Gold & Silver Digest: 5/30/13
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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5/30/13 8:43 PM EST US close metals price quotes from Finviz
Gold rose to a two-week high on Thursday buoyed by a fall in the dollar after weaker-than-expected U.S. economic data boosted prospects the Federal Reserve will keep its monetary stimulus in place.
Speculation the U.S. central bank could start reining in its $85 billion in monthly asset purchases as early as the summer had sparked a sell-off in gold and a rally in the dollar last week.
Gold demand in China, the world’s largest consumer after India, may slow in the second half of this year after surging in April, said Zhang Bingnan, secretary-general of the China Gold Association.
“The kind of frenzied buying in late April and early May won’t be repeated,” Zhang said. Some of the jewelry demand earmarked for festivals or weddings later this year may have been brought forward to April and May after prices fell, he said.
London gold trading jumped to a 20-month high in April and silver volumes surged 25 percent after a plunge in prices for both precious metals spurred an increase in physical buying, the London Bullion Market Association said.
Trading in gold averaged 24.1 million ounces a day in the London market, the most for any month since August 2011, the LBMA said in a statement e-mailed today. The total compared with 21.8 million ounces a day in March. Silver volume was 165.2 million ounces a day, up from 132.5 million ounces in the previous month. There were 5,395 gold transactions on average per day, the highest on record, while silver transfers at 1,007 a day were the second-highest ever, according to the report.
As if gold investors didn’t have enough to worry about, now comes the possibility that gold mining companies, by putting on hedges, will bet against investors’ hopes of recovering this year’s losses.
Gold producers are under pressure to hedge against potential further declines in gold prices, according to recent news reports. That action in itself, which involves pre-selling gold at a set price now, by its nature is rarely conducive to pushing prices higher. But after watching gold plunge some 17% this year alone, some miners want to reduce the risk that prices will be even lower later this year. For example, Petropavlovsk PLC, a Russian-based FTSE-250 miner, is hedging half of its second quarter 2014 production at $1,408 an ounce, according to The Telegraph newspaper.
Never Ending QE and Global Economic Problems with no end in sight. Doug Kass changes course and Goes for Gold!
“Sentiment in the gold market – especially among the hedge funds and institutional speculators – is already EXTREMELY NEGATIVE” says specialist U.S. precious metals analyst and cautious gold bull, Jeff Nichols in his latest posting (see http://www.nicholsongold.com). He reckons market psychology can’t get much worse, but comments that contrarians feel this unbalanced situation could be signalling an approaching upturn in prices.
While the markets have been very volatile lately, hence difficult to predict, it is reasonable to expect a bounce in the price of gold and silver. We hasten to say that nobody can predict the future, so our expectation could turn out to be wrong. To be more precise, the probability of higher prices is higher than the probability of lower prices, at least in the short run. Here is why.
(1) Excessive speculative shorts and growing commercial longs
In the short run, gold and silver prices are primarily dominated by the futures market (COMEX) as reported in the weekly COT reports. The futures positions of commercials are increasingly long while the speculators are historically short. The first chart below shows those positions. It appears that the short positions of small speculators (small and private investors) are as high as in the years prior to 2000 (just before the current huge bull market started). The divergence between the commercial long and speculative short positions is considerable. Ted Butler repeatedly reports the influence of commercials in driving the price, so the likeability of a rally is high. However, there is one caveat. No matter how well a contrarian position can work, the speculative short positions are so high that it could break whichever rule has worked in the past. Chart courtesy: Sentimentrader and Standard Bank Research.
GoldSeek.com TV presents an exclusive interview with the Founder of The Morgan Report, David Morgan. He discusses several topics with interviewer Vanessa Collette of GoldSeek.com, including:
- Why the biggest part of the gold-silver move is still ahead
- Best time to buy gold and silver stocks in 30 years
- Once in a lifetime opportunity in precious metals
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