Gold & Precious Metals

Tuesday’s Analytical Charts For Gold, Silver And Platinum And Palladium

(Kitco News) – Comex gold futures prices ended the U.S. day session solidly lower, hit a three-week low and closed below the key $1,300.00 level. Bearish technical postures for both gold and silver incited more chart-based selling pressure Tuesday. Also, Atlanta Fed president Dennis Lockhart on Tuesday said the Fed could start to taper its monthly bond-buying program at some point yet this year. A sharp decline in the U.S. trade deficit in June also was also a bearish factor for the precious metals, as it suggested a pick-up in U.S. economic conditions. December gold was last down $19.80 at $1,282.60 an ounce. Spot gold was last quoted down $15.00 at $1,289.50. September Comex silver last traded down $0.195 at $19.525 an ounce.

In overnight news, there was more upbeat economic data coming out of the European Union Tuesday. Germany’s manufactured goods orders increased by 3.8% in June versus May. However, European stock markets languished in quiet, summertime trading. Asian stock markets were mostly weaker in dull trading as the world market place awaits fresh macro inputs. The Reserve Bank of Australia cut its main interest rate by 0.25%, to a record low of 2.5% on Tuesday.

With many Europeans and North Americans on summer vacations and with the “dog days” of summer on the doorstep, trading volumes in many markets may dwindle until after the U.S. Labor Day holiday in early September.

In the U.S. institutional investors, in 2013, have sold off over 1,000 tonnes of gold holdings from the SPDR gold ETF, the investment banks, from the Gold Trust and from COMEX because they have switched from gold to equities in the U.S.

Nowhere in the world have gold investors followed U.S. investors, but have either held onto their gold or rushed in to buy up the physical gold made available to them. And this was done when prices were falling.

U.S. investors appear to have said there is no need to hold gold, we can make profits in a recovering U.S. economy. And so gold having fallen from above $1,650 to the low of $1,180 appears to have lost its wealth protective power. Or is it just out of cyclical favour?

Such an assessment overlooks it long-term role, but more importantly, its long-term value protection role. U.S. investors at institutional level have to account for their performance on a short-term basis, so usually do not have the option of investing for the long-term, riding the ebbs and flows of the day-to-day markets. And so they are not in a position to appreciate the real wealth protection value of gold. But the rest of the gold world outside the U.S. is keenly aware of its value. Hence their rush to buy physical gold as the U.S. sold it and prices fell.

So what value does gold and silver have to the foreign investors and is it relevant in these days?                       

Traditional Wealth Protection

To get a balanced sense of proportion in the gold world, please reflect on the reality that the U.S. accounts for around 8% of the demand for gold on an annual basis, whereas Asia as a whole accounts for around 65% to 75% of the demand for gold. The percentage that the U.S. takes this year may be higher as the demand for gold injewelry should rise as prices are so much lower now.

But before the Indian government imposed its stringent controls on gold imports, India was headed to 1,800 tonnes of gold in imports according to their Finance Minister. China is still headed to imports of over 1,000 tonnes. All this against a total supply before prices fell of 4,500 tonnes of gold. At 8% the U.S. was a taker of 320 tonnes.

It now seems that the U.S. selling has slowed to a trickle not sufficient to restrain gold prices.

Role of Currencies in Wealth Protection.

Outside the reach of the U.S. dollar lie a host of currencies all founded on the same principles as the U.S. dollar. Each of them displays different and variable values, but currently each –before the coming changes to the global monetary system –are in some way dependent on the U.S. dollar. How? Well, in today’s world as U.S. interest rates started rising, the prime impact of this interdependence was seen in the “Carry Trade’s” activity. Traders (primarily the banks) have taken advantage of the low European and U.S. interest rates and borrowed in either the euro or the dollar and invested in the emerging world at very much higher interest rates. Provided Euro and dollar interest rates stayed low, and emerging world interest rates remained high, the profits were easy and reliable. The danger in such trades is the changeability of exchange rates. If emerging nation exchange rates fell then profits are wiped out quickly.

This highlights the value of gold. Locals usually have access to local gold markets without going through banks. Where they use banks they have a reasonable pricing of gold too, unless the government imposes taxes or duties. In general, gold is free of taxes such as VAT, so it can act as a currency hedge, particularly against your own currency.

This is where the true value lies in owning gold. Investors, looking ahead, have become keenly aware that the monetary aspect of gold is kicking in more and more in a growing number of countries. We take two examples to highlight this. The first is India and we look over the last two years:

For instance, in South Africa, in the last nine months the exchange rate against the U.S. Dollar has fallen from R6.80 to R9.9 which translates into a 46% rise in income to the mines there, against a fall in the gold price of 24%. This translates into a gold price rise of 22% in the Rand.

