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09/28/2023 9:30 PM     Current Market Spot Prices:     Gold:  $1,866.38/ozt   Silver:  $22.83/ozt   Platinum:  $933.25/ozt   Palladium:  $1,313.90/ozt  

Friday, June 28, 2013

More Gold Capitulations at Quarter-End The U.S. Comex gold futures touched a low of $1,196.10 on Thursday, and are heading towards a loss of over 24 percent for Q2. Since the recent FOMC meeting on 18-19 June, the gold futures have lost 12 percent, the S&P 500 index has dropped 2.8 percent while the Euro Stoxx 50 index has declined 3 percent.

The stocks and commodities markets have not only reacted negatively to a more definitive plan from the Fed to taper its bond purchases but also to the rising bond yields. The U.S. 10-year government bond yield has risen 63bp month-to-date to 2.477 percent. The S&P 500 index rebounded 1.58 percent while the Euro Stoxx 50 index surged 3 percent in the past two days. The Dollar Index finished at 82.902 on Thursday, down from 83.375 at the end of May.

Month-end Liquidation
A few factors have helped to push down the gold prices further this week. The latest catalyst came from the stronger U.S. data. The U.S. pending home sales surged 6.7 percent in May compared to a median forecast of 1 percent while the jobless claims fell 9,000 to 346,000 in the recent week. Institutional investors and traders are liquidating their gold positions for month-end and quarter-end window-dressing.

The gold prices have also followed the break-even inflation rate of the 10-year TIPs lower. The holdings in the largest gold ETF, GLD, is now below 1,000 metric tons, back to the level in early 2009. Continuous selling by the ETF investors and the large speculators has led to an oversold position in gold as measured by the RSI, which reached 13.7 on Thursday.

Longer-run Offsetting Factors
While the momentum for gold is clearly down and the investors are disillusioned, several factors can help to prop up the gold market in the second half of 2013 according to GFMS. The sovereign debt crisis in Europe and the U.S. may resurface later this year.

The U.S. economy may recover more slowly and cause the Fed to postpone the bond purchases tapering. The equity markets may hit a wall. The supply of gold will be cut as gold prices plunge below the cash costs. Also, the fabrication demand may rise as a result of the fall in gold prices.

What to Watch
We will watch the final June U.S. and China manufacturing ISM data and the E-17 unemployment rate on 1 July, the ECB's interest rates decision and press announcement on 4 July as well as the U.S. June non-farm payrolls and unemployment rate on 5 July.
Posted by Mike Gupton at 11:27 AM 0 Comments

Thursday, June 27, 2013

Can Central Bank and Physical Demand Turn Around the Weak Gold Sentiment? After plunging 6.89 percent last week, the gold futures have dropped 1.31 percent in the past two days to finish at $1,275.10 on Tuesday. The prices fell to as low as $1,242.60 during Wednesday Asian morning. The Dollar Index continued to strengthen, rising 0.32 percent this week to 82.581 after surging 2 percent last week.

The S&P 500 index and the Euro Stoxx 50 index retreated 0.28 percent and 0.24 percent respectively in the past two days. Both indices traded up over 1 percent on Tuesday.

Stronger U.S. Data and Calmer Tone from China
The world equity and bond markets have turned upside down after the Fed's tapering talk last week. The MSCI Developed Market Index has dropped 4.75 percent while the U.S. 10-year Treasuries have plunged 3.50 percent since 18 June.

Gold was harder hit at 6.72 percent. In China, tight central bank's policy to control credit growth has led to the recent liquidity crunch among the Chinese banks, with the seven-day repo rate spiking to a two-year high of 11.2 percent on 20 June. On Tuesday, the Central Bank of China stated that it will stabilize the market rates and ease the tight liquidity. In the U.S., the May consumer confidence index surged to 81.4 compared to an expected 74.3.

The April S&P/Case-Shiller housing index rose 12.1 percent year-over-year while the May existing home sales reached an annualized ate of 5.18 million, a three-and-a-half year high. A better-than-expected U.S. growth and easier liquidity conditions in China led to the rebounding of global equities prices on Tuesday and Wednesday.

