Gold & Silver Digest: 7/1/13

Adam Taggart
By Adam Taggart on Mon, Jul 1, 2013 - 6:22pm

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.

7/1/13 7:13 PM EST US close metals price quotes from Finviz

Reuters: Gold starts Q3 with short covering rally

Gold started the third quarter on a strong footing to jump over 2 percent on Monday as technical buying and speculative short covering offset concerns that the U.S. Federal Reserve will rein in its stimulus program.

Prices surged 2.2 percent to a session peak of $1,260.61 per ounce as speculative investors raced to cover shorts and some investors snapped up bullion at what they considered bargain prices. The market hit a near three-year low of $1,180.71 on Friday.

Forbes: Technical Trading: Gold Is Oversold, Ripe For Bounce Higher

August Comex gold futures firmed in overnight action, supported by modest weakness in the U.S. dollar index. Also, new investment flows are pouring back into financial markets at the start of a new quarter. The S&P 500 is also stronger in pre-opening trade. The main even this week, however, will be Friday’s U.S. June employment report.

Financial markets have been jittery following recent statements by the U.S. Federal Reserve suggesting the central bank will reduce its stimulus program this year and could finish its asset buying program by mid 2014. Friday’s jobs data will be widely watched for confirmation that labor markets are stabilizing and/or improving and will be key for the U.S. dollar and in turn gold.

Forbes: CFTC Data Shows Decline In Net Length For Gold, PGMs In Wake Of FOMC

The latest report from the Commodity Futures Trading Commission shows that large speculators chopped their net length in gold and the platinum group metals in the aftermath of the June 19 meeting of the Federal Open Market Committee that left traders factoring in the start of a tapering of quantitative easing in the U.S.

Net long positions in gold now stand at multi-year lows. Large speculative accounts collectively remain roughly balanced in silver but increased their net short, or bearish, position in copper.

CNBC: Charts Show Gold Sell-Off Could Get A Lot Uglier

From a technical perspective, the outlook for gold is looking increasingly bearish, according to analysis by Australia New Zealand Bank (ANZ), which says the recent sharp declines open the risk of much sharper corrections.

If the yellow metal slides below a key support level of $1,150, the selloff could accelerate to $1,030 or even $870 an ounce – levels not seen since 2008 during the global financial crisis, Victor Thianpiriya, commodity strategist, Asia at ANZ wrote.

Minyanville: Indicators Suggest Gold Stocks and Silver Will Double

The recent gold stock bear market has had the fifth largest decline in history (data starts December 1938). It is also the third longest in history. Let’s look at what has happened after 60% gold stock bear markets.

GoldSeek: Bernanke’s conundrum – What it might mean for gold

For the Fed, the Treasury debt selling creates a twofold problem:

First, the supply of bonds in the open market will continue to drive up rates. When the goal is to keep rates down, it presents a new kind of conundrum — a Bernanke version the exact opposite of Greenspan’s. Greenspan wanted higher rates. The market gave him lower rates by accelerating its purchases of Treasuries, thus the conundrum. Bernanke wants the exact opposite, that is, lower rates. The market is giving him higher rates by accelerating the sale of U.S. government debt — a conundrum opposite to the one Greenspan encountered. Then and now, the market pundits fret that the Fed is losing (has lost) control of interest rates. Gold’s undervaluation is extreme

The price of gold fell last week to the $1,200 level. The lemming sentiment in capital markets is uniformly bearish, yet every price-drop brings forth hungry buyers for physical gold from all over the world. Even hard-bitten gold bugs in the West are shaken and frightened to call a bottom, yet it is these conditions that accompany a selling climax. This article concludes there is a high possibility that gold will go sharply higher from here.

There are three loose ends to consider: valuation, economic and market fundamentals.

SeekingAlpha: Analyzing The 2008 Silver Drop: What Should Investors Look For In A Silver Bottom

It has been an extremely tough time for gold and silver investors, with the metals dropping far from their 2011 highs. Year-to-date they are the worst commodity performers, and over the last few months, the drop has accelerated even as stock markets hit new highs.

We have repeatedly emphasized that the fundamentals for precious metals are still very strong. Silver production all-in costs are significantly higher than the current spot price, physical demand is surging, the Bank of India has now pushed the population into silver, and inflation looms in the future as the Federal Reserve desires a little more inflation.

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