Gold is at or Very Near, a Long-Term Bottom
GoldSeek
I am making Monday's premium report available to the public.
I doubt anyone was surprised by the reversal in the dollar index today.
It’s been made painfully clear that Bernanke is not going to tolerate a rising dollar, at least not for very long. Cycles are still working, and still generating bounces out of daily cycle lows, but they are never allowed to get any traction before the next beat down starts.
I would say there’s a pretty good chance that today’s reversal is signaling that the current daily cycle topped on day four, and the pattern of lower lows and lower highs is still intact.
Presumably the dollar will now start to decline and penetrate the May 1st intraday low before the next significant bounce. The daily cycle timing bands have adhered pretty closely to standard durations in the dollar index. I don’t see any indication that has changed, so we can probably expect the next significant bounce sometime around the last week of May.
Stocks:
If the dollar cycle has topped then the half cycle low scenario is still on the table.
In this scenario the stock market is on day 19 of its daily cycle and due to form a half cycle low at any time. As most of you probably remember, I’ve been expecting an extended consolidation in the general stock market. A dollar cycle topping on day 4 and a half cycle low on day 19 would be consistent with that theory.
If by some chance the dollar can recover and continue to rally for a few more days it could force stocks to penetrate the April 10th low. In that scenario I would re-phase of the daily and intermediate cycles as shown in the chart below.
At the moment I have no idea which scenario has greater odds of playing out, although I must admit the reversal today does not look good for the dollar.
Gold:
In my opinion gold is trying to move down into one more failed and left translated daily cycle, which I’m pretty confident would mark an intermediate degree bottom. However, as you can see from the chart below, as soon as Bernanke broke the dollar rally gold lost all of its downside momentum.
This has turned gold’s B-Wave decline into a mostly sideways consolidation for the last two months. If the dollar has indeed topped then I have my doubts that gold will be able to finish its intermediate decline and penetrate the April 4 low. The fact that the current daily cycle is running out of time may indicate that we are going to have to leave the April 4 low as an early intermediate bottom.
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Gold Rises as Jobs Data Renews Fed Easing Hopes
Reuters
Gold rose on Friday as investors selling crude oil and equities bought the metal after a weak U.S. nonfarm payroll report boosted bullion's investment appeal on talk that a weaker economy might prompt further monetary easing by the Federal Reserve.
Bullion still finished down 0.6 percent for the week. Gold has dropped $150 from a peak in late February after a strong run of U.S. data cast serious doubts over whether the Federal Reserve would launch a third round of government bond purchases, or quantitative easing, also known as QE3.
Fed Chairman Ben Bernanke "had said QE3 is going to be dependent on the incoming data. Next time when he speaks he's going to reemphasize that the Fed is willing to do more," said Axel Merk, chief investment officer of Merk Funds with about $650 million in assets.
"That's one of key reason why gold is up because we have had a very long period of consolidation," he said.
Gold rebounded from an early decline after the Labor Department reported that U.S. employers added 115,000 workers to payrolls last month, the third straight month in which hiring had slowed. The far weaker-than-expected jobs data knocked crude oil prices down 4 percent and hit the DowJones average with triple-digit losses.
Spot gold was up 0.4 percent at $1,643.20 an ounce by 3:43 p.m. EDT (1943 GMT).
Having traded $20 lower earlier in the session, the metal slowly chipped away losses on intensifying speculation of QE3, which has been a major driver behind gold's 5 percent rise this year.
U.S. gold futures for June delivery settled up $10.40 an ounce at $1,645.20, with trading volume about 10 percent below their 30-day average, preliminary Reuters data showed.
U.S. gold futures investors continued to digest news the CME Group (CME.O) was granted a 90-day reprieve from imposing new rules that will hike margins for some exchange members by as much as a third.
EURO JITTERS EYED
Traders said safe-haven buying could also benefit gold next week. Earlier this year, the metal had risen on jitters about the euro zone ahead of Sunday's elections in France in Greece.
UBS analysts said in a note that Europe debt fears could potentially disrupt global markets and derail investor sentiment, but gold is poised to benefit due to intense pressure on the euro.
Physical gold buying in top gold consumer India remained lackluster due to firm Indian gold prices as a result of the weak local rupees. <ID: nL4E8G44JV>
Among other precious metals, silver was up 1 percent at $30.35 an ounce. Spot platinum eased 0.3 percent at $1,522.50 an ounce, while spot palladium dropped 1.1 percent to $648.47 an ounce.
