Commodity Trade Mantra

Beware: Gold and Silver Bears will be the First to turn into Bulls

Gold and Silver Bears will be the First to turn into Bulls

Gold and Silver Bears will be the First to turn into Bulls

The markets of late seem to be flooded with bearish sentiments & news on Gold and Silver even though all the surrounding economic developments are very highly indicative of a sharp upside breakout in these Precious Metals very soon. It seems very clear that vested interests are at play in a large way, taking advantage of the thin trading volumes & misleading the Gold and Silver Market as China & some other Asian markets remained closed for this entire week. These very sellers of Gold and Silver today will be the foremost to turn into Bulls at the first seen opportunity as Gold and Silver now enter over sold conditions. Base Metals have largely remained range bound due to lack of direction clarity as its largest consumer; China celebrates a week long holiday. China’s stock, money, foreign exchange and commodities futures markets reopen on Monday after the Spring Festival holiday marking the Lunar New Year. Gold and Silver Prices could gain support then.

Views on Gold and Silver by Market Analysts:

Most of the Gold and Silver market analysts who have been highly Bullish earlier this year, now seem to be airing Bearish views recently. Gold, the worst-performing precious metal this year, may drop below $1,600 an ounce in the next couple of weeks after breaking a key support level, according to technical analysis by Commerzbank AG. “On a weekly basis, gold has fallen through the 2008-2013 uptrend line at $1,651.66 and may head down toward the $1,600 level. The $1,625.85 level remains key for the medium-term trend,” they wrote. “Failure here should provoke a sell-off to below $1,600 level before the precious metal levels out and starts rising again.” Gold prices that rallied the past 12 years will probably peak in 2013, or already have, according to Goldman Sachs Group Inc. and Credit Suisse Group AG. Gold Bullion is unlikely to return to its September 2011 high of $1,921.15 because of accelerating U.S. growth and contained inflation, Credit Suisse said in a Feb. 1 report. Goldman forecast in a Jan. 18 report that gold will climb to $1,825 in three months and peak this year. Gold has slipped 2.4% this year, under-performing an 11% gain in Platinum, an 8.3% climb in Palladium and a 0.2% rise in Silver. Global Gold investment, including Gold Bars, Gold Coins and Gold ETP, dropped 8.3% to 424.7 tons in the fourth quarter from a year earlier, the World Gold Council said in a report yesterday. Full-year investment slid 9.8% to 1,534.6 tons, WGC said.

Is Economy Recovery weakening Gold and Silver?

A lot of people have lightened up on Gold and Silver as economy is looking better, and people are moving to more remunerative assets like equities. We are seeing investment flows going into other markets on the apparent Economic recovery. The main drag on Gold and Silver Prices at this particular juncture is the fact that we are seeing money move into industrial metals, corporate bonds, sovereign paper and equities (which is what the government wants), leaving much less of the investment pie available for Gold and Silver. This projected Economic recovery is more of an Illusion as may soon be proven right. I have often said – More Debt can never be the right solution for Debt problems, because if that were so, Debt would not be a problem in the first place.  Economic Growth is expected to accelerate in the U.S. and China, the two largest economies, in the coming quarters, according to more than 100 economists surveyed by Bloomberg. In the U.S., claims for jobless benefits dropped 27,000 to 341,000 in the week to Feb. 9, fewer than any of the 49 economists surveyed by Bloomberg projected, the Labor Department said yesterday. Gold and Silver traders are the most bearish in more than a year on mounting speculation that improving economic growth from the U.S. to China will curb demand for the Precious Metals. Hedge funds cut bets on higher prices by 56% since October and are approaching their least bullish stance on gold since August, government data show. Long Term Gold Bull & billionaire investors George Soros and Louis Moore Bacon reported yesterday that they had reduced stakes in exchange-traded products backed by Gold as futures dropped the most in more than eight years. John Paulson maintained his holdings. Soros Fund Management LLC reduced its investment in the SPDR Gold Trust, the biggest fund backed by the metal, 55% to 600,000 shares as of Dec. 31 from three months earlier, a U.S. Securities and Exchange Commission filing showed yesterday. Bacon’s Moore Capital Management LP sold its entire stake in the SPDR fund and lowered holdings in the Sprott Physical Gold Trust. Paulson & Co., the largest investor in SPDR, kept its stake at 21.8 million shares. The reduction in holdings by George Soros may unnerve the market a little bit,” said Nick Trevethan, a senior commodities strategist at Australia & New Zealand Banking Group Ltd.

