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Gold And Silver Rebound On Renewed Bout Of Fear Trade Sentiments

By Commodity Trade Mantra CommoditiesJan 31, 2013 06:47AM ET
Gold And Silver Rebound On Renewed Bout Of Fear Trade Sentiments
By Commodity Trade Mantra   |  Jan 31, 2013 06:47AM ET
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I had alerted yesterday, Gold and Silver Investors have nothing to worry on price declines & should in fact look at all such dips as an opportunity presented on a platter. Also mentioned therein was that, Gold and Silver will soon break through all hurdles & previous Price barriers also. The major Gold and Silver Price booster was a surprisingly weak U.S. economic report. This came as a shock to the Gold and Silver Market which triggered knee jerk upside movements in Bullions & the Euro, which shot as high as $1.3587, its strongest level against the US Dollar since Nov. 2011. The sudden upside movements kept many Gold Investors on the sidelines. This data may help the markets erase worries from earlier this month that the Fed may look to pull back from its asset purchases, which had weakened Gold Prices. The US Federal Reserve on Wednesday maintained its aggressive easing policy stance in light of downside risks to the outlook, as widely expected. In a statement after a two-day FOMC meeting, the Fed said it will keep buying $85 billion a month in mortgage bonds and Treasuries, arguing the support was needed to lower unemployment.

This undisputedly means continued or further Quantitative Easing from the Federal Reserve, which in turn means support for Gold and Silver Prices. The Fed’s pledge to support the economy with easy money policies underpinned sentiment, but put the US Dollar on the defensive. The Fed said that economic activity has “paused in recent months” due to weather and other transitory factors. The Fed did not say or specify in any way on how long the bond purchases would last, but had last specifically said that it would last as long as unemployment is above 6.5% and inflation is no more than 2.5%. The vote was 11 to 1. Kansas City Fed president Esther George dissented, saying the Fed’s loose policy stance could lead to financial imbalances and higher inflation. Fourth-quarter U.S. GDP contracted by 0.1% on an annual basis. It is the first U.S. GDP decline in over three years. The market place was expecting the figure to be up 1.0%. Still, a lot of that weakness came from a plunge in defense spending, suggesting the underlying fundamentals were not as bad as the headline figures indicated.

The GDP contraction report came on the heels of a decline in U.S. consumer confidence reported Tuesday. The Conference Board said its index declined by 8.1 points in January to a 58.6 reading, the lowest since November 2011 and the third straight decline. The Gold and Silver markets popped higher immediately following the GDP report, on ideas the weak data will prompt the Federal Reserve to adhere to is very easy money policies presently in place. The Gold and Silver market seemed more focused on GDP rather than a report from ADP showing that the economy gained 192,000 private-sector jobs in January. There also were some reports yesterday that said Israeli Air Force jets struck a weapons convoy traveling from Syria into Lebanon Tuesday. That news may have also added to some safe-haven demand for Gold and Silver Bullion.

The Comex Gold April contract which has not been above the $1,700 level since Dec. 18, extended its gains above the 200-day moving average & closed at $1681.6 after rising to $1685 from $1663.5. Silver Futures for March delivery on the Comex smartly shot up to #32.30 from $31.25 & closed at $32.18. The MCX Gold Feb contract slumped to Rs. 30,006 earlier in the day before rising up to Rs. 30,297. MCX Silver on the other hand flew off to Rs. 59,139 from a small decline to Rs. 57,712 earlier. The declines in the MCX Gold trades earlier in the day were due to the smart rise in the Rupee – INR which closed at 53.53 / US Dollar.

US citizens now seen boosting Gold and Silver Prices via Unrelenting Bullion Demand:

American citizens who sense uncertainty in the air are flocking to the safety of physical resources. Silver Investment holdings reached an all-time high this month. A mind boggling 7.4 million American Eagle Silver Coins were purchased from the U.S. Mint in January, considerably higher than the previous record from early 2011. This has been the biggest monthly total since 1986, when the Washington-based Mint began the Silver Coins sale transactions. At 140,000 ounces, the Mint has also sold the most ounces of Gold Coins in January in almost three years, suggesting the rising “Currency Wars” are stoking people’s ongoing rotation from paper-to-physical assets as their ‘wealth’ slowing loses its value. Physical Gold and Silver coin sales are a barometer of longer-term investor demand for quality hard assets and also an accurate price direction indicator. With Silver trading at around $31 per ounce and the Gold spot price hovering around $1650, the US Mint saw some $460 million dollars shift into precious metals in the month of January alone. Proof enough that the US citizens are no longer confident in the stability of the system as a whole, and they are diversifying their assets into physical resources that will retain value – Gold & more conveniently Silver. Reuters reported huge quantities of Silver Coins being bought by investors including monster boxes full with 500 – 1oz Silver coins sealed by US Mint. It’s more than simply to analyze the WHY for this.

