Gold & Silver Digest: 8/9/13
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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8/9/13 7:47 PM EST US close metals price quotes from Finviz
Gold rose on Friday on an oil rally and falling U.S. equities, with bullion notched a second consecutive weekly gain due to uncertainty over when the U.S. Federal Reserve will reduce its economic stimulus policy.
Speculation the central bank could start tapering its $85 billion monthly bond purchases as soon as next month knocked gold to a three-week low earlier this week.
Following a solid rally and move over $1,300 an ounce, gold prices are expected to continue to press at least slightly higher next week, said a majority of participants in the Kitco News weekly gold survey.
In the Kitco News Gold Survey, out of 36 participants, 18 responded this week. Of those 18 participants, 12 see prices up, while 2 see prices down and four see prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.
Bob discusses missing gold at the central bank of England with GATA. Then Justine charts gold manipulation by high frequency traders. Perianne breaks down what the inventor of the freezer has in common with Jeff Bezos. Finally Bob discusses the use of eminent domain to refinance mortgages with Ramon Galindo.
I wrote an article way back in March 2013 about how fear was one of if not the main pillar supporting the price of gold. I also wrote an article detailing all the "pillars" supporting gold and why I don't own gold. To me gold is a rather simple trade to understand. Fear and lack of alternatives have driven gold to never before reached levels, but as fear subsides and interest rates increase, gold loses its main "pillars" of support. I find the "buy gold because of inflation" totally unconvincing in these economic conditions. If people are buying gold as a hedge against inflation, they will have a long wait, and gold will reach a bottom far below where it is today before a new uptrend develops discounting the real actuality of inflation. Buying gold in anticipation of inflation requires having the right expectations, and expecting inflation in the near or intermediate term is simply relying on a very outdated and erroneous economic forecasting model. I've found no objective market based indicator that shows any sign of inflation or even the fear of inflation…besides gold. The gold market is in total contradiction of the bond market, and I trust the bond market a whole lot more than I trust the gold market.
Americas-focused Hochschild, which has seen its share price halve since the start of the year, soared almost 24pc to close up 45.8 at 239.2p, topping the mid-cap leader board. African Barrick Gold was the second-biggest mid-cap riser, up 13.8 –12pc – to 128.6p.
Among the blue chips, the crown went to Fresnillo as the optimism helped the world’s largest primary silver producer recover from the near-11pc slump in its share price on Tuesday, when it had revealed a sharp fall in half-year profits. Fresnillo rose 78p – 8.2pc – to £10.35, just shy of Monday’s pre-results close price of £10.37.
Certainty it’s true in Thursday’s trading — but will it keep up?
Say this much: The tendency of miners to underperform gold is loosening up.
For years, if you thought a rise in the price of gold should be doubly good news for miners, your hopes were dashed by those companies’ incompetent management. The Market Vectors fund entered today’s session with a five-year annualized loss of 8.8%, versus a 7.6% gain for SPDR Gold Trust.
For the past few weeks I have been harping on JPMorgan’s massive long position in COMEX gold futures, stating that nothing comes closer in importance for the price. There has never been a case where a market corner wasn’t the prime price determinant. Preventing or eliminating market corners is the number one priority under commodity law. A market corner is the antitheses of how a free market is supposed to operate. A series of market corners and manipulation in the early part of the last century (the Jesse Livermore era) was what led to the formation of commodity regulation in the US in the 1930’s. It’s bad enough when entities such as the Hunt Brothers or the rogue copper trader from Sumitomo cornered markets; but it’s a whole different level of badness when the most important US bank corners a market, as JPMorgan has done in COMEX gold futures.
Silver has suffered a miserable year so far, bludgeoned by gold’s unprecedented selling anomaly. The exceptional weakness in both metals was greatly exacerbated by futures speculators piling on short-side bets. But with silver shorts hitting record extremes, a super-bullish short squeeze now looms. Any rapid silver rally is likely to spook the highly-leveraged futures traders, sparking a massive stampede to cover.
Even greater short-squeeze potential exists in gold, as I discussed in an essay several weeks ago. And gold is the dominating primary driver of silver prices. Since silver’s secular bull was born nearly a dozen years ago, silver has had a stellar 0.924 correlation r-square with gold. Over 92% of all silver’s daily price action in that long secular span was statistically explainable by gold’s own! This is very important today.
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