What about Recessions, Currency Declines & Unavoidable Inflation?

Germany’s economy, the largest in Europe, contracted 0.6% in the fourth quarter, and French GDP dropped 0.3%. Japan’s economy, the world’s third largest, is in a confirmed recession after contracting an annualized 0.4% in the final quarter of 2012, following a revised 3.8% fall in the previous three months. Nothing need be said about the economic state of Spain, Greece, Italy, Portugal, Ireland and the likes. Even as the recession in Europe deepened more than economists forecast last quarter and Japan’s economy shrank, the International Monetary Fund predicts global growth will climb to 3.5% this year from 3.2% in 2012. Amazing analysis! Investors generally buy Gold and Silver as a hedge against Inflation and currency declines, apart from jewelry purposes. Inflation expectations measured by the break- even rate for five-year Treasury Inflation Protected Securities rose 13% this year and reached a four-month high Feb 6. The S&P GSCI gauge of raw materials climbed to the highest since September two days ago and is little changed this week. Speculators increased bullish bets across 18 U.S.commodities for a fourth week in the period to Feb. 5, CFTC data show. That clearly indicates the approach of a massive Inflation storm in the near future. Some analysts say that while improving growth may curb demand for Gold as a protection of wealth, other commodities used in industry and food products may benefit. Usage will outpace supply this year in tin, platinum and palladium, while corn, wheat and cocoa will have shortages in the 2012-13 seasons. Finance ministers from the Group of 20 have gathered this weekend in Moscow amid concerns of a fresh wave of Currency Wars as countries continue to weaken their Currency Exchange Rates to make exports more competitive. Focus is on the outcome of a G-20 meeting, which could influence currencies after data showed the euro zone slipped deeper into recession in late 2012 than had been expected, sending the Euro to a three-week low versus the US Dollar. Historically, assets that are regarded as safe havens include the JPY, the CHF, the USD and Gold,” says the HSBC precious-metals team. “Gold Bullion, being the Currency that you cannot print, may benefit should the Currency War escalate.”

Gold and Silver Technically Speaking:

For the Gold and Silver market trader, the precious metals seem approaching reasonable support levels. Comex Gold has a crucial support around $1621 which only if breached with sustained momentum, could again lead to the strong flooring around $1540. As alerted earlier also, Comex Silver prices have a dual support around $30 & then at $29.20. This seems to be a very strong support & may be tough to crack. But if breached, could drag Silver all the way to $25. Ideally Gold Prices should bounce up from $1621 & Silver Prices from anywhere between $29.20 and $30.

Inflation is bound to hit higher levels while unemployment is yet a massive concern as almost half the world is amid a renewed recession. The Currency Wars aim to reduce your buying power drastically. The US seems to willingly support Japan & others devaluing their currencies as the US Dollar then appears much stronger to them in comparison. A stronger US Dollar helps the US find more & more buyer for their Debt while they are engaged on a QE to infinity mission. All of this accounted – the monetary backdrop is still extremely positive for Gold and even more so for Silver InvestmentChina accounted for about 25% of consumer Gold Demand last year and narrowed the gap between India, the world’s top Gold buyer to the smallest ever. WGC yesterday said that Gold Bullion consumption from both countries may rise at least 11% in 2013. Central banks from Brazil to Russia are buying more gold to diversify from currency holdings. They added 534.6 tons to reserves last year, 17% more than in 2011 and the most since 1964. Could Russia & China be so very wrong while they continue to pile up their already massive Gold and Silver holdings? What do they know that the western nations do not? Physical demand for Gold and Silver coins & bars has shot up to multi-year highs since the beginning of this year. Physical demand is the foremost important fundamental for price appreciation. Do not get misled by vested interests manipulating the markets. Stay Invested & look to accumulating more at declines. The currently apparent Big time Bears will soon get morphed into fire breathing Bulls while the common man – the individual investor is left holding his short positions in Gold and Silver in despair.


Currency wars come to Moscow as G20 spars over yen – Reuters

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