SILVER PRICES exploded for a third day running in London on Tuesday, jumping another 3% to reach what technical analysts called key technical levels at $16.05 per ounce and outpacing gold as the Dollar weakened following the worst US trade deficit data for 7 years. Reversing all of the last 3 month's drop to new 6-year lows against the Dollar, silver also shot higher for Eurozone and UK investors, breaking sharply above €14 and adding almost £1 since a week ago to near £11 per ounce. With Chinese markets still closed for the week-long National Day celebrations, gold also rose but again lagged silver prices, touching 7-session highs just shy of $1150 per ounce – a new half-decade low when first reached on the way down last November. New York stock markets meantime fell, and European equities cut earlier sharp gains, after new data showed the US trade deficit yawning to the widest August gap since 2008 at $48 billion on a 4-year low in export sales. "Short term a rebound is on" in silver prices notes one bullion bank's technical chart analysis today, with the metal peaking 10% above last week's close to September, and gaining over 14% from August's new 6-year lows at $14 per ounce. Silver turns over one-tenth as much as gold by Dollar value in London's professional bullion market, center of the world's wholesale physical trade. Daily price history since 1968 show silver moving 1.75% for every 1% move in gold, both up and down. Bearish betting against silver by money managers trading US Comex futures and options grew 15% in the week ending last Tuesday, latest data from regulator the CFTC say, reaching a gross notional short position of $2.4 billion. Managed-money long positions held unchanged at $3.1bn, some 29% larger. Gold futures and options, in contrast, saw hedge-fund and other speculative financial players cut their Comex short bets by 15% last week, down to $8.5bn against bullish bets some 55% greater, equal to $13.2bn of metal. "Silver's interim low" around the $14 level, says Karen Jones in her Bullion Weekly Technicals for German bank Commerzbank, has been "reinforced [since August's low] gearing up for a challenge of the 200 day moving average at $16.04" per ounce. Gold has meantime "tested and seen a strong rebound from the 3-month uptrend at $1104," Jones adds, "and is expected to tackle the 2015 downtrend [now at] $1150." "Short term," agrees Stephanie Aymes in her technical analysis at French investment and bullion bank Societe Generale, "gold looks poised to inch higher towards $1148/1152 – the descending trend line." Further "upside [is] limited" however, says Aymes, because the recent August and July highs of $1163 and $1173 respectively on gold's price chart "remain an important resistance. "Only a break above [that level] will mean an extended rebound" for gold prices.
GOLD PRICES eased but held 90% of Friday's $30 jump in London trade Monday, sitting above $1135 per ounce as world stock markets extended the strong rebound in New York equities following last week's surprisingly weak US jobs data. Japan's Nikkei added 1.8% and France's CAC40 rose 3.5%, while silver jumped ahead of gold prices again, adding another 35 cents to Friday's sudden 80c move to reach 6-week highs above $15.60 per ounce. "The Fed's credibility is at stake if it fails to move on interest rates this year," says Mitsubishi Corp's precious metals analyst Jonathan Butler, noting that the US central bank has "spent the past two years preparing the markets. "As such, Q4 could be a difficult one for precious metals if rate rises are priced in." The chances of a US rate hike by December "have dwindled", says French investment bank and bullion market maker Societe Generale, now putting the odds of a delay until March 2016 at 50-50. But for gold prices – and with traders in No.1 consumer market China on holiday until Thursday – "physical demand has been muted so far," SocGen goes on. "The mood is rather to sell into price-strength until the broader sentiment towards gold improves." Gold shipments into India's western state of Gujarat fell 80% last month from September 2014, the Times of India reports. US bond traders now price the odds of an October "lift off" from zero at just 1-in-10, Bloomberg News says, citing futures market positioning. Former US House speaker Stan Collender now sees a 50% chance of a government shutdown in December – such as happened in late 2013 – when the current stop-gap agreement over the debt ceiling expires. The US Fed lacked the tools to prevent the financial crisis starting in 2007, several senior members told a weekend conference in Boston about "macroprudential monetary policy", and the central bank remains "a long way from being able to successfully use such tools" today. More banking executives "should have gone to jail", former US Fed chair Ben Bernanke told USAToday on Monday, blaming them for causing what it calls the Great Recession of 2008-2011. The UK's Financial Conduct Authority – the only regulator so far to identify and fine a bullion bank for 'control weaknesses' inviting a member of staff to try and rig gold prices – now regulates three times as many companies as it did before the crash, an FCA member told a meeting entitled "regulation and responsibility" on the fringes of governing political party the Conservatives' annual conference in Manchester this morning. Looking at today's gold price charts, "From a technical perspective," says a note from ICBC Standard Bank's commodities team, "Friday’s bounce slowed the downward momentum in gold but a close above $1148 is needed to turn the outlook more positive. "A move up through $1160 would break a weekly downtrend stretching back to mid-2012 and open the way to $1200."
