Gold & Precious Metals

Two Promising Trends in Gold & Precious Metals

Posted by Dave Forrest - Pierce Points

on Thursday, 20 February 2014 17:07

UnknownI try to keep an eye on a lot of sources. Some of them from far-flung places and industries.

One of those is the jewellery world. Where lately there have been a number of interesting happenings. Sending some important signals about the precious metals markets.

In short, metal demand from the jewellery industry is soaring. Spurred by rising buying interest at today’s considerably-lower prices.

In the U.K., for example. Where new stats show that demand for gold jewellery enjoyed its biggest increase in volume in 16 years, during 2013.

All told, gold jewellery consumption jumped 17% from 2012 levels. To a total 2,209.5 tonnes, according to the World Gold Council.

Elsewhere, we’re seeing a similar pattern of rising consumption. Even in places that can’t buy gold.

That’s been the case in India. Where recent restrictions on gold and silver imports have limited the amount of the metal available for sale in the country.

That hasn’t stopped value-seeking buyers however. Who have simply turned to another precious metal: platinum.

According to India’s Gems and Jewelry Export Promotion Council (GJEPC), that’s had a big impact on overall platinum demand. With imports of the metal into India jumping 140% year-on-year during January.

Taken together, these are both signs that precious metals markets are equalizing. With prices having fallen to a point where buyers are entering the market in a big way.

That increased demand comes even as supply is getting tighter. We’re continuing to get reports of precious metals mines closing globally, due to low prices. Right now focused around the highest-cost producing regions, like Africa.

These are both bullish factors for prices. If the world is demanding more gold and producing less, it’s only a matter of time until prices rise.

We have indeed seen some signs of life from the gold price the last few weeks. It won’t be a straight-line trend, and it could go lower before it goes higher again. But all signs are suggesting this is a promising sector to be in.

Here’s to bringing buyers and sellers together,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

Screen Shot 2014-02-20 at 6.50.39 AM

Gold: Get Positioned and Sit Tight

Posted by Justin Smyth - NextBigTrade.com

on Thursday, 20 February 2014 3:49

If gold is entering a new bull market then it’s a great time to get in. Technical evidence is mounting, big volume is coming into gold mining ETFs and they are leading the market. Take a look at the monthly volume on the Junior Gold Miners ETF GDXJ. After a huge volume increase in January, the buying pressure hasn’t subsided as February is set to smash the record volume set just last month. GDXJ is also pressing up against downtrend resistance and the monthly MACD is turning higher, setting up a potential breakout.

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As the gold sector is leading the market this year, trading desks around the world are probably scrambling to figure out what to do about it. Wall Street exited gold en masse in 2013 and formed a herd against gold declaring it a short for 2014. Now with GDXJ up over 40% this year and gold stocks reaping big gains they have to decide when and how they want to get back into the gold sector. Look for opinions on gold to start changing from the big banks as they won’t want to stay bearish on gold forever if it’s price continues to rise.

Some people might argue that Wall Street has such a huge information advantage over the individual investor that they can outsmart and out maneuver the individual investor whenever they choose. But this information advantage goes up against two distinct advantages the individual investor has over a big bank: speed and contrarian thinking.

Individual investors don’t have to wait for confirmation from clients or from other members of a firm on investing decisions. They can simply deploy funds however they choose, without the need to consult a hierarchy of decision makers on how to enter and exit the market. This freedom allows individual investors to trade at whatever speed and conviction level they want, which is a huge advantage when it comes to getting onboard new trends as early as possible.

The other advantage the individual investor has is trading outside of the groupthink that tends to invade Wall Street. Even with their armies of analysts and mountains of information, Wall Street still falls prey to what happens to humans whenever they form groups. They start thinking like a herd. And as anyone that has studied markets knows herd thinking is what ultimately ends long term trends and starts new ones. So while Wall Street takes its time to wake up to a possible new uptrend in gold, the individual investor can use their speed and independence to their advantage and get positioned.

Sit Tight

Getting positioned early in a new bull market is hard enough. Taking a contrarian view, and waiting for a market to transition into a new uptrend takes patience and skill. But perhaps a more daunting challenge is what to do after getting positioned in a new uptrend and seeing a profitable trade start to form.