Subdue Physical Demand Response So Far
The Indian and Chinese consumers have not rushed to buy gold this time. The Indian government has restricted banks to lend gold-backed loans in order to curb gold imports. The end of the wedding season in India has also weakened demand.

The cash crunch among the Chinese banks, the slowing economy as well as the market volatility have dampened the gold demand in Hong Kong and China, causing people to wait-and-see. Premiums in gold bars in Hong Kong are around $2.50 an ounce compared to $6 in May. According to the CFTC, the hedge funds have cut their net positions by 2 percent across 18 commodities, and have reduced their net long positions in gold by 29 percent as of 18 June.

Barclays commented that the recent price plunge below $1,300 will likely lead to more selling by investors who accumulated below this level. The Chinese demand in the near-term and other central bank's actions will be the key to the turnaround of the already very weak sentiment in gold prices.
Posted by Mike Gupton at 10:34 AM 0 Comments

Monday, June 24, 2013

The Latest in Metal Analysis Technology Hits KMG Gold

KMG Gold Latest Innovative TechnologyKMG Gold is ready to improve the speed and efficiency of metal analysis even more with the newest addition to their location at 620 Academy Road. The Fischerscope X-Ray XAN 123 Spectrometer was recently purchased by the company and is one of two machines in all of Winnipeg. This innovative machine is optimized for fast, non-destructive analysis of jewellery, precious metals, gold, platinum, silver, rhodium coins and all jewellery alloys and coatings - everything KMG Gold sees on a daily basis.

This new machine allows for extreme precision and very low detection limits, detecting elements of precious metals in mere seconds. Fast and accurate, with better than 1% precision for gold, this machine displays its results in karats or KMG Gold Latest Innovative Technologyweight
 percentages and results can easily be printed out as custom reports. Our customers will benefit from this high-tech equipment and get a faster and more accurate analysis of materials they bring to us, resulting in an even higher payout.

KMG Gold president Michael Gupton says of the machine, "With only two of these machines in Winnipeg, KMG Gold is committed to providing our customers with the absolute best that the industry has to offer." This statement certainly rings true as the acquisition of this machine marks another part of KMG Gold's ongoing commitment to using the latest developments in science and technology to improve their level of service to the customer and as a tool in their ongoing efforts to help create a more educated consumer.

Posted by Mike Gupton at 11:51 AM 0 Comments

Friday, June 21, 2013

Gold Plunged Below the April Trough after the June FOMC meeting After the June 18-19 FOMC meeting, the U.S. Fed has injected more fear than calm into the gold market. The U.S. Comex gold futures inched up 0.52 percent on Wednesday after the Fed has released its FOMC statement. On Thursday, the gold futures plunged as much as 7.18 percent to $1,275.40 before finishing the day at $1,286.20, the lowest level since September 2010.

During Asian Friday morning, the gold futures have rebounded slightly to around $1,290. Year-to-date, the gold futures have declined about 23 percent. The CRB Commodities Index also tumbled 2.91 percent on Thursday, the largest drop in two months.

The Dollar Index rebounded 1.62 percent in the past two days and ended at 81.915 on Thursday. The S&P 500 index and the Euro Stoxx 50 index fell close to 4 percent in two days in response to the FOMC meeting.

What's New from the Fed?
Ben Bernanke said that if the economy moves in line with the Fed's forecast, then the Fed thinks it is appropriate to reduce the pace of the bond purchases later in 2013. The Fed will continue to taper and finish the asset purchases by mid-2014, if the economy is performing as expected.

To actually taper the QE3, the Fed needs to be fairly confident that the Q4 GDP in the U.S. will reach 2.3 to 2.6 percent, and the unemployment rate to drop decidedly below 7.2 to 7.3 percent. The inflation rate is expected to stay well below the 2 percent target.