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Gold Bubble? “More People That Own Apple Stock Than Gold”
Goldseek
Gold’s London AM fix this morning was USD 1,629.50, EUR 1,240.20, and GBP 1,007.54 per ounce. Yesterday's AM fix was USD 1,642.50, EUR 1,251.24 and GBP 1,015.90 per ounce.
Gold dropped $16.50 or 1.00% in New York yesterday and closed at $1,637.10/oz. Gold gradually traded lower in Asia and in European trading.
Cross Currency Table – (Bloomberg)
Gold is down 1.6% on the week. The gold market has seen peculiar, lack lustre, low volume trading this week punctuated with sudden, oddly timed, very large sell orders. This leads to quick price falls followed either by slow, gradual recovery or a sharp bounce, prior to next bout of strangely timed sudden large sell orders.
This was clearly seen by the mysterious and massive $1.24 billion ‘Goldfinger’ trade on Monday.
While the $1.24 billion trade on Monday was attributed to a “fat finger” or algo trading in the gold market, there was a similar spike in volume at exactly the same time in silver – while all other markets saw little price movements.
There have been a few instances of this and it was seen yesterday again around 1330 GMT when there was a large 3,000 plus lot gold sell order which saw the price quickly fall by over $5 before a rapid recovery. Volume that size is unusual for that time of the day on the COMEX.
Yesterday the silver pits again suddenly saw the sale of some 200,000 lots in a minute or two that knocked the most-active SI future back a few cents (see chart below) and this led to silver breaching the $30/oz mark later in the session.
It is unusual to see a market building momentum in a certain direction and then to see massive sell orders in both the gold and silver market which then lead to further tech selling which can feed on itself.
At the same time there appear to be eager buyers at these levels who continue to accumulate on the dips. Ultimately prices will be dictated not by strange and potentially manipulative trading on the COMEX but by the global supply and demand of physical bullion.
Silver Price and Volume – May 3rd (Thomson Reuters)
Gold’s weakness may also be due to short correlations with equity markets – which have come off due to investor jitters after recent poor data and ahead of the US payrolls report.
Market expectations for Friday's non-farm payrolls report have fallen this week, with dealers now expecting that the economy added 125,000 to 150,000 jobs in April, below the previous Reuters consensus forecast of 170,000. Investors are expecting more lacklustre job growth last month following a trail of weak U.S. indicators.
A poor jobs number should lead to gold moving higher as it will lead to concerns about the US economy and concerns that QE3 will be launched leading to the further debasement of the dollar.
The European Central Bank kept rates steady at 1% as expected by market watchers. The euro faces additional risks on Sunday from elections in France and Greece which could create further disruption in the Eurozone about their countries commitment to fiscal austerity.
Euro gold is consolidating between €1,150/oz and €1,400/oz (see chart below). Given the terrible economic mess that Europe finds itself in, it seems only a matter of time before gold reaches €1,400/oz again and there is of course the risk of the euro falling by much more against gold.
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Marc Faber: Gold is no bubble
Money Week
Gold a bubble? No chance, says respected Swiss investor Marc Faber.
The reason that people think gold is a bubble, says Faber, is that its current price of around $1,700 per ounce seems a lot higher than its 1999 price of $252. But despite the significant gains, gold is still not as widely owned as other assets were during past examples of bubbles.
“In 1989, everybody owned Japanese stocks. And in 2000, everybody owned tech stocks. That is the bubble, when the majority of market participants own an asset. I think there are more people that own Apple stock than gold.”
The increase in gold’s price is down to the huge increases in debt levels, not tech-boom-style irrational exuberance.
“We had an explosion of debt, not just government debt, but private sector debt, and an explosion of unfunded liabilities such as in the pension fund industry, and not just with Medicare, Social Security and Medicaid.”
This creates “a situation where maybe the price of gold should be much higher because the economic and financial conditions are worse than they were 12 years ago.” The hard times encourage indebted governments to print even more money, driving up the value of gold.
Faber, who writes the Gloom, Boom and Doom newsletter, also thinks that the growing reserves of emerging market governments will also help the gold price in the long run. “International reserves accumulate principally at the hands of Asian central banks and central banks in emerging economies”, notes Faber. Right now those reserves are in dollars and euros but Faber thinks that will change.
