Gold & Silver Digest: 5/20/13
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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5/20/13 5:19 PM EST US close metals price quotes from Finviz
Comex gold and silver futures prices suddenly surged higher near midday Monday, to reverse early, substantial losses and then ended the U.S. day session higher and near their daily highs. Heavy short covering and bargain hunting were featured during the precious metals’ turnarounds. The key “outside markets” were also in a bullish posture for gold and silver Monday, as the U.S. dollar index was lower and crude oil prices were higher. Gold on Monday ended a seven-session losing streak, while silver posted technical action that now hints it has put in a near-term market bottom. Comex June gold last traded up $18.70 at $1,383.00 an ounce. Spot gold was last quoted up $24.80 at $1,385.50. July Comex silver last traded up $0.313 at $22.67 an ounce.
There was also a report released at midday Monday that could have sparked some safe-haven buying demand for gold and some short covering. Moody’s reportedly said if the U.S. fails to act on its budget problems in 2013, then the ratings agency might downgrade U.S. government debt. However, that news is not at all earth-shaking and it was likely just a coincidence that it was released about the same time gold and silver embarked upon their rallies.
Today King World News is reporting on incredibly important developments taking place in the gold and silver markets. Acclaimed commodity trader Dan Norcini spoke with KWN about the amazing action in both of these key markets and provided four tremendous charts. Below is what Norcini had to say in his interview.
Norcini has been stunningly accurate in his predictions of the movement in the gold and silver markets. Now the acclaimed trader discusses these incredibly important developments in both of these markets: “Gold appears to have successfully retested its former spike low down in that important support level between $1320 – $1340 and held. What is important from a technical analysis perspective is that the volume completely dried up as price worked its way back into that critical support zone noted on the 4 hour price chart.
There is not much doubt in my mind that the antics we saw in the silver, and to a lesser extent gold, markets last night were a classic hit and run, Dr. Evil market play.
It is not particularly sophisticated, more like a brazen street con, or a smash and grab. But it does require a complacent regulatory environment, and a certain regard for fellow insiders who are in a position to see what has happened and raise objections with regulators and the exchanges.
Short covering, triggered by rumours of a potential US downgrade from Moody’s, are sending gold and silver prices vertical. The move higher comes after a very suspicious spike this night in which the silver price was pushed 10% lower within the first hour of Asian trading (with a bank holiday in Europe). The charts show the price action in today’s trading sessions. In our own words: folly of the highest degree, or the metals being subject to greediness of traders.
Gold bugs have done a lot of crying, rending of clothing, and gnashing of teeth in recent weeks as gold has swooned. It’s worse this morning as gold's price sinks even a little below the levels on these charts. At the same time there’s been lots of gloating and cheering among mainstream media types who hold the yellow metal in low regard.
Gold bugs have been complaining about nefarious manipulation by the forces of evil, central banks, particularly the Fed, and the big bullion banks like JPM. I’m not a gold bug, but I respect that it has a role to play, and it’s pretty clear that the central banks hold it in high regard. The Fed holds $400 billion of the stuff.
Gold prices are up modestly today, but continue to be near their lows of the year.
"Downward pressure on gold continues and we are now back to levels post the mid-April selloff," said UBS's Edel Tully in a note titled Gold Shorts Dominate. "Investor sentiment remains negative as highlighted by the persistence of ETF selling and the extension of speculative shorts to an all-time high."
A lot has happened in the past few weeks. First, the Cyprus banking crisis roiled the markets and exposed, yet again, the risks posed by Western banks and their investments in sovereign debt.
Two weeks later, we saw the precious-metals market drop significantly. The exact cause of the price drop is debatable, but one thing is certain: "paper gold" is playing a big part in the market's instability.
Big buyers of paper gold and silver use leverage to make their purchases – a practice which causes price distortions during periods of volatility. When the price moves below their margin limit, they need to deposit more cash to protect their positions. That typically involves selling some or all of their holdings, adding more downward pressure on prices.
Still No Joy in Gold-Land
Below is a brief technical overview in view of last week's action in the gold sector. Gold stocks have continued to lead to the downside, something they have done throughout the bear phase to date. Thus the HUI index ended the week at a new low for the move, below the lows put in concurrently with gold's crash low in mid April. This obviously constitutes a technical divergence, but such divergences have as a rule been a sign that still more declines lay ahead. It would be different if the divergence ran the other way around – i.e., if a new low in gold and silver concurrently with a higher low in the mining stocks were to occur. That would constitute a bullish divergence. That said, a few things argue in favor of the idea that at least a dead-cat bounce could be close at hand (famous last words).
On the daily and weekly chart of the HUI, there is now a price/RSI divergence. Moreover, the daily chart shows a close well outside the lower Bollinger band (unfortunately the bands are widening as well, which is usually a bad sign). In short, the decline happened so fast that momentum oscillators have failed to keep pace with it. The weekly HUI chart remains close to the most oversold RSI reading in all of history (the record was set in April).
The U.S. is trying to stop the gold rush to Iran in a bid to undermine the Islamic Republic's plummeting currency, but critics say the move is more likely to hurt ordinary citizens than the rogue regime's leadership.
A top Treasury Department official told lawmakers that, starting July 1, the U.S. plans to crack down on all transfers of gold to the Iranian government or its citizens. The move appears aimed largely at banks and gold brokers in Turkey and the United Arab Emirates. Companies operating from within those nations have shipped large amounts of gold to Iran as Tehran attempts to stabilize its currency, the rial, amid increasing international economic isolation.
"Half science, half art, half luck," is how Brent Cook describes a geologist's work in distinguishing an anomaly from a deposit. But in his interview with The Gold Report, the publisher of Exploration Insights suggests investors will have an easier time distinguishing good drill results from bad if they know how to dissect a company's press releases. And despite the current preference for cost cutting over discovery, Cook discusses several miners whose futures are bright.
The Gold Report: After the Prospectors and Developers Association of Canada Convention in March, you said that the next 12–18 months could define how investors, speculators and mining companies perceive and value both the junior and major mining sectors. That was before the volatility of mid-April. With higher production costs being the new normal, what percentage of miners can make money at the current gold price?
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