Commodity Trade Mantra

Gold and Silver on a Roller Coaster ride before the Giant Takeoff

Gold and Silver on a Roller Coaster ride before the Giant Takeoff

Gold and Silver on a Roller Coaster ride before the Giant Takeoff

Gold and Silver Prices swung sharply up on Wednesday as GDP data showed the US Economy shrank in the fourth quarter & also as the US Federal Reserve indicated it will maintain its stimulus program. But Bullion ended yesterday’s session sharply lower and gave up more than all of Thursday’s solid gains on some end-of-the-month position squaring, profit taking from short-term traders. The slump in Gold and Silver Prices extended deeper on a reported stronger-than-expected reading from the Chicago Purchasing Managers Index (PMI) in January which read 55.6 versus 50.0 in December. Gold and Silver seemingly are moving like risk assets with most movements Intraday based upon Technical levels or short term effected Economic data. The higher but short lived momentum seems to pick up solely on the basis of panic squaring of shorts or longs after Economic data is announced & when trade movements are triggered in opposite direction of positions taken. Anybody who is recently long or short is covering up positions. That’s why you’re seeing the sharp rises one day & deep slumps the next. Gold and Silver appear to be reacting partly to the anticipation that monetary Inflation will inevitably occur, while facing some pressures from stronger demand for Equities or other Riskier assets at this time of severe Global Illusion. Everything in the composition of the outlook for Gold and Silver seems mixed, and continued volatility should be expected going forward, albeit for a very short term. Though Gold and Silver fundamentally, have more than just very strong reasons to rise much more faster & higher, they seem to be consolidating at lower levels & testing the faith & patience of the investor community more than the day traders. The staunch Gold and Silver believers are bound to stay & add more positions on all dips, but these sudden swings in opposite directions may keep the weak minded & easily influenced traders in the Risk On mode for an unnecessarily longer term. The powers-that-be having vested interests will be doing all within their power & reach to create as solid an Illusion as possible to project the correctness of their chosen path & decisions until nothing or absolutely little can be saved or salvaged. Was the actual & real US Economic data showing a contraction in U.S. fourth-quarter Gross Domestic Product construed simply to mean & justify continued Federal Reserve monetary accommodation? As seen till now since long time, corrective measures are always kicked further down the road, while collecting or adding more & more irreversible damage for the future. But there comes a point in time, when everything has to be answered or paid for. What happens then? Who pays for the damage? You & me, my dear friends – “The Taxpayers,” and if we eventually have to pay, we may as well safe guard ourselves till we have the time & pray – the Wisdom too.

Gold and Silver on a Roller Coaster ride before the Giant Takeoff

Gold and Silver on a Roller Coaster Ride:

The uncertainty surrounding recent U.S. data is not helping Gold and Silver Investors come up with a clearer view at the moment & is looking for a more convincing catalyst to determine the next direction. The Gold and Silver Market is now focusing on Friday’s US employment (Non-farm payrolls) report for January. The Labor Department will probably say employers hired 165,000 new workers last month, following a 155,000 gain in December. The unemployment rate is forecast at 7.8%, which is unchanged from the previous month. A stronger-than-expected U.S. jobs report would likely be bearish for the Gold and Silver Market, while a weaker-than-expected report would likely be bullish. Gold and Silver traders need to get ready for upside swings again – a continuation of the Roller-coaster ride of the previous 2 days.

Physical Demand for Gold and Silver seem to be on a Rise:

Physical Gold and Silver Demand seems to be on a rise, which is the most supportive factor for any Bull Run. The US Mint’s sale of Gold and Silver bullion coins have started the year in impressive fashion. A mind boggling 7.498 million American Eagle Silver Coins were purchased from the U.S. Mint in January. This exceeds the previous monthly sales record of 6.422 million achieved in January 2011. This has been the biggest monthly total since 1986, when the Washington-based Mint began the Silver Coins sale transactions. It resumed sales on Jan. 28 after suspending them for more than a week because of a lack of inventory. Sales of American Eagle Silver Coins by the US Mint jumped to a record this month on increased demand for an alternative to currencies as the US central bank presses on with unprecedented stimulus. At 150,000 ounces, the Mint has also sold the most ounces of Gold Coins in January in almost three years. This is the highest monthly sales total for the 22 karat Gold Bullion series since July 2010. Higher inflation targets by the Fed and Bank of Japan should increase investor demand for Gold and Silver and central-bank buying is likely to continue. The Indian government’s efforts to stem Gold consumption may not have the desired effects, to say the least. The passion & craze for Gold is so deeply ingrained in the Indian mindset that Gold or Silver Demand will never weaken – be it due to rising prices or due to any other mitigating factor. No wonder that India has been the world’s largest Gold consumer so far & that too only on retail demand & not by the central bank to increase its Gold Reserves – unlike China, which has different reasons to go on a mad Gold accumulation spree. Gold and Silver buying interest in China is picking up on Lunar New Year-related appetite, with volumes on the Shanghai Gold Exchange elevated and premiums trending higher over the last few days. Against its whopping US$3.2 trillion reserves, China’s Gold Holdings is only 2%. So Beijing’s official position has been “We don’t have enough Gold” The massive US$ reserves leads to China’s current, frenetic buying spree of Gold Bullion. Whenever China says it needs more Gold, it is shown as justified for a hedge against potential risk, but is done especially to Promote the Yuan globalization. Whatever be the reasons- Remember that the overall trajectory for Gold and Silver remains high – Very High.

MCX can relax circuit limits by extra 3% without prior approval- FMC

India’s commodity exchanges (MCX, NCDEX & other) have been given the permission to raise the circuit limits beyond the current 4% by an additional 3% without seeking prior approval from India’s commodity market regulator, FMC; said a directive to exchanges from the market regulator pertaining to internationally referenceable contracts. “The Commission has reviewed the practice of seeking the prior approval for relaxation in the daily price band, beyond the maximum limit in the internationally referenceable contracts.” a directive from the Commission said. “In view of the consideration that a time lag in the communication of the approval for the relaxation can impact the participants adversely, the Commission directs that the Exchanges may relax the daily price band in steps of 3% beyond the maximum permitted limit, in the contracts without seeking the prior approval of the Commission.” the directive added.

For Detailed FMC note – Click here.

News:

Gold mitigates foreign-exchange risk when investing in emerging markets – WGC

Peter Schiff: Obama recession will be worse than the Obama recovery – Video

During the 2012 Presidential election, President Obama boasted about the third quarter growth of theAmerica’s GDP, but the fourth quarter is a completely different story. The country experienced a decline in GDP in the last quarter for the first time since 2009 and many critics believe that somehow the Obama administration manipulated the data to come out victorious in the November election. Peter Schiff, president of Euro Pacific Capital, gives us his take on how the government could have played with numbers.

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