It is definitely tempting to trade, especially for new traders, and try and capture the profits and avoid the pullbacks. But legendary trader Jesse Livermore warned against this in the book Reminisces of a Stock Operator in the following passage:

“And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”

Let’s break down what Livermore is saying here and see what we can learn (with emphasis on what is highlighted in bold). He starts by basically saying of all the time he’s spent on Wall Street, with the millions of dollars he’s won and lost, this is one of the most important lessons he learned. He only made the big money by sitting tight and letting a big trade form, and not by trading in and out of the markets all the time. One of my favorite parts of this quote is when he says “Got that?” as if to say “Hey knucklehead! This is important so you better listen up!”. Livermore is trying to pass on knowledge here, and help the reader learn from his mistakes.

Livermore states that not only was sitting tight one of the most important things he learned, but it was also one of the hardest things he learned. It took him years of success and failure to figure out how important this was. But he says once he firmly grasped the idea of sitting tight in big trades, it allowed him to make the big money.

Connect with me on Twitter: @nextbigtrade

The original article and much more can be found at: http://www.nextbigtrade.com

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

On a weekly basis, our investment team shares the most important events in gold, resources, and emerging markets. The results are categorized in terms of strengths, weaknesses, opportunities and threats. We believe this SWOT model helps investors make informed decisions about their stock and bond investments.

Here are the biggest precious metals events of the week:

Strengths

 

  • Gold rose to $51 per ounce for the week, breaking above its 200-day moving average for the first time since August 2012. Reports show that the Federal Reserve began 2014 with a sharp increase in M2 money supply. In addition, gold ETF holdings showed a net increase of 22,000 ounces so far this month, reversing the large redemptions from last year.
  • Dundee Precious Metals reported fourth-quarter earnings, beating the consensus and featuring better-than-expected production results. The results beat estimates primarily due to a rebound in Chelopech mine grades, which has exceeded guidance for three consecutive years. Another factor was that most of the improvements to the Tsumeb smelter are realized, and will allow full capacity production in the first quarter. This may prove as an inflection point for Dundee as Chelopech continues to deliver, the Tsumeb overhand is largely removed, and financial liquidity remains healthy.
  • Klondex Mines released drill results from its Fire Creek project which included 166 grams per tonne over 1.5 meters, and 47 grams per tonne over 2.5 meters. The results extended the Joyce and Vonnie veins to depth, and the Joyce vein to the north. In addition, a drill hole intersected a new structure approximately 1,000 feet from existing infrastructure, highlighting the prospect of the Fire Creek deposit. Klondex is expected to release the Fire Creek PEA in the first quarter of 2014. According to M Partners, thanks to the significant underground infrastructure in place and a milling solution secured, the economics are likely to be very robust.

 

Weaknesses

 

  • Gold is likely to remain in its 2014 range as sentiment on the U.S. recovery is still very well anchored. According to UBS, gold is in a frustrated market as the metal needs the risk-on, developed market growth story to be challenged in order to rise. Additionally, despite the emerging market turmoil, along with a few weak macro data points in the U.S., it appears investors will not budge. The risk for gold is that the environment makes it neither a clear-cut buy nor a sell.
  • Barrick Gold achieved slightly better fourth-quarter results, while the company’s 2014 guidance appears weaker. Barrick incorporated higher operating costs along with slightly higher capital expenditure. Reserves decreased by 26 percent, significantly higher than prior management indications, while reserve grades increased by a modest 4 percent, according to Dundee Capital Markets analyst Josh Wolfson. The silver lining however, is that the company has dissipated some of the headwinds, and has the opportunity to focus on extracting profitable ounces. This is a move that the sector expects will drive more generalist buying.
  • Iamgold Corporation has reported a strike over redundancy pay packages at its joint venture mines, Sadiola and Yatela, in Mali. Iamgold said its joint venture (JV) partner at the two mines, AngloGold Ashanti, was managing the local operations and remained in dialogue with employees and representatives. Mali, Africa’s third-largest gold producer, will see its production dip in 2014 as AngloGold Ashanti and Iamgold close down the Yatela mine.

 

Opportunities

 

  • There is chatter that the Bank of China stockpiled 500 tonnes of gold during recent weakness. A Financial Times article highlights that gold imports and production in China outpace the retail and investment sales data, leading to a 500-tonne gap, which is speculated to have been absorbed by the central bank. In addition, the Gold Forward Offered Rates (GOFO rates) tightened this week across the board, as a shortage of gold bars in London reflected the record Chinese physical off take in January.
  • Paradigm Capital thinks that the recent strong performance in gold should translate into a rotation into equities whose share prices have lagged, starting with those of better quality. Despite the strong showing of the sector year-to-date, share prices have recovered only a small percentage over the past three-year loses, thus leaving a large amount of upside to be captured. As a matter of fact, gold has recovered only about 15 percent of its three-year, high-low spread, and the vast majority of equities have recovered even less.
  • The chatter on private equity approaching the gold sector materialized this week as QKR has agreed to buy AngloGold Ashanti’s Navachab gold mine in Namibia for $110 million, as outside money begins to flow into the sector. QKR is one of the more high profile private equity groups that have amassed about $1 billion in funding, specifically to buy undervalued and turnaround mining assets. 