“Even a central banker, with his just-below-average intelligence, will one day notice that maybe it’s not that desirable to be in the US dollar or Treasury bills that have essentially no yield. In other words, you have a negative real interest rate on these dollars.
“So they move money into gold. They should have done it a long time ago. But don’t expect too much from a central banker.”
But despite his bullish stance on gold Faber is wary of buying mining stocks. In particular, he doesn’t like explorers. “The problem with the exploration companies is that a lot of them will have financing difficulties and they will have to cut down on exploration. They may not get financing at all. If you have 100 exploration companies, 80 to 90 of them could easily be out of business.”
Of course, you shouldn’t have all your money in gold. Instead investors should diversify, says Faber. “I’d put 25% in equities, 25% in physical precious metals, 25% in Asian properties and 25% in corporate bonds, mostly emerging economies.”
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This Is the First Time In History that All Central Banks Have Printed Money at the Same Time…And They’re Failing Miserably
Simultaneous Global Printing Is Failing Miserably
Mainstream Keynesian economists argue that the failure of the European austerity measures to pull Europe out of the doldrums proves that more stimulus is needed, and that austerity is poison at this stage.
Indeed, most mainstream economists pretend that debt doesn’t exist … or believe that debt for its own sake is good and necessary.
But Martin Weiss noted last month:
Four of the world’s largest central banks have gone absolutely berserk, running the money printing presses like never before in history:
The Bank of Japan (BOJ) had already been printing money like crazy ever since their bubble economy burst in the early 1990s.
So when the debt crisis struck in 2008, the size of their balance sheet assets, which measure the cumulative total of a central bank’s money printing operations, was alreadythe biggest in the world: About 20% of their economy.
Then, when the shock waves of the Lehman Brothers collapse struck Japan, what did they do?
They stepped up their money printing operations EVEN further — to about 30% of GDP. (See yellow line in chart above.)
Other than Brazil in the 1970s or Germany in the 1920s, no other major nation — or group of nations — on the planet had ever gone that far! (Until, that is, Europe, which I’ll get to in a moment.)
Meanwhile …
At the U.S. Federal Reserve, no Fed Chairman in history — not even notorious easy-money advocates like Arthur Burns or Allen Greenspan — had EVER run the money printing presses for any extended period of time.
But Fed Chairman Bernanke changed all that. Soon after the debt crisis hit in 2008, he nearly TRIPLED the size of the Fed’s balance sheet from about 6% of GDP to almost 17% of GDP.
And in the years since, he has pumped it up even further to about 20% of GDP! (Red line in chart.)
The Bank of England (BOE) has mostly been expanding its balance sheet in lock step with the Fed (green line).
But in the global race to print money, it’s the European Central Bank (ECB) which has been leading the pack in the past year or so, suddenly expanding their balance sheet from about 20% of GDP to close to 30% GDP (blue line).
This is absolutely massive!
Heck, in the 1990s and 2000s, just the money-printing operations by ONE central bank (the Bank of Japan) changed the world:
Global investors borrowed abundant amounts of cheap money in Japan and poured it into risky investments around the world, helping to create some of the largest bubbles — and busts — in history.
Now, imagine FOUR central banks doing the same thing at the same time!
Indeed, China and India have been printing as well, as shown by the last 2 of these 2011 charts:
The U.S. is printing lots of money…..
Source, The St. Louis FedThe Bank of England is printing lots of money…..
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Simultaneous Global Printing Is Failing Miserably
The Inflation Trade Is On: Bernanke Has Broken the Dollar Rally
Minyanville
It may not seem like much happened yesterday, but a very important event occurred. Yesterday the US Dollar Index breached 78.65. The reason that is significant is because 78.65 marked the intraday low of the prior daily cycle. A penetration of that level indicates that the current daily cycle has now topped in a left translated manner and a new pattern of lower lows and lower highs has begun. Any time a daily cycle tops in a left translated manner it almost always indicates that the intermediate cycle has also topped.
In this case it would indicate that the intermediate dollar cycle topped on week two and should now move generally lower for the next 10-12 weeks, bottoming sometime in late June or early July, about the time Operation Twist ends.