For the first eight months of this year, production of gold rose by 5.45% to 93407.227 kilograms, from 88581.841 kilograms for the same period of last year.
Recall what happened to gold prices 7 years ago this month in the Lehman's crash? Wanna bet on a repeat...? MAYBE it's the end of the world...maybe there's nothing to worry about, says Adrian Ash at BullionVault. If the former...rather than blue skies, plain sailing...how might precious metals respond? Between the collapse of Bear Stearns in March 2008 and the crash of Lehman Brothers six months later, the price of gold dropped 25%. The real start of the real crisis, in other words, was ignored by the mass of investors, professional and private. They assumed things were just fine..."contained" in the words of the time...and resolved by the US Fed arranging a rescue of the credit bubble's worst miscreant. Indeed, speculators in the US gold futures and options market halved their bullish betting on gold...and doubled their bearish bets as a group. Because, what could go wrong? The worst behaved bank wasn't the biggest, however...nor the worst. And when the cracks in the wall really broke and the whole dam collapsed, the dash for gold began amid the worst slump in global trade and credit since the 1930s. At first, gold prices shot higher. Then they crashed with everything else...swinging $100 per day at one stage to hit 13-month lows fully one-third beneath the Bear Stearns' high of March 2008. How come? Even as physical demand from 'real money' investment managers and private investors leapt, it also destroyed much of the financial credit needed by hedge funds and other speculators who were betting that gold would rise via the US Comex derivatives market. Silver got hit even worse, as we explained as the dust began to settle. Tail wagging dog? The relationship between derivatives betting and the gold price is, perhaps, controversial. Whether derivatives trading can determine the physical price long term is far from clear. But looking at US regulator the CFTC's weekly commitment of traders data, the plain fact is that positioning by speculative players (ie, those futures and options traders working outside the miners, refiners or bullion banks) shows a very strong, positive correlation with prices on a short-term basis. Week-to-week, the average correlation of Dollar gold prices with the 'net spec long' position (ie, the number of bullish bets minus bearish bets held by that group) has been 0.87 over the last 20 years. It would read 1.00 if they moved absolutely in lock-step with each other. Anything over 0.70 would be deemed 'very strongly positive' by statisticians. You can see the recent relationship here. Could a Lehman-style crash (if it strikes) force gold lower again in 2015, thanks to a loss of speculative credit across financial markets sucking some 'air' out of prices short-term? Maybe. The big difference from today against summer 2008 is that speculative traders are now very much less bullish overall, both because that group holds fewer bullish contracts in total (barely 25% as many) but also holds many more bearish bets (almost 4 times as many) as on the eve of the last crash. The 'hot air' of derivatives credit, in short, has now inflated the bearish pressure on gold prices. Should it suddenly gush out, we might expect prices to rise, or at least to escape the deflation they suffered when credit was pulled from the much more bullish market of 7 years ago. No guarantees, of course. Because if you dare recall the panic sweeping the markets...as well as businesses and households worldwide...7 years ago, you'll remember what a real financial crisis looks and feels like. Buying credit-crunch insurance wasn't so plainly smart when the end of the world seemed at hand. Hence the volatility. For now, and given that futures and options contracts do reflect the broader sentiment of professional money managers, note that the ratio of bullish to bearish bets amongst speculative traders now stands at levels last seen in 2002...down below 1.5 bullish bets for every bearish contract. Compare that with the 20-year average of 4.1...or the 2008-2009 peaks near 15-to-1. Sure, sentiment surveys say that money managers are far more cautious today about the outlook for world stock markets and 'risk' assets. But what they say and what they do are two very different things. And actual behavior, meaning the trades they've put on using client money, suggests the complacency which whacked the investment industry in 2008 is very much greater today. Maybe the City, Wall Street, Frankfurt and the rest have been calling it right, selling and shorting gold while piling on equities and corporate bonds. They certainly seemed to think that was the right call, judging by behavior. Right up until the economic data has now started to sour.
