Gold & Silver Digest: 7/25/13

Adam Taggart
By Adam Taggart on Thu, Jul 25, 2013 - 7:55pm

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.

7/25/13 7:38 PM EST US close metals price quotes from Finviz

MarketWatch: Gold notches first gain in three sessions

Gold futures finished higher on Thursday after being yanked down more than 1% the previous day, buoyed by a weaker dollar as investors looked for clues in the day’s data about when the Federal Reserve will start to taper its monetary stimulus.

While durable-goods orders came in better than expected and raised the prospect for an earlier exit, jobless claims came in generally as forecast.

CNBC: The game change in gold

How quickly things change. Gold's critical $1,300 level, which once served as resistance, is now support.

Although it matched the previous session's $1,348.70 high, gold failed to make a new high and stalled out against our $1,351.40 resistance level very early in Wednesday's session. Thursday is August option expiration, and as clocks tick, we are seeing a similar pattern to one we saw in April. Back then, when gold broke down through $1,500 and reached down to $1,323 before bouncing, many put option sellers found themselves with serious losses, and they were forced to either cover puts or buy futures to close the option position. This caused a quick bounce, and strong price action in gold.

Forbes: Is Gold's Rally A Bull Trap?

The market internals were weak Wednesday, especially notable was the negative A/D ratios in the Nasdaq Composite though it actually closed higher. The McClellan oscillator has confirmed a new short-term downtrend and could drop below the zero line with a lower close Thursday. The stock index futures are showing significant losses in early trading despite Facebook FB +29.59%’s (FB) stellar earnings.

Monday’s $39 rally in the gold futures had some gold bulls out of the closet while skeptics warned that rumors of a gold shortage were part of a global conspiracy. Gold lost $14 on Wednesday, which accompanied a $2 drop in crude oil.

Silver Bear Cafe: COMEX Gold Inventories Plummet: Shorts May Be Forced To Cover Fast

We have covered the rapidly declining COMEX gold inventories in previous articles, and the story seems to be getting old, but COMEX gold continues to drop with registered gold inventories hitting their lowest levels ever. Additionally, total COMEX gold has now dropped under 7 million total ounces or by almost 40% since the beginning of the year (we started 2013 with around 11 million total ounces).

GLD, PHYS, and CEF) because any abnormal inventory declines may signify extraordinary events behind the scenes that would ultimately affect the gold price.

BullionVault: Comex Gold Warehouse Stocks: How It Works

THERE IS a lot of misinformation recently about Comex warehouse gold stocks, writes Miguel Perez-Santalla at BullionVault.Most notably, there's confusion about how this year's sharp drop in the quantity of gold bullion in stock might point to some looming shortage of metal to settle gold futures contracts, or even signal an outright default by sellers to buyers.

CoinWeek: Will COMEX Gold Market Fail Within 90 Days?

New York’s COMEX commodity gold market has been one of the two most important venues referenced for determining the price of gold for all other trading purposes.  Yet this market, which largely reflects the trading of paper contracts rather than physical metal, is quickly heading toward the point where it may no longer be used in setting the price of gold in the physical cash markets.  There are two significant developments which could make the COMEX gold market obsolete within the next 90 days.

Reuters: Chinese gold demand could hit 1,000 T this year - WGC

China's gold demand could hit a record 1,000 tonnes this year, the World Gold Council said on Thursday, which means it would overtake India as the world's biggest bullion consumer.

Chinese gold demand is likely to be in the region of 950 to 1,000 tonnes in 2013, the WGC's managing director for investment, Marcus Grubb, said, but risks are skewed to the upside and could push demand past the upper end of that range.

King World News:   Richard Russell - The War In Gold & A Danger Sign For Stocks

On the heels of continued volatility in key global markets, the Godfather of newsletter writers, Richard Russell, discussed the war in the gold market and a danger sign for stocks.  This is a fantastic piece where Russell included several charts and some outstanding commentary.  King World News even included an incredibly important note for gold the bulls from Russell’s November 7th, 2012 comments.

Richard Russell:  “The trend continues bullish.  This is confirmed by the DIAs (chart below) breaking out to the upside. Remember, use a price of 154 as your safety level.  If the DIAs drop blow 154, sell them and take a small profit.  Note that the RSI is almost overbought, and the histograms are trending lower.

Arabian Money: Gold going to $7,000 in currency reset says author Jim Rickards

Gold prices will surpass $7,000 an ounce in an inevitable global currency reset forecast author of the new book ‘Currency Wars: The Making of the Next Global Crisis’ and MD of Tangent Capital, said Jim Richards speaking at the Agora Financial Investment Symposium in Vancouver yesterday.

Mr. Rickards recalled how the global currency system has been reset three times in the past century: 1914, 1939 and 1971. He noted that the dollar standard reigned from 1982 under Paul Volcker’s Fed to 2010.

The Real Asset Co: Backwardation, negative GOFO and the gold price

Confused by talk of gold backwardation, the gold lease rate, GOFO and what it all means for gold prices? Read Jan Skoyles’ explanation of it all to get the whole picture…

The term ‘backwardation’ has suddenly popped up in the mainstream financial media and is being touted as the signal that the price of gold is on its way back up.

The Silver Bear Cafe: Silver Set to Soar

Gold just shot up to over $1,330 and ounce, a level it hadn’t seen for a month. After dropping to $1,180 at the end of June — a 38% decline from its peak and the first time in almost three years it has gone that low.

While analysts say it was likely a short squeeze that sent gold soaring, suggesting that recent gains probably won’t last particularly long (despite the Fed giving assurances to the market about its monetary policy), count me among those who aren’t looking at the yellow metal for the real profits, but rather its gray cousin, silver.

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1 Comment

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5420
Dan Norcini explains "gold backwardation"

Great article from Dan Norcini on backwardation, how to calculate it, and what it means.  I've seen the very effect he talks about.  Front month contracts trade frequently, back month contracts trade much more infrequently, so if all you do is look at "last sale price" for a contract that only had a trade on it two hours ago, you might get the idea gold is in backwardation, when in fact it is not.

Dan is a solid believer in sound money.  He is just trying to be a voice of truth - to correct misapprehensions that might lead people to buy into rumors that have no basis in fact.  He wants sound money, but ... well read the article and it will become clear.  I haven't seen Dan write anything yet about the markets that I don't agree with.

I think other signals of shortages (and for sure, outflows) are accurate - just not this one.

http://traderdannorcini.blogspot.com/2013/07/gold-backwardation-misinfor...

There is no backwardation occurring on the Comex at this present time for any time interval whatsoever.

The reason why some contracts occasionally have a last trade price higher than a more distant month is because the more distant months are not trading as frequently because there is no liquidity in those months.

when you have a volume of trade of 182,000 in a nearby versus 2,085 in a more distant February for example - there are going to be times when the last trade price of a more distant month might be at a discount to a nearby. That is merely a function of low liquidity. If you want to see where the contract might trade IF AN ACTUAL TRADE OCCURRED, you have to look at the Bids and Offers and see where those are currently sitting.

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