Cross to India where the gold price 2 years ago was Rs.71,350 when the Rupee cost Rs.44.08 and the dollar price of gold was 22% higher than today at $1,618.65. Today, with gold now lower at $1,324.35, in the Rupee it is now Rs.80,136 12.3% higher and the Indian Rupee  at Rs.60.375 against the U.S. dollar.

Gold is therefore proving an excellent hedge against local currency depreciation even with a falling gold price! And this is the function it fulfils long-term.

But these two countries and their currencies are not the only ones to reflect this wealth protection facet.

The buying power of all currencies when taken back in time reflects a massive fall. When a country targets any level of inflation they are targeting a loss in buying power, and this is what gold protects against over the long-term.

The fall in the gold price in 2013 is a temporary correction, simply because the buying power of all currencies is designed to keep falling. Gold’s long-term rising price compensates for that and will always do so.

Hold your gold in such a way that governments and banks can’t seize it!

Enquire @ admin@StockbridgeMgMt.com

 

Get it First. Subscribe @

www.GoldForecaster.com

www.SilverForecaster.com

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.  Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

— Posted Tuesday, 6 August 2013

 

NEW YORK (MarketWatch) — Gold prices fell under the key $1,300-an-ounce mark on Tuesday as investors wrestled with uncertainty about the Federal Reserve’s timeline for reducing the flow of monetary stimulus.

 

The U.S. trade deficit fell 22.4% to $34.2 billion in June, the lowest since the fall of 2009. The drop in the trade deficit likely means the U.S. second-quarter growth figure will be revised higher.

 

Separately, President of the Atlanta Fed Bank Dennis Lockhart said Tuesday a step down in the Fed’s asset purchases could be announced at any of this year’s remaining policy meetings, including in October, when there is no press conference scheduled.

In another gloomy signal for gold, Dallas Federal Reserve Bank President Richard Fisher on Monday said the fall in the U.S. unemployment rate to 7.4% in July means the Fed is closer to slowing its asset purchases from $85 billion a month.

….read more HERE

 

Your Most Important Gold & Silver Questions – Answered

I’m getting so many questions from readers that I’ve decided to devote this week’s column to answering the most important ones. So let’s get started.

Q: Larry, you were right as rain about gold. It crashed this year and came close to one of your targets at the end of June. Is the bottom here yet?

A: It’s too soon to say. But referring to the chart I presented last week, repeated here, as I had forewarned then, gold and silver should head lower almost chart1simmediately, into late August/early September.

And indeed, the latest rally early last week has failed, and now both gold and silver are moving lower again.

So the question now is whether gold will hold its previous low at $1,178, or move lower to test major support at the $1,050 to $1,070 level.

Silver’s major long term support lies between $15 and $17.

If gold closes below $1,295.80 and then $1,262.50, new lows will likely be seen heading into September. That would be the final low.

If silver closes below $18.51 — highly likely based on my trading models — then new lows will be seen in that metal as well.

If neither of the above occurs during the month of August, there’s an excellent chance gold will merely retest its prior lows, then start to take off to the upside. It’s also possible gold will hold its prior low while silver makes a new low, and then both will go to the upside.

Click for a larger version of the chart

In short, neither metal is out of the woods yet, but they are making some good headway at establishing what should prove to be major lows out of which the next leg up will begin.

Q: Why isn’t inflation a big problem now? Everyone is expecting it, and the world’s central banks have certainly printed trillions of dollars of paper money.

A: As I’ve said all along, printing money by itself is not inflationary if the majority of investors and consumers don’t want to spend or borrow money. That’s been the case for years now as consumers, investors and businesses — the private sector — all retrench.

In addition, you need an important shift in confidence by the private sector. Until recently, the private sector showed a lot of confidence in the public sector, government, to solve the financial crisis. So, trillions of dollars were plowed back into government securities for safety.

But as we’ve recently seen, the private sector is losing confidence in government. Hence, the bond market is now starting to crumble and interest rates are surging. The private sector is starting to yank its money away from government.

That’s evidence that confidence in government is now declining. As that progresses, inflation will indeed tick higher and all the central bank money printing that’s been going on will finally come home to roost.

