummeted below $1,600 per ounce to hit a six-month low Wednesday, its fundamentals remained strong, Rick Rule of Sprott Asset Management said.

"I think the technical are scary, but the fundamentals are pretty good. What you find in gold bull markets is retrenchments are fairly frequent, and this is nothing particularly unusual," he said.

On CNBC's "Fast Money," Rule noted that recent declines in gold have sent the precious metal lower by as much as 10 to 15 percent, after which prices rebounded.

The Atlantic: Why Does Virginia Want a Back-Up Gold Currency?

It's not everyday that a U.S. state starts planning for the demise of the dollar. Today is apparently that day for Virginia.

Despite sub-2 percent inflation right now, state lawmakers are worried the Federal Reserve's expanding balance sheet could eventually stoke Weimar-style hyperinflation and want to prepare for the day after such Mad Max monetary mayhem. As Ylan Mui of the Washington Post reports, Virginia's House of Delegates recently passed a bill calling on the state to spend $17,440 studying the feasibility of returning to a metallic money standard should Fed policies or cyberattacks obliterate the value of the dollar.

Barron's: Gold and Silver CEF Premiums Shrink: Time to Buy?

Dispirited gold and silver investors are driving down the prices of closed-end funds again on Wednesday. Several are sitting right at net asset value, or dipping below. Trading below NAV is a rarity for precious-metal CEFs, which more often fetch premiums like 2%-4%.

Yesterday we showed you the Central Fund of Canada (CEF). Today, as the price of gold bullion falls 1.2% to $1,587.50 per ounce, the fund is slumping 2.6% to $19.45. It closed last night two cents above the $19.96 net asset value.

A similar pattern is showing in Central GoldTrust (GTU), which finished Tuesday 43 cents above its $59.57 NAV. Today the Central GoldTrust has fallen 1.9% to $58.88. Sprott Physical Gold Trust (PHYS) is down 1.8% at $13.33, while the Sprott Physical Silver Trust (PSLV) has slumped 2.4% to $11.38, after finishing Tuesday 14 cents above the $11.52 NAV.

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3 Comments

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
Interesting day with the markets

One really interesting thing is that gold moved up about 20.00 from around 1560 when NY opened (dipped briefly yesterday to 1557), to move up to 1580 in the afternoon.  What I find significant and encouraging is that this occurred with the dollar moving higher - solidly above 81 on the DXY. There is a  strong but by no means 100%, inverse correlation  bewteen the DXY and spot AU. The dollar is now at the high end of its range of many months.  My guess is that the euro problems have both driven the dollar index up, but that some people may be moving back into PMs sensing the risk of the stock market and the general economy - what some call the "risk off trade" (which tends to drie money toward PMs most of the time).  This is in addition to the fundamentals (e.g. China and Russia buying etc), which surely have to kick in at some point - affecting the paper markets.  In any case, there is definitely a change in sentiment with the major stocks indexes moving lower after the huge run up and the XAU and HUI moving up significantly. Might be the biggest opportunity in a long time. It's too early to call the bottom, but meatl prices are looking solid in some aspects.

If there are any traders  out there, I'd like to know how you're handling the PM stocks.  I dumped everything several days ago; even sold a couple short.  This morning I reentered with about 25% of my PM cash using VERY tight stops. Basically, I'm willing to risk a little here in the hope of catching the bottom - hopefully at the beginning of a dramatic upturn, which would not be out of the question given the violent, fairly relentless downturn of the last couple of weeks. 

Beware the dead-cat-bounce, however.  (no offense to cat owners - pleast excuse)

So, what's the view - bottom in?

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 2933
Bottoms are notoriously hard/dangerous to call

Bottoms are notoriously hard/dangerous to call - but today sure feels like it could be one.

Bob Moriarity of 321gold.com, a veteran commentator on the PM markets, has stuck out his neck and called it:

 

For the last month there have been no rational sellers of junior mining stocks or gold or silver. What has happened is that people with margin accounts and some big name mutual funds have been caught short and were forced to sell at any price.

Wednesday February 20 was a day of total capitulation with sentiment matching the record lows of late 2008. 2011 was a disaster, 2012 was a disaster and 2013 even more so.

But 2009 and 2010 were wonderful.

It’s a bottom.

 

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
yeh, I think that's right

I hope he's calling it correctly.  I think Faber called it too - maybe not quite so difinitively over at KWN. 

It feels like a really really strange contrarian sort of moment taking shape.  You know all the mainstream media types and generally most everyone else is buying this hype about the economy being solid and "put your money in stocks (except PM that is)".  There are so many many things wrong, that can go wrong - you know everything from the European crisis to the middle East to the draught.  I was talking to this broker yesterday and with him it's just all so obvious that everything is 'fine and everybody is going to get rich in stocks, and we're going to grow ourselves back into the black (yadda yadda yadda).  It really feels strangely Orwellian, like I'm in some sort of alternative surreal, reality.  It also feels like there is something impending, about to happen.  Maybe just my overly active imagination. But, I'd not be surprised to see those markets turn on a dime - SPX drop 20% or more and a stampede into metals. I'm not counting on it, but it certainly wouldn't surprise me either - and I've been patiently waiting on " the big crash" since 2005.  Something feels strange and unsettling (nore than usual) to me right now.

Who knows, but, one thing that always impressed me about CMs analysis is that exponential function. At some point things - like say volitility for instance - may (will) really accelerate in time.

We shall see.

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