Commodity Trade Mantra

Contradictory Views, Swings & Data Confuse Gold & Silver Market Trader

Contradictory Views, Swings & Data Confuse Gold & Silver Market Trader

Contradictory Views, Swings & Data Confuse Gold & Silver Market Trader

Gold and Silver have maintained their second weekly upside momentum, surprisingly amidst stronger US Data reports. Gold and Silver Prices have generally been sensitive to the recent string of positive US economic data, often falling when the data shows an upside surprise. Gold and Silver Prices remained mostly bi-directional for the day but ended the session with modest gains on a late bounce up near the day’s high. Safe have buying could have been triggered by the constant outflow of more downbeat economic data from the European Union. EU employment level was reported at the lowest number in seven years during the Q4 of 2012. Gold ETP holdings rose to 2,471.073 metric tons yesterday for the first gain since Feb 7, while Silver ETP holdings jumped to a record on March 13. The US Stock Markets have shot to all time highs & the existing fundamentals & massive national Debt sizes surely do not support these kinds of rises. Moreover people must be realizing, with nine straight days of gains in the Dow also makes the case for an impending correction anytime soon.

Bi-Directional views on Gold and Silver:

Citing “investor fatigue,” Barclays on Thursday lowered its 2013 average gold price forecast to $1,646 an ounce. Barclays said that the revision was done as the downside risks to the outlook have risen while the upside catalysts have receded, while also mentioning physical buying, particularly in China, responded to the lower Gold Prices and is providing solid support. The Bank said that the recent rally in equity markets is the main reason which is hampering interest in Gold and Silver. More surprisingly, BNP Paribas lowered its 2013 and 2014 average price forecast for Silver citing weakness in Gold for Silver’s weaker outlook. Contradictorily, Michael DiRienzo, Executive Director of the Silver Institute, said that Silver Demand is broadening in many directions. Industry’s widening use of the precious metal is expected to average more than 483 million ounces (Moz.) from 2012 to 2014, a level 53 percent greater than the average annual industrial fabrication demand of 313.4 Moz from 1992-2001. Read more – Industrial Uses Forecast to Boost Demand for Silver. In other happenings, Haruhiko Kuroda has been confirmed as Governor of the Bank of Japan today and may push for more stimulus within weeks. This may give more support to Gold Prices in Yen terms which have already shot up to record highs recently. Bloomberg News reported that China may limit Gold Holdings to 2% of foreign reserves, citing Yi Gang, deputy governor of the People’s Bank of China. PBOC can invest only about 1-2% of its foreign exchange reserves into gold due to the size of the bullion market.

Rise in India’s Gold Demand during Wedding season may get affected by new Laws:

Gold Demand in India is generally expected to pick up from April with the commencement of the wedding season as seen each year. Due to the Indian government raising import taxes on gold, demand in the country, the world’s most prolific consumer for years, has been on the wane in the first few months of 2013. In January, duties were raised by 50%, up to 6% from 4%, in an attempt to curb the country’s voracious appetite for gold that is largely to blame for the mounting current account deficit. The move has so far kept Gold Demand in check to an extent, but India has yet to move into its major Gold buying season – the wedding season, which starts next month and will continue until early June. Jewelry for 10 million weddings that are celebrated in the country each year accounts for the majority of gold bought in India. It is not uncommon for $200,000 to be spent on gold for a middle class wedding. India’s passion for Gold has played a major role in the it’s 12 year bull market, and investors rely on the Indian Gold Demand to trigger further upsides in Gold Prices. Gold Demand may again pick up as also seen last year when buying was sluggish after the first tax hike but buying returned with the wedding season. Moreover, the INR now rising against the US$ is making Gold Prices cheaper & more attractive in Indian markets.

India enforces KYC norms for Gold purchases:

India enacted a law making it mandatory for jewelers to collect a KYC (Know Your Customer) document from all customers purchasing jewelry worth Rs 50,000 & above. India made an amendment to extend the purview of the Prevention of Money Laundering (PML) Act to enforce Know Your Customer norms for retail purchases of gold and precious stones. India banks on this law to cut down gold imports which is the second largest import responsible for the country’s staggering Current Account Deficit. Implementation of the KYC norms is also expected to arrest rampant sales tax evasion that is prevalent in some states across the country. The All India Gems and Jewelry Trade Federation said it was an impractical idea, as every 15 grams of Gold Jewelry purchase would invoke the KYC norms at the current price of gold.