That said, inflation is coming. It’s right around the corner. But do not bet on hyperinflation in the U.S. That’s not going to happen. Our bond markets are too big and too deeply liquid and our economy too large for it to experience Weimar- or Zimbabwe-like inflation. Anyone telling you otherwise does not know what they are talking about or they are simply out to scare you.

Q: Where do your war cycles stand?

A: Precisely as forecast, they are ramping up big time. You can see it all over the world, in Egypt, in Asia between China and Japan, in social unrest in Europe, and in the latest news that a record 83 percent of Americans polled are dissatisfied with Congress. That, plus the National Security Agency (NSA) spying on all Americans, is soon going to lead to massive social unrest in this country.

The war cycles point up all the way into 2021, so fasten your seatbelts.

Q: You’ve been forecasting that the U.S. stock market will take a moonshot to Dow 21,000 — even as high as 31,000 — over the next few years. Is that forecast still on target?

A: Absolutely. There is no doubt in my mind we will see the Dow move to at least 21,000 by 2016, and probably much higher. And not despite turmoil in the world, but because of it. The Dow and other blue-chip-type stocks can and often do act just like gold, as a safe haven for capital and as an inflation hedge.

But the Dow has not yet completely broken out to the upside. A sharp, swift correction is overdue. When that comes, I will be giving the signal to back up the truck for stocks. But not until then.

Q: JPMorgan was fined for manipulating the energy market. Are such manipulations routine, and are they present in gold and silver?

A: Yes, it is routine. The big investment bankers are always attempting to manipulate markets. But here’s the important point: Manipulations never, ever change the destiny of the markets. They don’t change the trend, and they certainly cannot reverse major trends. All they do is increase volatility.

So don’t buy into the excuses, for instance, that if it weren’t for some manipulation, gold or silver would never have crashed this year. That’s pure baloney put out by inexperienced traders and analysts, and by dealers who want to blame some outside force to get you to believe that gold and silver’s decline isn’t real, and that if you simply dive into the markets you’ll make money.

Those people — and there are a lot of them —are just trying to line their pockets with fat dealer premiums and commissions, and at your expense.

Q: Comex gold inventories are at or near record lows. Isn’t that bullish for gold?

A: Not necessarily. Think about it. Suppose you own gold at a Comex warehouse and you simply want to store it somewhere else. So you take your gold out and ship it to a private vault in Switzerland. The Comex inventories go down, yet your gold isn’t going back on the market. There’s no net change.

Screen Shot 2013-08-05 at 6.28.29 PMOr, suppose you’re a jewelry manufacturer and you take delivery of your Comex gold to produce and sell more jewelry. Comex inventory goes down, and your metal ends up on the market as supply, though in fabricated form.

In both cases, Comex inventories go down. In the first, there’s no net change overall in the supply of gold. In the latter, inventories are down but available supplies are up. They offset each other.

Bottom line: The fact that official Comex inventories may be extremely low means nothing. You have to analyze what’s happened to the metal to make the final determination as to whether it’s bullish, bearish or a net nothing.

This is similar to the manipulation discussion above, in the sense that way too many supposedly impartial analysts use low Comex inventories to conjure up a nice logical-sounding sales pitch.

But in reality, they haven’t done their homework, they’ve only looked at half the evidence — and usually their motive is, again, nothing more than to generate a nice commission off you by getting you to buy at almost always the wrong times and prices, and for the wrong reasons.

Q: Some time ago when Germany decided to remove its gold from the New York Federal Reserve’s vaults and start shipping it back home, you said it was bearish for gold. Everyone thought you were nuts. But I just read that Germany sold 25,000 ounces of its gold. Is that a sign of things to come, central bank gold sales?

A: Yes, I believe it is. Look, no matter what you hear, Western central banks have no use for gold and, instead, want to make it obsolete. They want to move the world to an electronic currency that can be fully tracked, traced and taxed.

So to them, gold is a dinosaur that needs to be put in the past, just like they did with silver in the 1960s.

In addition, Europe’s central banks, especially Germany, needs cash and liquidity to fight the European sovereign debt crisis. So you should indeed expect European central bank gold sales going forward.

But importantly, that does not mean gold will go down. It would be more like the period from 1978 to 1980 in the U.S. when our Treasury dumped millions of ounces of gold on the market, and yet gold prices soared.

Why? Because when central banks dump gold for cash, it’s a surefire sign that all is not well with government finances. Investors, always smarter than governments, move in and start buying up what the central banks are forced to dump.

That’s it for now. Stay tuned — my models are showing that this month and next will be pivotal for almost all markets, leading to major trends unfolding and a slew of new profit opportunities.

Best wishes,

Larry