 

Threats

 

  • Earlier in the week RBC published a report that highlighted their analysis on the expected negative impact on reserves for most gold producers. The analysis suggested most senior gold producers would cut reserves as much as 8 percent as they updated their reserves with lower gold prices and factored in a sharp reduction in capital expenditures. As reserve updates were announced, it became evident that senior producers went beyond analysts’ expectations and cut reserves up to 37 percent. The flipside is that this exercise allowed miners to identify and concentrate on extracting more profitable ounces, which will more than outpace the value lost to the reserves that were cut.
  • Credit Suisse argues that the recent rally in gold through $1,300 is rather “uninspiring,” and will likely be met by substantial selling from “stale longs of whom there are still many looking for an exit.” The bank’s analysts argue physical demand has been steady and the main driver of the strong upswing is short covering. Against that backdrop, and in the context of a 12 percent rally in U.S. 10-year rates, the gold rally is nothing to write home about.  As such, they maintain a bearish outlook on gold.
  • ABN Amro, the largest Dutch bank by assets, argues that gold will decline as the U.S. dollar strengthens on positive macro data. The bank, which last spring announced  it would not honor its commitments on physical gold deposits but would instead issue paper gold receipts to its customers, says that the positive start gold has seen this year as the best-performing metal, will soon come to an end.

 

The strengths, weaknesses, opportunities and threats of the gold market are published every week by U.S Global Investors. You can subscribe here. It arrives in your email inbox every Friday evening and best yet, it’s free.

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. M2 Money Supply is a broad measure of money supply that includes M1 in addition to all time-related deposits, savings deposits, and non-institutional money-market funds. The following securities mentioned were held by one or more of U.S. Global Investors Funds as of 12/31/13: AngloGold Ashanti, Barrick Gold, Dundee Precious Metals Inc., IAMGOLD, Klondex Mines Ltd.