The U.S. has been growing at slightly above 2 percent in the first half of 2013 while the unemployment rate is currently at 7.6 percent. The Fed has implicitly set a new target of 7 percent unemployment rate to reduce the asset purchases. The Fed also revised down slightly the GDP growth and the unemployment rate for 2013.

Gold Sentiment Hammered Further
The stronger dollar, the rising U.S. bond yield, the weaker-than-expected China May flash manufacturing PMI, the general commodities sell-off, a subdue inflation rate, and the continued outflow from gold-backed ETPs have pushed down gold's sentiment further.

In Bloomberg's weekly survey, the number of gold bears reaches the highest since January 2010. In the next few days, the market will closely watch the actions of the physical buyers. According to Bloomberg, the gold-backed ETPs have dropped 525 metric tons year-to-date to 2,106 metric tons, compared to a rise of 275 metric tons last year.

As gold prices in China have dropped continuously in the past week, volume traded in the Shanghai Gold Exchange has climbed to a one-month high on Wednesday. The gold futures' RSI has plunged below 25, an oversold territory.

What to Watch Next Week
Apart from watching the physical demand response, we will also watch Germany's June IFO business climate index on 24 June, the June U.S. consumer confidence index and the May U.S. new home sales on 25 June as well as the June Germany unemployment change, the May CPI and the industrial production in Japan on 27 June.
Posted by Mike Gupton at 10:00 AM 0 Comments

Wednesday, June 19, 2013

Will the Fed Calm or Ignite More Fear for the Gold Investors? The U.S. Comex gold futures dropped 1.49 percent in the past two days while the S&P 500 index jumped 1.54 percent and the Euro Stoxx 50 Index rose 1.26 percent. At 2.185 percent, the U.S. 10-year government bond yield is trading only 5 basis points below its recent high of 2.23 percent.

Year-to-date, the gold futures have corrected 18.43 percent to $1,367 while the CRB Commodities Index dropped 2.91 percent and the Dollar Index rose 1.06 percent.

Data before the Fed Meeting
The U.S. CPI rose 0.1 percent in May compared to the expected 0.2 percent. Year-on-year, the CPI rose 1.4 percent compared to 1.1 percent in April. The core inflation rate rose 0.2 percent as expected. An inflation rate of lower than two percent gives the Fed more room to continue with the monetary stimulus.

The May U.S. housing starts also rose less than forecasted at a yearly rate of 914,000.

Investors Positioning
After jumping 17.48 percent in the previous week, the net non-commercial combined positions in gold declined 7.13 percent during the week of 11 June to 60,227 contracts. In the past twelve months, the level has declined 56 percent as the developed market equities have risen 22 percent. According to Barclays, the net redemptions from gold-backed ETFs have slowed, with an outflow of 15 tonnes in the first half of June compared to 48 tonnes in the first half of May.

The cash-negative gold positions have also fallen to fewer than 70 tonnes. On the contrary, investors in China continue to see gold as a store of value, boding well for the launch of the first two yuan-denominated gold ETFs to be listed on the Shanghai Stock Exchange.

Reading the Fed
According to a Bloomberg survey on 7 June, the Fed will likely trim the QE by $20 billion to $65 billion as soon as the October meeting.

For the Fed's meeting, the investors will watch out for the conditions under which the bond purchases will be reduced, the Fed's outlook for the interest rates as well as the Fed's projections of the inflation and the unemployment rate.
Posted by Mike Gupton at 11:10 AM 0 Comments

Friday, June 14, 2013

Range-Bound Gold Market Looks to the Fed's Guidance Next Week The U.S. Comex gold futures jumped 1.09 percent on Tuesday, but tumbled back down the next day, ending at $1,377.80 on Thursday. During Asia's Friday morning, the gold futures traded higher at around $1,385.

The Dollar Index has fallen 1.12 percent week-to-Thursday as the Japanese Yen has surged 2.30 percent and the Euro has risen about 1 percent versus the dollar.