Richard Russell, the Godfather of newsletter writers, said that Silver looks very interesting to him because of the massive short position. With Gold on the move and Silver surging above $32, here is what Russell had to say: “Silver is beginning to look interesting to me. About a month ago, I showed charts of silver mining stocks that had exploded. This suggested to me that something bullish was coming up in silver. Since 2003 silver has gained 1,012%, and in doing so it has outpaced gold. At present the overgrown supply of silver is dangerously low. This sets us up, say Silver Experts for a huge squeeze on the silver shorts. On the Comex there is currently a giant silver position, a position that almost dwarfs the available supply of free silver. A rise in silver will almost surely rub off on gold, since there is a ratio that constantly connects them. Therefore, I will keep a sharp eye on silver in coming days and weeks. By the way, the outfit that holds an enormous short position in silver on the Comex is JP Morgan. And I wonder, is JPM working secretly for the Fed?”

Zerohedge yesterday said: US Ends 2012 With 103.8% Debt To GDP
Previously, when calculating debt/GDP metrics for the US, we naturally assumed some GDP growth in Q4. Following today’s GDP data we now know what Q4 GDP is. We also know that, at least on a preliminary basis, it posted a decline on an annualized basis. This means that we now have an official print for US Debt/GDP as of December 31, 2012. The numerator, or debt: $16.432 trillion, or the debt ceiling, which as we know was breached on the same day, and which has yet to be formally raised. The denominator, or GDP: $15.829 trillion. This means that the formal debt/GDP is now 103.8% and growing fast. Indicatively, this has risen from 76.5% on the day of Obama’s first inaugural address. And for those who, erroneous, allege that Q4 GDP declined due to US government “austerity”, here are the facts: in Q4, the US added some $312 billion in debt. And more to the point, the US government spent a grand total of $907.9 billion in the same quarter. This compares to $877.1 billion a quarter earlier: $30 billion less. Some “Austerity.”

Stock Markets Decline:
Asian Stock Markets fell slightly on Thursday after rallies to multi-month highs, and longer for some Southeast Asian markets, while the U.S. Federal Reserve’s pledge to retain its stimulus policy undermined the US Dollar. A weak dollar and signs of stabilization in the Eurozone underpinned Gold Prices, and expectations that demand will pick up for industrial commodities supported oil and copper prices. European markets are likely to extend losses, with financial spread betters predicting London’s FTSE 100,Paris’s CAC-40 and Frankfurt’s DAX would open down as much as 0.3%. A 0.1% drop in U.S. stock futures suggested a soft open at Wall Street. After recent gains that took several stock markets to multi-month highs, investors appeared to adopt a cautious stance ahead of key data such as China’s official manufacturing PMI and U.S. monthly Non farm payrolls on Friday.

The Euro held near a 14-month peak against the dollar and a 2-1/2 year high versus the yen on Thursday, supported by expectations for central banks in the United States and Japan to keep an aggressive easing stance. With the euro having breached key resistance at $1.35, analysts say its rally may have more room to run. “Euro/dollar we now think will rise to $1.37. The euro crosses are also likely to benefit from the return of exiled capital that left the Eurozone,” said Gareth Berry, G10 FX strategist for UBS in Singapore. A rise toward $1.37 or $1.38 can’t be ruled out on the back of the current trend, but I don’t think you should view a move like that as one that is based on a positive view of (economic) fundamentals. Against the yen, the single currency held steady at 123.53 yen, near a peak of 123.87 yen set on Wednesday, which marked the Euro’s highest level against the Japanese currency since May 2010.

Gold And Silver Rebound On Renewed Bout Of Fear Trade Sentiments

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Gold And Silver Rebound On Renewed Bout Of Fear Trade Sentiments

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