  1. For the past few years, the citizens of China and India have been in the “gold buying spotlight”. I’ve hinted that the citizens of Japan could soon become another source of sizable demand.
  2. In contrast to their “debt-a-holic” government, Japanese citizens tend to shun the use of debt. Over the past year, the actions of Shinzo Abe and Haruhiko Kuroda have resulted in a tumbling yen, and the official inflation rate has started to rise.
  3. The citizens of Japan have started to increase the amount of gold they are buying, to protect themselves. Over the next six months, I expect that trend to accelerate significantly.
  4. “Gold demand in Japan jumped threefold in 2013 as prices slumped and investors sought refuge from Prime Minister Shinzo Abe’s campaign to stoke inflation and weaken the yen, the World Gold Council said. Demand for jewelry, bars and coins increased to 21.3 metric tons last year from 6.6 tons in 2012….” – Bloomberg News, February 18, 2014.
  5. I’ve argued that gold entered a jewellery-oriented “bull era” in 2013. I’ve predicted that consistent monthly demand for gold in the form of jewellery, just from China, Japan, and India, will surpass the entire monthly global gold supply.
  6. On that note, about 17 tons of the reported 21.3 tons of Japanese total demand was in the form of jewellery.
  7. Compared to the demand from China and India, Japanese gold demand is tiny, but Abenomics has barely started, and the Japanese inflation rate is still very low.
  8. The per capita GDP in Japan is about $35,000 a year, and the Japanese economy is the third largest in the world. That translates into massive gold buying power.  
  9. The QE experiment in Japan is extremely dangerous because the government debt versus GDP ratio is much higher there than in America. Cost-push inflation could begin much more quickly than most analysts are anticipating.
  10. The combination of a debt-obsessed Japanese government and debt-averse citizens could soon produce an almost maniacal charge into gold, by millions of frightened Japanese savers.
  11. In America, the appointment of Janet Yellen to head the US central bank could also prove to be a “golden game changer”.  Gold investors should focus on a subtle difference between the economic philosophies of Dr. Yellen and Dr. Bernanke.
  12. Dr. Bernanke believed that the financial crisis of 2008 produced the need for strong but temporary action to be taken by the Fed. His focus was on providing liquidity to the financial system, as a substantial but temporary strategy.
  13. In contrast, Dr. Yellen believes in the Phillips Curve.   In the 1950s, William Phillips suggested that there is an inverse relationship between inflation and unemployment, and his ideas are used extensively by Keynesian economists. To learn more about the Phillips Curve please click here now.
  14. In 2007, as head of the San Francisco Fed, Dr. Yellen authored a significant essay that was titled, “Implications of Behavioral Economics for Monetary Policy”. It focused on the Phillips Curve and the use of it by the central bank as a “workhorse”. If you want a copy of that essay, send a request tostewart@gracelandupdates.com and I’ll send it to you.
  15. The bottom line is that Dr. Yellen is a strong Keynesian who is in charge of America’s central bank. She believes that real unemployment will fall significantly, if she raises the inflation rate. That has the attention of powerful institutional money managers, and it should have the attention of everyone in the gold community.
  16. In the short term gold is massively overbought, from a technical perspective. Many gold enthusiasts became almost giddy with the prospect of an “ultimate bottom” being completed in the $1180 area. Gold could suffer a sharp and frightening sell-off right now, from this key sell-side HSR (horizontal support and resistance) zone.That decline would help create a large and bullish inverse head and shoulders bottom pattern.
  17. On that note, please click here now. That’s the daily gold chart. Note the “nosebleed” on my stokeillator at the bottom of the chart. The lead line sits at about 93, which is where many violent sell-offs have occurred in the past.
  18. The entire $1335 – $1360 price zone represents significant sell-side HSR. If gold is going to challenge the August highs in the $1432 area, it would attract a lot of technical buyers if a head and shoulders pattern is clearly apparent on the chart.
  19. Please click here now. This daily silver chart shows that silver has started to outperform gold on days when gold rises. That tends to happen near the end of a minor trend move. When the stokeillator moves down and gives the next buy signal, I expect silver to continue to outperform gold, which is good news for silver bugs who have shown tremendous patience with this mighty metal!
  20. When a financial crisis is the focus of institutional money managers, they tend to buy gold bullion. Recently, gold stocks have done much better than gold. That’s likely because institutional money managers are aware of Dr. Yellen’s tendency to endorse a higher inflation rate.
  21. Gold stocks have arrived at some minor sell-side HSR in the $27 area. To view the GDX daily chart, please click here now.   While I’m cheering for gold stocks to continue to rally, it’s prudent to book some light profits here. Like pruning a fruit tree produces more fruit, investors should prune profits from their gold stocks!
  22. A pullback to the $24 area might be disappointing, but it would only add to the bullish look of the chart. That would attract more technical buying.
  23. Since the year began, junior gold and silver stocks have outperformed every asset class. On that note, please click here now. This daily GDXJ chart suggests that institutional money managers are aware of the need to find much more gold, to supply the buyers in the gold jewellery era!
  24. Note the inverse head and shoulders bottom pattern in play. That’s very bullish. In the short term, the stokeillator is very high, so a decline is to be expected. On a pullback to the $38 area, I’d like to see strong buying from the gold community!

Special Offer For Website Readers: Please send me an email tofreereports4@gracelandupdates.com and I’ll send you my free “Battle Of The ETFs” report! Gold stocks may be set to dominate bullion for a long period of time. I’ll show you which ETFs I’m focused on, to maximize potential reward!

Thanks!

Cheers

St

Stewart Thomson

Graceland Updates

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Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:  

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Appetite For Distraction

Posted by John Mauldin - Things That Make You Go Hmmm…..

on Tuesday, 18 February 2014 8:39

“Nobody really understands gold prices, and I don’t pretend to understand them either.”

– Ben Bernanke

mon·ey (mŭn′ē)

1. A medium that can be exchanged for goods and services and is used as a measure of their values on the market, including a commodity such as gold, an officially issued coin or note, or a deposit in a checking account or other readily liquefiable account.

2. The official currency, coins, and negotiable paper notes issued by a government.

3. Assets and property considered in terms of monetary value; wealth.

 

“There’s fool’s gold — pyrite — and then there’s fool’s gold — gold owned by idiots willing to trade it for worthless dollars.”

– Jarod Kintz, This Book Has No Title

“The desire of gold is not for gold. It is for the means of freedom and benefit.”

– Ralph Waldo Emerson

2315

…..for the entire essay and charts go HERE