GOLD PRICES jumped almost $25 in 15 minutes on Friday after new US jobs data said non-farm payrolls grew much less in September than analysts forecast. Western stock markets slashed earlier strong gains but US Treasury bonds leapt, driving the yield on 10-year debt down to 1.95% – the lowest level since April. Adding 142,000 for last month, the US government's non-farm payrolls estimate badly missed consensus predictions of 203,000 with the second lowest addition in 18 months. The US Dollar dropped over a cent against the Euro on the FX market following the news, while gold rose 1.9% to $1134 per ounce – recovering two-thirds of the week's earlier losses. Silver rose twice as fast to reclaim all but 10 cents of this week's drop and edging just above $15 per ounce – a new 6-year low when broken decisively this summer. "I expect that we'll reach our maximum employment mandate in the near future and inflation will gradually move back to our 2% goal," said San Francisco Federal Reserve Bank president John Williams – known as a 'centrist' rather than a 'dove' or 'hawk' on raising rates – in a speech Thursday. "In that context, it will make sense to gradually move away from the extraordinary stimulus that got us here." Today's jobs data held the US unemployment rate unchanged at 5.1%. US consumer price inflation was last seen at 0.2% per year on August's official data. With two Fed meetings now left before 2016, Williams yesterday repeated earlier comments that he expects the Fed will vote to raise rates after 7 years at 0% "sometime later this year." "The prospect that the turn in the US monetary cycle is still imminent," says a new note from precious metals analyst Robin Bhar at French investment bank and bullion market maker Societe Generale, "remains central to our view that we remain bearish for the yellow metal." "Our view is still that the Fed will hike in December," says FX strategist Steven Barrow at investment and bullion bank ICBC Standard Bank. "[But] if economic data, like payrolls, start to peel back, perhaps in response to weaker export orders, the Fed might be forced into believing its rhetoric from September, that overseas factors should stall lift-off." Ahead of Friday's weak US jobs data, Dollar gold prices had been on track for their sharpest weekly in almost 7 months according to Bloomberg data. "A strong print," the Wall Street Journal this morning quoted Swiss bank and bullion market maker UBS's precious metals analysts, "holds downside potential for gold. "The risk [was] that there may be limited immediate support as participants in India are out today for a public holiday while participants in China have been out from yesterday for the Golden Week."
GOLD BULLION rallied 0.7% from new 2-week lows in London trade Thursday as the Dollar dropped following the weakest data on US manufacturing activity since 2013. New York stock markets also slipped after the Institute for Supply Management said its manufacturing PMI index fell last month from 51.1 to 50.2 – only just showing expansion. Financial data providers Markit also said their survey of manufacturing purchasing managers held near 2013 lows. Gold recovered to $1118 per ounce as the US Dollar fell on the FX market. Silver bullion rose faster, adding 1.4% from its own new 2-week lows at $14.49 per ounce. "US manufacturing growth is essentially flat," says a metals market note from US brokerage INTL FCStone, "especially if automobile production is taken out of the mix. "Nevertheless, the general consensus is that the Federal Reserve is still going to raise rates sometime this year." Ten-year US Treasury yields fell as bond prices rose after the manufacturing PMIs Thursday, hitting fresh 5-week lows of 2.03%. But interest rate betting in the futures market still put the odds of a Fed rate hike in October around 1-in-10, with odds nearer 2-in-5 for 'lift off' at the December meeting. Thursday's earlier "weakness" in the gold price," says German bank Commerzbank, "also dragged the prices of silver, platinum and palladium down with it, though their losses have been limited thanks to the firm base metal prices." "Lower lows and lower highs make for a short-term bearish trend," said bullion bank Scotia Mocatta's daily chart analysis Wednesday night. Should this trend contine, "[it] will run into technical support at $1100 from September 11th. Moving average resistance now comes in near $1130." Despite yesterday's drop in gold prices, however, the giant SPDR Gold Trust (NYSEArca:SLV) yesterday needed a further 3 tonnes of bullion to back its shares in issue, taking the total to a 10-week high after growing in size for 4 days in a row last week – a run not seen since September 2012. Totalling 687 tonnes, however, the GLD's holdings have nearly halved from their peak of three years ago. The giant iShares Silver Trust (NYSEArca:SLV) has meantime added 10 tonnes from last week's new 4-month low of 9,898 tonnes, but the number of shares outstanding – and so the quantity of bullion held to back them – remains almost 10% beneath 2014's highs. "Total silver ETF holdings [unlike gold] have remained relatively stable since 2013," says a note from precious metals analysts Thomson Reuters GFMS, in part because those trust funds tend to appeal to private "retail" investors. Gold ETFs, in contrast – and appeal more to "managed money" investors – "have been on a declining trend since the beginning of the year," GFMS adds, with total holdings across the space "down 4% intra-year...recording a 9% decline year-on-year" despite the upturn seen since the US Fed's surprise 'no change' announcement mid-September.