JPMorgan withheld loss data, ignored risk limits, warnings from traders:

A Senate subcommittee report on Thursday charged JPMorgan Chase & Co. with ignoring its own limits on risk taking, manipulating risk models to avoid detection and ignoring warnings from traders as the bank’s CEO, Jamie Dimon, intentionally withheld investment bank profit and loss data from federal regulators. The report was commissioned to examine a $6.2 billion credit derivatives trading loss last year at JPMorgan’s London investment office. The loss was partly attributed to a trader, Bruno Michel Iksil, dubbed the “London whale” for his large positions in credit derivatives. The report notes that the current status of the losses is unclear because J.P. Morgan dismantled the portfolio late last year, moving some funds to its investment banking unit. The report does have one example showing that Dimon intentionally sought to cut off regulators from critical daily profit and loss trading data at the investment bank. The report notes that the bank’s chief investment office and its investment bank assigned different values to identical credit derivatives holdings, raising warning flags for regulators. Meanwhile, there were many examples of trader warnings going unheeded. In one recorded conversation from March, Iksil, the “London whale,” told Julien Grout, a junior trader, that their supervisor, Javier Martin-Artajo, was expecting a reworking of their calculation of losses. At one point in March, Iksil characterized the huge losses as “hopeless” and he predicted that “they are going to trash/destroy us” and “you don’t lose 500 million without consequences.” More… A Marketwatch report

How London’s Gold and Silver prices are “Fixed”:

London’s Gold and Silver Markets face the possibility of a probe into price setting, putting a century-old practice under the spotlight after the Libor rigging scandal that exposed widespread interest rate manipulation by banks. The U.S. Commodity Futures Trading Commission (CFTC) has started internal discussions on whether the daily setting of gold and silver prices is open to manipulation, the Wall Street Journal reported on Wednesday. The CFTC declined to comment, while the chairs of the London Gold Fixing Company and London Silver Fixing Company were not available for comment. CFTC Commissioner Bart Chilton, attending the annual Futures Industry Association conference in Boca Raton,Florida, declined to specifically address the report, saying: “Given the club by manipulation efforts we saw in Libor benchmarks, I assume other benchmarks – many other benchmarks – are legit areas of inquiry.”Britain’s Financial Services Authority (FSA) also declined to comment on whether it was looking into gold and silver price setting, but said on Thursday it is feeding into a wider review of price benchmarks run by the International Organization of Securities Commissions (IOSCO) – a global umbrella group for markets regulators. IOSCO is set to publish a report in May with principles on how to compile important benchmarks to avoid rigging. The setting, or “fix”, of the gold price in London dates back to 1919, originally involving NM Rothschild & Sons, Mocatta & Goldsmid, Samuel Montagu & Co, Pixley & Abell and Sharps & Wilkins. Silver price setting started in 1897. Currently, gold fixing happens twice a day by teleconference with five banks: Bank of Nova Scotia-ScotiaMocatta, Barclays Bank Plc, Deutsche Bank AG, HSBC Bank USA, NA and Société Générale. The fixings are used to determine prices globally.

Chairmanship of the Gold Fixing rotates annually among the member banks.

At the start of each gold price-fixing, the chairman announces an opening price to the other four members who relay that to their customers, and based on orders received from them, instruct their representatives to declare themselves as buyers or sellers at that price. The gold price is adjusted up and down until demand and supply is matched at which point the price is declared “Fixed”. The fixings are used to determine spot prices for the billions of dollars of the two Precious Metals traded each day. Buyers and sellers can get insight on price changes and the level of interest during the fixing process. They can cancel, increase or decrease their interest based on that information. Gold and Silver price setting has long been the subject of debate, and the CFTC looked at complaints about the silver market in 2008. But most believe that the process is transparent. “The fix is open, consequential, transparent and has stood the test of time. It’s not open to manipulation in the same way as Libor,” said Ross Norman, chief executive of bullion broker Sharps Pixley. – A Reuters report

There is increasing evidence that the Gold Market is manipulated.  The amount of physical bullion may be greatly over-stated, and gold may be manipulated in the same way that Libor rates are. For more interesting details on this topic, read this article : Gold and Silver Prices Are Set In Libor-Like Daily Conference Calls Between a Handful of Big Banks – By washingtonsblog

All said & done, after reading the data, hearing the news & witnessing the market swings in Gold and Silver, does the common trader actually get an idea of which way the market is really headed for now on? This is all because a lot of strong hands own or have strong hold over some of the major influencing media which covers-up facts, creates news & contradicts factual occurrences. There you go – the common man will be more convinced by a bigger name saying something that he wishes to hear & be reassured of. Illusion thus, created, packaged & sold off too! – Successfully…


India Gold buying slows before inauspicious period for purchases – Yahoo

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