Click to enlarge
Now that we have confirmation that Bernanke has broken the dollar rally I'm confident in calling April 4 an intermediate bottom (B-Wave bottom) in the gold market. Gold should now be entering the consolidation phase of the next C-wave. I expect a test of the all-time highs sometime this summer as the dollar moves down into its intermediate cycle bottom. The ETF for large gold mining companies I'm tracking isMarket Vectors Gold Miners (GDX).
That being said I have no interest in a 15% rally in gold. The real money will be made as the mining stocks exit their bear market, re-enter the consolidation zone between 500 and 600, and move up to retest the old highs. It's not inconceivable that we could see a 30-45% gain in mining stocks over the next 2 1/2 months on the GDX.
Sentiment in the mining index (^HUI) has reached the same levels of bearishness that were seen in the fall of 2008. That black pessimism drove a 300%+ rally over the next two years. I have little doubt this time will be any different.
Now what we need to see is a change in character. We need the mining stocks to stop generating these sharp bear market rallies and transition into the wall of worry-type rally that characterizes a bull market. So far that is exactly what is happening. The miners are rallying very hesitantly, and as long as this continues it will camouflage the move and keep sentiment depressed. That's exactly what we need to happen to drive a long sustained rally back up to the old highs.
The problem with the rocket launch type rallies we've seen over the last year and a half is that they swing sentiment very quickly to the bullish side and we run out of buyers.
As long as the bottoming process proceeds gradually I think there's a very good chance the HUI could break back above the 200 day moving average, and possibly test the 600 level by mid-July. (this is technically his first mention of HUI by name... not sure the previously mentioned "miners index" is the same thing)
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Gold’s 3-Month Drop Could be Basis for Fresh Uptrend
Economic Times
Gold prices have just fallen for three straight months, a dubious feat last achieved before the market's 12-year bull run, but with last year's positive drivers still simmering the lull could yet prove the basis for another push higher.
Questions over euro zone stability and the sustainability of anaemic U.S. economic growth could help the defensive qualities of the metal return to the fore of investors' minds, while chart analysis of its price also looks supportive.
On the face of it, gold does not look on the cusp of renewed greatness. Prices, currently at $1,660 an ounce, were pinned in April to their narrowest monthly trading range since last June.
Having ended February, March and April in the red, bullion is down more than 4 percent since the end of January, reflecting a slide in coin sales and holdings of the metal via exchange-traded funds (ETFs), a common vehicle for investor interests.
The decline in enthusiasm for gold came as investors took a slightly more stable economic backdrop as a catalyst to increase exposure to arguably more risky investments like stocks.
But such an extended fall is unusual. Prices have not fallen for three straight months since the period to May 2000, before the start of a rally that took gold from around $250 to nearly $2,000 last year.
Widening the lens to commodities as a whole, the asset class has struggled. The Thomson Reuters-JefferiesCRB index global benchmark hit its lowest level in April since December 2011, with investors awaiting greater clarity on demand from top raw materials consumer China.
Yet some analysts who study past price moves to determine the future direction of trade say gold is still looking poised to reignite a rally that took it to record highs above $1,920 an ounce last year.
"Although gold has been consolidating for months, I don't interpret this as challenging as long as the long-term trend support prevails," Stephanie Aymes, a technical analyst at Societe Generale, said. "The uptrend is still intact in my view."
Such a trend would only be broken, Aymes said, by a monthly close below $1,600 an ounce.
CENBANKS BUY
Such optimism contrasts with other global trends. Demand in the world's biggest bullion buyer India has been slack for much of the year so far and even the arrival last week of Akshaya Tritiya, one of the most auspicious gold-buying days, did not significantly lift sales.
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Gold Nudges at Two-Week Highs as Dollar Retreats
Reuters
Gold touched two-week highs on Tuesday, set for its longest stretch of daily gains in eight months, after a rally in the dollar fizzled out as investor concern escalated over the resilience of the U.S. and euro zone economies.
The dollar pared gains to fall against a basket of major currencies after the most recent spate of data from the United States revived some expectations that the Federal Reserve would offer additional support to the economy via a third round of quantitative easing, or purchases of govenrment bonds to anchor market interest rates.
Spot gold was up 0.4 percent at $1,670.76 an ounce by 1245 GMT, having fallen earlier to a session low of $1,658.83.
The price was on track for a sixth day of gains in a row, the longest rally since last August, yet without confirmation from the Fed of more support for the U.S. economy, gains could be limited in the near term, analysts said.
