PM Daily Market Commentary - 12/16/2013

davefairtex
By davefairtex on Tue, Dec 17, 2013 - 1:13am

Gold closed up +2.10 to 1240.10 on moderate volume, while silver closed up +0.31 to 19.97 also on moderate volume.  The gold/silver ratio fell -0.86 to 62.11.  Gold sold off in asia and europe, only to jump higher starting at 0730 EST and continuing through mid-day in NY, reaching 1251 on several flurries of high volume short covering.  Once at 1251, the gold buyers vanished and gold sold off through the end of the day, ending almost flat.

Today's movement in gold was a lot of short-covering sound and fury to end almost even.  Silver did substantially better, retaining about 50% of the day's gains.

The dollar also closed the day mostly flat, up +0.02 [+0.02%] to 80.22.  I keep watching the buck, but for a while now, it has not seemed to affect gold's price movements much at all.

GDX was up +1.28% on relatively light volume, while GDXJ was up +1.49% on heavy volume.  Miners followed the track of gold, rallying as it moved up and then fading into the close.  Price action on the miners looked very modestly bullish.  I got the sense that the mining shares were in a wait-and-see mode regarding gold.  The heavy volume and outperformance of the junior miners (GDXJ) vs the overall GDX was a possibly-meaningful bullish note.

Both GDX and GDXJ closed above their short term 8 EMA, as did silver, which is bullish, as is the drop in the silver/gold ratio.  The moves weren't dramatic, but taken together tend to provide a subtle bullish tone as we approach the Fed meeting that starts tomorrow, with the press conference coming Wednesday.

Taper or No Taper?  As always its not the answer to the question, it's the market's reaction to it that counts.

 

2 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5463
COMEX gold reserves - another viewpoint

The VP of Biz Dev at Bullion Vault has this view on what declining warehouse stocks at COMEX means.  He has a 30 year history in the PM business as well as a PM refinery.  Short answer: in his opinion, the drop in reserves don't signal an impending default.

I believe a default may well happen in the future, I just don't think it will happen through the normal course of business.  "The gold won't just run out."  Instead, my opinion is it will be some massive unexpected exogenous event.  The number of "warehouse receipt" schemes that have failed are numerous, as we all know. 

Anyhow, this is just opinion (based on his experience), but I thought it might prove interesting.

http://goldnews.bullionvault.com/comex-gold-stocks-072420136

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.
 
But there is no mystery or hidden agenda of how Comex works. In this article our goal is to explain how the Comex works in the simplest fashion. Having been involved in the physical gold markets for thirty years – both making and taking delivery on the exchange, as well as through off-exchange deals for miners, refiners, fabricators and investors – I hope I'm in a position to share a true "insider" view, the better to inform this debate properly.
davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5463
china's gold demand 1400-2000 tons

A week or so ago Koos Jensen released a paper on what might be considered "estimated true chinese gold demand" which after some calculations, can be turned into actual Chinese net imports.  It's thick with detail, but just the sort of detail I enjoy reading.  Seems to me like he makes a pretty good case, namely, Chinese actual gold imports were at a minimum 1436 tons this year, and possibly as high as 2000 tons, depending on how much gold the PBOC buys in secret and to what extent the Chinese government is monkeying with the "gold scrap" stats - which could be another 100-150 tons or so.

This is significant because mine production is around 2500 tons per year, and we can see that the Chinese demand is a very large fraction of that - and the number is underestimated by the World Gold Council.

My intepretation: if/when Western ETF demand comes back online, price could move in some pretty exciting ways.

http://www.ingoldwetrust.ch/shanghai-gold-exchange-physical-delivery-equals-chinese-demand-part2

 

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