Gold & Silver Digest: 4/29/13
The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.
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4/29/13 6:16 PM EST US close metals price quotes from Finviz
Slowing inflation offers the Fed more scope to provide the economy with more liquidity and lower interest rates for longer. Chow Sang Sang Holdings International Ltd. (116) said that jewelry sales at its 44 shops in Hong Kong more than doubled in the two weeks ended April from a year ago. Last week, gold jumped 4.2 percent, the most in 15 months, partly as coin demand from mints in the U.S. and Australia soared after futures on April 15 plunged 9.3 percent, the most in 33 years.
Gold's post-plunge rally of the past 9 trading days has been quite impressive, given what preceded it, but it has not vitiated the implications of the support failure and plunge, and it won’t until either a substantial base pattern forms, or the price breaks back above the strong support that has now become strong resistance. The chance of the latter happening over the short-term is low, and with the price now up within sniffing distance of the resistance, gold is viewed as being at a good point for traders to short it for a retreat back towards the recent lows, at the least.
Attractive valuation plus renewed demand for physical gold could be putting a bottom in for the metal that has been riding a wild bout of volatility.
Gold rallied 3 percent last week, primarily thanks to surging demand for the actual metal rather than the funds that have become so popular with investors trying to cash in on the price surge in recent years.
One analysis suggests that even though the near term remains somewhat murky, the longer outlook remains solid.
Gold may or may not be a currency or hedge against crisis but it has been traded for thousands of years. That being the case, gold can probably be expected to fluctuate in value but it's not going to disappear. At least not in a straight line.
Jeff Kilburg, founder & CEO of KKM Financial, is a gold trader rather than a fundamental purist. For him the underlying demand gives him a trading backstop, but getting ahead of price fluctuations are how he brings home the bacon.
You've undoubtedly read about the dramatic increase in demand for gold and silver bullion products since the big correction two weeks ago. Supply has gotten tight, premiums are rising, and inventory is hard to come by, especially for certain silver products.
But it's worse than you may know. Many of these reports come from the retail side of the business, including those from sovereign mints. This information is indicative, but more important is the activity among the wholesalers. It's possible the retail trade is just experiencing a giant bottleneck, which would come with a different set of conclusions than if behind the scenes the wholesale industry is seeing net sales.
Think the recent collapse in Bitcoin’s value was the end of the experimental currency’s, um, currency? Not even close, says Chamath Palihapitiya, the longtime Facebook executive who now runs The Social + Capital Partnership.
Likening Bitcoin to the “red pill” from the movie “The Matrix,” which exposes those who take it to a hidden reality, Palihapitiya sounded as bullish as could be during a Q&A at TechCrunch Disrupt NY on Monday morning. “We are entering a complete world of uncharted water right now,” he said.
Seldom has there been an asset class so despised by investment professionals and the modern banking establishment as gold. It does not provide a yield. Its supply is limited by forces outside of our control, and there is no clear formula upon which investors can readily rely to calculate its value. It is, therefore, common practice by said investment pros to rebuke gold’s potential as a sound investment by relying on the widely held misperception that it performs well during periods of inflation and poorly during periods of deflation. It is also an ironic feature of such a tangible asset that its valuation carries with it so many characteristics of the intangible, and herein lies the problem for the institutional investor.
In a recent article penned by Alexander Green, investment director of The Oxford Club, the esteemed stock picker makes his case for why he has turned bearish on the yellow metal for the past two years, after being bullish on gold since 2003.
The slump in silver this month has spurred demand for products from Silver Bullion Pte, one of Singapore’s largest suppliers of coins and bars to retail investors, depleting inventories and doubling delivery times.
Holdings of bars fell to just 54 ounces from 60,000 ounces two and a half weeks ago, according to founder Gregor Gregersen. It now takes at least six weeks for new supplies to arrive in the country up from two to three weeks previously, he said. The company, set up in 2009, counts the Perth Mint in Australia and the Royal Canadian Mint among its suppliers.
After being stuck in a tight range following its plunge about 9 trading days ago, silver finally responded to gold’s creeping advance and “popped” on Thursday, but it was not that impressive and was followed by a rather negative “spinning top” candlestick on Friday, meaning that it could have been a 1-day wonder especially given that gold’s relief rally looks to be about done.
We can see recent action in detail on the 8-month chart below. On this chart we see that once silver crashed key support at and above $26 it plunged on very heavy turnover, which was bearish. The current minor relief rally is serving to unwind the oversold condition and thus creating the conditions for renewed decline. This rally is unlikely to get far and may be done already. With the earlier strong support so clearly and sharply defined, any attempt to get above $26 will meet with heavy selling from the wall of overhanging supply above that level arising from trapped traders who bought at higher levels.
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