The Euro Stoxx 50 index dropped for four consecutive days by 2.29 percent. The S&P 500 index rebounded 1.48 percent on Thursday although it has fallen 0.43 percent this week. Since the peak in early May, the U.S. high yield bond prices have fallen about 3 percent while the emerging market bond prices have dropped even more by 6 percent.

Slowing Growth Outside of the U.S.
The growth in the U.S. is holding up better than that in the rest of the world, and its stock market is outperforming this month. The latest U.S. weekly jobless claims dropped 12,000 to 334,000 while the May advance retail sales rose 0.6 percent compared to the expected 0.4 percent.

The World Bank lowered this year's world GDP growth forecast from 2.4 percent in January to 2.2 percent. In particular, it reduced its growth expectations in China and Brazil, expected the Euro economies to contract 0.6 percent, and revised up the growth in the U.S. and Japan.

As the market increasingly expects the Fed to reduce its bond purchases, bond yields, especially in the emerging countries, have backed up, sending investors' money out of global bonds.

Investors Feeling Bearish Again
Based on the Bloomberg survey, the number of bearish gold traders has increased the most since a month ago. The gold-backed ETP holdings fell to a two-year low of 2,117.96 metric tons on Thursday.

The Chinese may lend support to the physical gold market after their three-day holiday. Import demand in India has dropped significantly in June after the government raised the import duty from 6 to 8 percent on 5 June and imposed further shipments restrictions.

Gold prices will be under further pressure if investors continue to flee from the gold-backed ETPs without a big enough offset by the physical demand.

What to Watch
Next week, the important events to watch will include the U.S. May CPI and housing starts on 18 June, the U.S. FOMC rate decision and the Fed's press conference on 19 June, the Eurogroup meeting on 20 June as well as the June "flash" PMI index for China, the E17 and the U.S. on the same day.
Posted by Mike Gupton at 10:03 AM 0 Comments

Friday, June 07, 2013

Gold Buyers Cheer as the Dollar Falls The U.S. Comex gold futures rebounded 1.33 percent in the past two days to $1,415.80 on Thursday while the Dollar Index plunged 1.49 percent to finish at 81.537 on Thursday. The Japanese Yen rallied about 3 percent against the U.S. Dollar just in the past two days. The stock markets remain volatile with the S&P 500 index dropping 0.5 percent and the Euro Stoxx 50 index falling 3.37 percent this week.

The VIX, or the fear index, has risen from 12.5 percent in mid-May to a recent high of 17.5 percent on 5 June.

ECB Actions and the U.S. Dollar
On Thursday, the ECB decided to leave the interest rates unchanged at 0.5 percent and would not take any immediate actions such as negative deposit rates or cash lending to institutions to further boost the economy. The U.S. stock investors were initially disappointed that no further stimulus measures are taken despite big promises from the ECB governor and an expected 0.6 percent contraction in the Euro Area this year.

The Outright Monetary Transactions program is yet to start. In the U.S., the May ADP employment increased 135,000 versus an expected 165,000. The Dollar weakened further against the Euro. For Friday's employment report, Bloomberg shows an expected change in non-farm payrolls of 163,000 and a projected unemployment rate of 7.5 percent.

Gold Fund Flows
As stock prices wobble and the U.S. Dollar falls, the number of gold traders who are expecting a jump in the gold price next week rises to the highest since mid-March according to Bloomberg. Nevertheless, the investors in paper gold continue to sell. Year-to-date, investors have sold 495 metric tons of gold-backed ETPs. EurekaHedge reported that 20 gold hedge funds have closed doors so far this year.

However in China, the gold price premiums to international prices jumped from an average of $7 in the year ending mid-April to an average of $31 after April when the gold prices plunged.

What to Watch
Apart from watching the U.S. nonfarm payrolls report on Friday, we will also monitor China's May industrial production and inflation data on 9 June, Japan's BOJ Target Rate on 11 June, The April E-17 industrial production on 12 June, the May U.S. retail sales on 13 June and the May U.S. industrial production on 14 June.
Posted by Mike Gupton at 8:22 AM 0 Comments