Best of the Week
Most Popular
1.Stock Market Continues Defying Gravity, Dow New All Time High - Nadeem_Walayat
2.America Superpower 2016 - Ian Bremmer
3.The US Dollar and the Precious Metals Complex - Rambus_Chartology
4.UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - Nadeem_Walayat
5.The “Real Flash Crash” Will Scare You to Death - Shah Gilani
6.Gold Price Trend Forecast - Bob_Louka
7.UK Deflation Warning - Bank of England Economic Propaganda to Print and Inflate Debt - Nadeem_Walayat
8.Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - GoldCore
9.Will Interest Rates Ever Rise? - BATR
10.Who’s Killing the Stock Market? - Shah Gilani
Last 5 days
This New Currency Could Wipe Out the Euro - 28th May 15
US Housing Market - Something Smells Fishy - 28th May 15
US Economy – Semi b2b Amps Up its Trend - 28th May 15
U.S. Fed Exported QE Travesty: Meet The BLICS Nations - 28th May 15
World War D—Deflation - Secular Bear Markets Analysis - 28th May 15
George Soros Warns of “Third World War” - 28th May 15
Why You Shouldn't Try to Invest Like Warren Buffett - 28th May 15
Stock Markets Buy and Hold is Back! - 28th May 15
We're Now Frighteningly Vulnerable to a Bond Market Crash - 28th May 15
Austerity, Economics and Religion - 28th May 15
National Holidays London and the Magic of Legoland UK Review - 27th May 15
Imminent Stocks Bear Market Signaled by Dow Theory ... - 27th May 15
Gold Price Has Bottomed – More Evidence - 27th May 15
Three Reasons You Shouldn’t Try to Invest Like Warren Buffett - 27th May 15
Gold Is “100% Guarantee from Legal and Political Risks” States Russian Central Bank - 27th May 15
Don't Drown in the Sea of Global Debt - 27th May 15
Three Reasons Why Carl Icahn Is Wrong About Apple Stock - 27th May 15
Crude Oil Price Stochastic Signals - 26th May 15
Why the Stock Market Will Crash - 26th May 15
GDP, Inflation, Employment Economic Statistics: It’s All a Lie - 26th May 15
Introduction to Peak Food - 26th May 15
Should We Dump the Euro? - 26th May 15
A Geopolitical Net Assessment of Europe - 26th May 15
Stock Market Top in Place? - 26th May 15
Best Cash ISA SBI 2.3% - 2.8 Year Fix, UK Interest Rates 2016 - 26th May 15
China Sets Up Gold Bullion Fund For Central Banks - 25th May 15
Is The Silver Trade Getting Crowded? - 25th May 15
Money Murder Mystery: Who Killed the Stock Market? - 25th May 15
Why Do We Celebrate Rising U.S. House Prices? - 24th May 15
Mario Draghi’s Slippery Downward Slope - 24th May 15
Gold : Truth is Stranger than Fiction - 24th May 15
Facebook Stock Price Forecast - 24th May 15
Make a Killing on the Coming Energy "Debt Bubble" - 24th May 15
Stock Market SPX Uptrend Inflection Point - 23rd May 15
What You Know for Certain - Huge Demand for Gold And Silver - 23rd May 15
Are We in Another Credit Bubble? And Is It Different than Before? - 23rd May 15
The “Real Flash Crash” Will Scare You to Death - 23rd May 15
Venezuela: No Rule of Law, Bad Money - 23rd May 15
Robots That Can Beat the Market by 100% - 23rd May 15
Why Shake Shack Stock Is a Bad Investment - 23rd May 15
Gold Price Primary Driver Bullish - 23rd May 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Biggest Debt Bomb in History

Gold Price Challenges $1350

Commodities / Gold and Silver 2014 Mar 07, 2014 - 10:24 AM GMT

By: Alasdair_Macleod

Commodities

From last Friday's close at $1322, gold opened strongly on Monday trading, as high as $1355 before losing two thirds of the rise on Tuesday. On Thursday afternoon (GMT) gold rallied back to challenge the $1350 level. This morning (Friday) it is in the balance as to whether or not gold will need more consolidation before moving on towards $1400, with everyone watching out for US employment numbers.

The change in sentiment over the last eight weeks has encouraged small traders to go long on gold. Normally, market-makers would be able to mark prices down aggressively to shake out these short-term speculators, but it has not recently happened. This suggests that the underlying market is robust.


Admittedly political developments in the Ukraine are acting as a positive factor, potentially stimulating regional gold demand from countries such as Turkey. There are signs that investor liquidity may also be building in China, driven by bond market concerns. China suffered a minor corporate bond default this morning, notable because it is the first that has been allowed to happen, and it has led to other planned issues being put on hold. Gold is likely to benefit, driven by a new source of Chinese investor anxiety.

In theory at these levels there are stale gold bulls from last October/November to take out before the price can regain the $1400-1420 level, which halted the July/August run-up last year. This can be seen in the chart of the gold price below.

Weekly Gold Chart

Neither of these supply hurdles should be significant, because of the significant change in underlying sentiment. Furthermore, the ephemeral nature of futures contracts makes past supply levels progressively less important with time.

Silver which is normally twice as volatile as gold, underperformed in January before catching up somewhat last month as shown in the second chart. If gold gets above the $1350s, silver will still have some catching up to do.

Weekly Silver Chart

The futures markets for precious metals are now at a crossroad. The short positions of the hedge funds, which have driven gold and silver prices higher have now been significantly reduced and are no longer extreme. In gold the bullion banks appear to have taken these positions onto their books and also as swaps. In silver, the shorts have been crossed out against matching longs with open interest falling by 18,000 contracts since mid-February. So instead of precious metals being driven by a bear squeeze, the market will need to either continue to lose physical metal to Asia or find growing support from new bulls attracted by the reversal in trend.

Both are quite likely, and probably explain why gold is bid, despite some obvious profit-taking.

Next week's calendar

Monday. Eurozone: Sentix Indicator. Japan: M2 Money Supply, Economy Watchers Survey.

Tuesday. UK: BRC Retail Sales Monitor, Industrial Production, Manufacturing Production, NEISR GDP Estimate. US: Wholesale Inventories. Japan: BoJ MPC Overnight Rate.

Wednesday. Japan: Consumer Confidence, Key Machinery Orders. UK: Trade Balance. Eurozone: Industrial Production. US: Budget Deficit.

Thursday. US: Import Price Index, Initial Claims, Retail Sales, Business Inventories.

Friday. Japan: Capacity Utilisation, Industrial Production. Eurozone: Employment. US: PPI.

Alasdair Macleod

Head of research, GoldMoney

Alasdair.Macleod@GoldMoney.com

Alasdair Macleod runs FinanceAndEconomics.org, a website dedicated to sound money and demystifying finance and economics. Alasdair has a background as a stockbroker, banker and economist. He is also a contributor to GoldMoney - The best way to buy gold online.

© 2014 Copyright Alasdair Macleod - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Alasdair Macleod Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History