"What I would definitely say is, near term, I can't see the price breaking higher, to $1,700 an ounce or above. It needs another catalyst, something more powerful than perhaps in the near future there could potentially be QE," Nikos Kavalis, an analyst at RBS, said.
"Of course, an excessively loose monetary policy environment will continue but whether there is a need for another QE, I am not convinced," he said. "We are in an enviroment where market-specific fundamentals are taking a bit of a backseat and general sentiment is really the driving force."
Though the disappointing data may fuel expectations that the Fed might launch more QE, two of the central bank's policymakers both said they saw no need for further easing but also said they do not believe the Fed should quickly move to raise rates. <ID:nL1E8FU562> <ID:nL1E8G10JW>
The gold price ended April in the red for the third consecutive month after data showed improvement in the U.S. economy and the Fed's stance became less dovish.
LOW-RATE BOOST
Gold benefits from low interest rates in that it can compete more effectively for investor cash that can see diminished returns from stocks or bonds. Loose monetary policy also creates the potential for a pick-up in inflationary pressures, something gold can help portfolio managers guard against.
"The bullion markets have been on the defensive since U.S. Federal Reserve Chairman Ben Bernanke began distancing the Fed from a third round of quantitative easing in testimony to Congress on 29 February," HSBC analyst James Steel said.
"Prices appear to be stabilizing above $1,620 an ounce, however, and we believe that net long positions on the Comex in gold and silver have fallen to levels at which latent bulls may begin to rebuild positions. This leads us to believe that prices may bottom out, at least in the near term," he said.
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Gold Ticks Higher, Awaits Data
The Wall Street Journal
Gold futures edged higher on a weaker dollar as traders looked ahead to U.S. economic data due later Tuesday, though chatter about Monday's volatile trading persisted in the market.
The most actively traded contract, for June delivery, was recently up $5.30, or 0.3%, at $1,669.50 a troy ounce on the Comex division of the New York Mercantile Exchange.
A weaker dollar gave gold a boost. Dollar-denominated gold attracts buyers who use other currencies when the dollar eases as the yellow metal seems cheaper to these investors. The ICE Dollar Index was recently at 78.661 down from 78.824 earlier.
Market participants were cautiously upbeat ahead of U.S. manufacturing and construction-spending data. Reports released in recent weeks have painted a more obscure picture of the U.S. economy, stoking worries that growth is slowing and raising hopes of a third round of quantitative easing. Gold prices, which have rallied during past instances of monetary stimulus, are likely to benefit from another round of stimulus.
Elsewhere, traders continue to digest Monday's volatile early-morning trading. CME Group Inc. (CME) briefly halted trading in gold futures Monday following a sharp plunge in prices.
Many in the market initially attributed the fall in gold to a "fat finger", or input error. However, some participants later questioned whether the massive flux of activity seen at 8.31 a.m. was an erroneous trade or a flurry of automatic-selling orders triggered by electronic trading programs.
CME Group Inc. said that no transactions were cancelled Tuesday and that a 10-second trading halt occurred at 8:31 a.m., just as New York trading day was getting under way.
The move down could have been triggered by early-morning losses in silver, as the two precious metals often move in tandem, said Frank McGhee, head precious metals dealer with Integrated Brokerage Services.
"I think someone came in and realized that gold was out of line with silver on the day, sold into some stops and you had a cascade," said McGhee.
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Gold Climbs 1 Percent on Options-Related Buying
Reuters
Gold rose 1 percent on Thursday on options-related buying and as investors' risk appetite rose broadly a day after Federal Reserve Chairman Ben Bernanke said the Fed is prepared to do more for the U.S. economy.
The metal, which has tended to follow riskier assets most of this year, extended its rise to a third consecutive day as U.S. equities climbed on encouraging corporate results and a strong housing report. .N
Renewed gold buying could be seen after May COMEX options expired in the previous session as the liquidation pressure on the underlying futures have disappeared for now, traders said.
"After options expire, volatility may temporarily increase as investors have better leverage and can buy more options at a lower premium in the short term," said Thomas Philippides, derivatives broker at Capfeather Brokerage Group.
Spot gold was up 0.8 percent at $1,657.69 an ounce by 2:30 p.m. EDT (1830 GMT).
U.S. gold futures for June delivery settled up $18.20 at $1,660.50. Trading volume was below its 30-day average but continued to recover after falling to the lowest level of the year last Friday.
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