Gold & Silver Digest: 8/26/13

Adam Taggart
By Adam Taggart on Mon, Aug 26, 2013 - 8:08pm

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.

8/26/13 7:07 PM EST US close metals price quotes from Finviz

Reuters: Gold breaks above $1,400 on weak U.S. durable goods data

Gold prices rose to an 11-week high on Monday after a surprisingly weak report on U.S. durable goods boosted hopes that the Federal Reserve will maintain its bond-buying to prolong economic stimulus.

The metal breached $1,400 for the first time since June 7 after data showed orders for long-lasting U.S. manufactured goods recorded their biggest drop in nearly a year in July, while a gauge of planned business spending on capital goods also tumbled.

Bloomberg: Hedge Fund Gold Bets Reach Six-Month High After Rally

Hedge funds and other speculators raised bets on higher gold prices to the most in six months as signs of slowing U.S. growth drove bullion above $1,400 an ounce for the first time since June.

The net-long position increased 29 percent to 73,216 futures and options by Aug. 20, U.S. Commodity Futures Trading Commission data show. Short contracts fell for a second week and to the lowest since Feb. 12. Net-bullish holdings across 18 U.S.-traded commodities jumped 34 percent, the most since July 2010, as wagers on copper and soybeans more than doubled.

Market Watch: Gold to the Fed: You are bluffing

Gold has been in a nice uptrend since bottoming late June, bouncing from deeply oversold levels following Bernanke's dovish reassurances on monetary policy. Clearly there are many reasons why people buy gold. Some prefer holding the metal physically as a store of wealth. Some like the diversification benefits it provides. Still others view it simply as a momentum trade when strength persists. Whatever the reasons may ultimately be, as with every investment, price is driven purely and always by perception.

So what is the perception about gold now as we enter the dreaded "taper"?

Bull Market Thinking: Gold’s Explosive Move Continues–Trader Expects “$1500 Within Next 2 Weeks”

What started out as a quiet and sideways week in the metals and miners, finished off explosively!

Technical gold trader Gary Savage noted in weekend commentary that Friday’s explosive finish in gold confirms yet another trading cycle, which may assault the 200 day moving average at $1500 oz. within the next two weeksHe further added that as a result of the strength of this close, he also expects a 10%-15% move in the miners next week.

CNBC: Here’s why you need to own gold this week

Is the Fed taking a September taper off the table? That's certainly what gold bulls are hoping for.

After holding the major $1,352 level, gold finished the week with tremendous strength, trading to new swing highs. Although the metal was just short of $1,400, it closed nearly $20 higher on Friday, reaching $1,399.90. Gold then continued the run on Sunday night, trading to $1,407.

Jesse's Café Américain: Gold Daily and Silver Weekly Charts - Bad Economy, Big Finish

Gold in particular was under pressure since yesterday evening, with a concerted effort being made to hold the line on price around the $1400 level.

This is a big week for gold and silver, with COMEX option expiration tomorrow, and the end of August delivery on Friday, with available inventory at record low levels for this bull market.  There was intraday commentary on this here.

Stocks did a reversal and gold and silver popped like coiled springs when US Secretary of State John Kerry vowed that the US would respond to 'the moral obscenity of massacre in Syria.'

GoldSeek: Physical Gold and the Financial Market

Last week we illustrated how gold should be treated as a special alternative to dollar denominated paper assets. Yet, It is not only the “system-hedge” aspects that determine the value of gold, since supply factors also come into play.  There has been a lot of talk about the divergence between the gold physical markets and the financial markets. There are those who spout conspiracy theories how financial institutions (including central banks) are manipulating the gold market (and as someone observed that should not come as a surprise since central banks manipulate bond markets and interest rates every day). How much these statements are true is a separate issue, yet there is in fact some level of discrepancy between the financial market and the real market (which overall in the longer run should disappear). This discrepancy can help us separate short run speculations from long run movements.

After the last huge fall in the gold price one could observe that the physical market was not that shaken. Actually, it was spurred. As Bloomberg reported, the Shanghai Gold Exchange supplied 1098 tons of gold in the first part of 2013 (1139 being the total for the whole 2012 year), which is around 40% of annual gold production (yes, you are reading correctly: during half of the year the Shanghai stock exchange saw trading of 40% of annual production). We see therefore some big volume of gold being traded in the market. Although we have to admit there was a visible slowdown. In April 236 tons were delivered, in May 224 and 180 in June.

SRSroccoReport: Future Silver Supply in Question as Mexico Oil Production Declines

The largest silver producing country in the world saw its oil production decline to the lowest level since 1995.  Mexico who produced 162 million ounces of silver in 2012 is slated to increase this substantially by the end of the decade… that is, if they have the available energy to do so.

If we look at the chart below, we can see just how much Mexico’s oil production has declined since 2000:

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