GOLD BULLION prices fell to 2-week lows in London trade Wednesday after new US data showed jobs hiring stronger than analysts forecast. Dropping to $1119 per ounce – a level identified by several bullion analysts as today's 'moving average' of the last 2 months' prices – gold bullion fell as the US Dollar gained on the FX market. Payrolls service provider ADP said US companies added a net 200,000 jobs this month, lagging the pace of last September but beating analysts' average forecast by 2.5%. The US government's non-farm payrolls estimate for September is due out Friday. The People's Bank of China meantime said it grew national gold reserves by 1.0% in August, taking the total above 1,693 tonnes. Buying 16 tonnes in August, the PBoC grew its reserves at twice the average monthly pace of accumulation between 2009 and 2015. But the State Administration of Foreign Exchange also said today in a semi-annual report that Beijing's bullion holdings are now large, and expose it to what SAFE sees as gold's price volatility, small market size, heavy storage costs, poor liquidity, and zero interest payments. "Not exactly an advert for gold," writes strategist Tom Kendall at the Chinese-owned ICBC Standard Bank in London, "and not really supportive of the gold-bug conspiracy theorists who suggest China's official holdings are much higher than the PBoC reports." Shares in giant mining and commodities trading group Glencore (LON:GLEN) meantime rallied for a second day, recouping most of Monday's shock 29% plunge. Bloomberg reports rumors that, in its bid to cut the group's $30 billion of debt, Glencore is now looking to finance future gold and silver output from its South American operations in so-called "streaming" deals. "Analysts say Chinese companies would be most interested in the Swiss trader’s copper mines," the newswire adds. But overall, "The current turmoil in commodities is clearly weighing on gold," adds another bullion bank's sales desk, "especially as physical demand (India, China, Middle East) is absent and inflation remains lackluster." Trading on the Shanghai Gold Exchange fell sharply today ahead of the week-long National Day holidays starting Thursday. For US Dollar price, "Dips should find initial support circa the 55-day moving average at $1119," says a technical analysis from Germany's Commerzbank, "ahead of the 2-month uptrend [now] at $1101.69." With official US non-farm payrolls data due Friday, "I suspect we will stay range bound until then," the Wall Street Journal quotes David Govett, head of precious at brokers Marex Spectron in London.
China's gold reserves stood at 54.45 million fine troy ounces at the end of August, up from 53.93 million at the end of July.
Do precious metals investors need more patience...or a hole in the head? SO the U.S. Fed will "likely" raise its key interest rate from 0% "this year," says one policy-maker, writes Adrian Ash at BullionVault. Or at least, the long-delayed "lift-off" looks "appropriate...sometime later this year," says another, meaning it's got to pull the trigger at either the October or December meeting. Failing that, "it could well be the middle of next year," says a third Federal Reserve member. If ever. Something for everyone then, yet again, from Monday's latest raft of Fed speeches. But while the world's single most important central bank wrestles with the promises it made about finally starting to "normalize" 7 years after slashing to zero, the rest of the world is moving the other way. Parents trying to save money for their kids in the UK, for instance, just found the 3% rates launched in 2012 to much fanfare by Lloyds TSB now cut to just 1% following the bank's split into two companies. India's central bank meantime cut its key interest rate for the fourth time in 2015 this morning, thanks in most part to inflation slipping to new all-time lows. Inflation remains the big problem everywhere in fact. Or rather, its absence. Not too hot, not too cold, the Western world's target of 2.0% per year is now a distant dream. And only by abandoning the inflation half of its legal mandate could the US Fed possibly hike from 0% any time soon. Confusion rules, in short, as this week's trading shows so far. The collapse in raw materials prices maps the worst drop in Hong Kong's stock market since 2011, if not the Asian Crisis of 1998. This century's famous 'commodity supercycle' made a lot of rich people richer, and its downturn is hurting them and their investments, as the Saudi example shows. Over-capacity in everything...from US shale gas to London buy-to-let apartments to Chinese factories...threatens a deflationary slump worse even than 2007-2011. Gold and silver are doing a little better than industrially useful stuff like platinum, energy inputs like crude oil, or base metals like copper. But that really isn't saying much. The breakdown in US stock markets hasn't yet switched the relative trends of rising equities, falling gold either. Do precious metals investors need more patience...or a hole in the head? Professional wealth managers are split right down the middle, and it's their (clients') money which matters. If you have time, scroll through this summary of 6 big-money viewpoints polled by CityWire. Ignore the errors littering the gold bears' opinion. Because what counts is sentiment, not facts. And after the long bull market of 2001-2011, those fund managers who see gold as crisis insurance have already got it, and won't let go. Those who do not still can't imagine they will need it any time soon. One group is wrong. The gap between them is widening. The same is true of economists too. Commodities point to a global slump. Or maybe just to rising disposable incomes. And where one side sees only blind panic amongst the other, the opposite side sees dangerous complacency. Maybe it's the end of the world. Or nothing to worry about. If that feels oddly like mid-2008 to you...when gold slid 25% in 4 months, even as the collapse of Lehman Brothers drew near to mark the sharpest plunge in global trade since the 1930s...you aren't alone.