Investing in precious metals 101

PM Daily Market Commentary – 1/14/2014

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  • Wed, Jan 15, 2014 - 08:48am



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    PM Daily Market Commentary – 1/14/2014

Gold closed down -7.40 to 1244.90 on moderately heavy volume, silver closed down -0.15 to 20.25 also on moderately heavy volume.  The gold/silver ratio moved up slightly, +0.09 to 61.49.  Gold traded sideways into the NY open, but failed to make a new high, which seemed to bring out the sellers who at 11:16 EST hammered gold down $10 in 15 minutes.

Silver did make a new high hitting 20.67 and causing one of those high volume short-covering spikes at 10:24, but could not hold, selling off along with gold at 11:16.  While volume was relatively heavy, the move down was not large.

The dollar moved up somewhat, closing +0.12 [+0.15%] to 80.72, right above its 50 day MA.  I certainly can't figure out what the buck is up to – the 50 MA is rising, the 200 MA is falling, and the USD price is in the middle, in a sort of no man's land.  USD movement could be decisive in gold, but it hasn't been for a while now.

GDX retraced most of its gains from yesterday, closing down -2.43% on moderately heavy volume.  It remains above its 50 day MA, but not by much.  GDXJ fared better, off only -2.14% on extremely heavy volume.  GDXJ retained most of its gain, and is looking the best of the instruments in the PM complex.  My speculation is that the long-awaited industry consolidation in the mining sector has been kicked off with Goldcorp's bid for Osisko, and traders are bidding up juniors that they believe are takeover targets in anticipation of more M&A activity in the sector.

Goldcorp itself didn't fare so well after launching the bid – it moved below its 50 MA on pretty heavy volume.  Perhaps traders are wondering if this will be yet another example of a major overpaying for an acquisition.  So far the bid doesn't seem so expensive, but who knows what the final price will end up to be.

I was a bit concerned that the 1260-65 resistance level might bring out the sellers at the COMEX, since it is a logical place for the shorts to establish new low-risk positions, and that's what seemed to have happened.  It is often the case that a rally will "take a break" after hitting resistance and back off for a time.  Either something happens that causes renewed buying pushing price through resistence, or the longs get cold feet and ring the cash register on the rally, selling at what they think will be the highs, and the prices drop back down.

Longs now need an unhappy economic news event.  We have some events scheduled for tomorrow, (MBA purchase applications, a PPI, a Mfg survey) and Jobless Claims and other assorted events on Thursday.  Any of these, if unexpectedly bad, could be a catalyst.  We are also heading into earnings season, and from what I've observed, bad days in equities tend to lead to good days for PM.


  • Wed, Jan 15, 2014 - 10:23am



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    repost: talk of a gold smash

Hi Dave, Jim, Hrunner and all,

I'm reposting this in today's market commentary; I hope that's alright.

Here are two predictions of a fall in gold prices in the near-term.

According to this recent KWN podcast interview, William Kaye believes that the bullion banks (and the Central Banks) are looking for one more big gold smash in the first two quarters of 2014, down to some level between $1150/oz and $1050/oz in order to increase their current net long position.  Note that on the KWN blog these comments have been edited out with ellipses (…) but you can hear Kaye's view on this in the audio interview.  Now Kaye, like most of us here, is a goldbug, and this is not the type of prediction you typically hear at KWN

Also, Jeffrey Currie Goldman Sachs' head of commodities research, is calling for a fall in gold prices in 2014 similar to Kayes' projection, down to about $1050/oz.  I don't take anything from Goldman Sachs at face value, but they did forecast a drop in the gold price a short time before the last big smash last summer, and then, if I'm not mistaken, they bought up a bunch of PM securities during the smash.  While that seemed to be dishonest media manipulation, it served them well, and their red flag did come just before the big smash im PM last June/July.

So, I'd be interested to hear what you guys make of such reports on a short-term fall in gold prices.  For the record, Kaye sees much higher gold prices in the medium term (he says 12-18 months) and I also believe that in the medium to long term there is a very high likelihood of much higher real gold prices.  But, a short-term smash in the gold price wouldn't surprise me.  

Any ideas?



  • Wed, Jan 15, 2014 - 06:39pm



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    gold smash predictions

Eh, I don't really follow predictions.  None of these guys really knows anything.

Current medium term trend is down.  Long term trend is down.  This leads to downside pressure.  Could 1180 fail?  Yes it could, just as a matter of shorts continuing to jump on gold whenever logical resistance levels are reached, and not enough buyers in the west showing up to buy.  Gold moving above 1265 would lower this risk substantially.

A deflationary accident would lead to another drop in gold, most likely.

A decision to reflate by eliminating interest payments on excess reserves would lead to a rise in gold, most likely.  A decision by India to reduce duties on gold would also most likely lead to a rise in gold.

So bottom line – if you tell me which of these things ends up happening, I'll tell you what happens to gold.

  • Mon, Jan 20, 2014 - 01:21am



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    Gold smash predictions

USA has hardly any real gold and the only way they can drive down gold is to short. This is disastrous for usa beause they will shortly have no gold. They owe Germany a bunch of gold.

For every gold coin you and I own there are about 100 claims on that gold coin. So If i put one gold coin out for sale I should get $100 for it. I am not selling anything. This is the stuff that $100 up moves in one day are made of.

What they could do is confiscate gold, so I had better build a safety deposit box in the office I am building–under ground and under concrete.

I might support litigation against manipulators as Sprott has defined so well, manipulators and crooked traders.



by the way I see gold over 2500 by 2016 AND over 5000 by 2025. Nothing has been done since the so called financial meltdown in 2008-9

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