Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
How to Trade Binance Vanilla Options for the First Time on Bitcoin Crypto's - 2nd Aug 21
From vaccine inequality to economic apartheid - 2nd Aug 21
Stock Market Intermediate Top Reached - 2nd Aug 21
Gold at a Crossroads of Hawkish Fed and High Inflation - 2nd Aug 21
Bitcoin, Crypto Market Black Swans from Google to Obsolescence - 1st Aug 21
Gold Stocks Autumn Rally - 1st Aug 21
Earn Upto 6% Interest Rate on USD Cash Deposits with Binance Crypto Exchange USDC amd BUSD - 1st Aug 21
Vuze XR VR 3D Camera Takes Near 2 Minutes to Turn On, Buggy Firmware - 1st Aug 21
Sun EXPLODES! Goes SuperNova! Will Any planets Survive? Jupiter? Pluto? - 1st Aug 21
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
WEALTH INEQUALITY WASN'T BY HAPPENSTANCE! - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Traders Resolve Tested

Commodities / Gold and Silver 2014 Apr 10, 2014 - 05:11 PM GMT

By: HRA_Advisory

Commodities

Just when you thought it was safe to go back into the market the gold price and junior resource stocks drop and nervous traders declare the sky is falling yet again.

I’m not thrilled by the market action of the past two or three weeks but I also don’t think the basic narrative has changed.   The gold price has corrected but I don’t think its rolled over unless it gets quite a bit lower.  Likewise, the correction in the Venture Index is not large compared to some of its larger brethren and well within the bounds of what one would see as part of a larger bullish advance.


It’s still very quiet on the news front and this is one issue that needs repair before a strong bull run develops.  Most companies just raised money so it will take time for them to start reporting from the field.  That will help carry things forward and new discoveries and new ideas will help even more.

Most of what I’m seeing is still recycled.  I think traders want some new ideas and the companies that deliver those can generate the sorts of gains that remind traders why they play resource stocks.  I think they will come but first we need to see a renewed advance that calms down investors.  Brokers and traders need to see more green on their screens before they are willing to pay up for untested ideas but I think that day is coming soon.

***

Did I mention I hate geopolitical gold price spikes?  I believe I did.  I made that comment in the last issue that was released just after a Crimean referendum that generated a wholly predictable result.

Gold topped immediately afterwards and continued to fall for the next two weeks notching a cumulative loss of over $100 before finding support around $1280.  This has gold bugs and resource stock traders back into a (so far) mild panic.  The question is whether metals and the producer and explorer stocks can get some near term traction and continue their advance.

I expected a pullback after the Crimean vote but was surprised by the strength of it.  The political situation seemed co clear cut to me that I couldn’t convince myself that there was that much gold buying based on the Ukraine.  Apparently there was.  It’s mindboggling to me that traders who paid the slightest attention to the doings of Vladimir Putin in the past 15 years expected any other outcome.  Things are still tense in the Ukraine but I expect it to fade as an above the fold political story.

Russia will probably complete an annexation in everything but name over the coming weeks and months.  As long as Putin has total control of the logistical routes in and out of the Crimea I doubt he cares what the name on the map is. This was about winning and, so far, he’s won.

Where there may be tension is other eastern European states that want to continue to move away from Russia.  Will the EU and NATO back them up or will Putin be allowed to strong arm them too?  I hope for the former but political cynicism makes me fear the latter.

Of course the Ukraine was only half the story.  Fed chair Janet Yellen had her own impact on the markets since the last issue.  Off the cuff comments during the post Fed meeting news conference freaked out the markets and tanked the gold price.  Here again, I find it a bit crazy that traders are still reacting to potential changes in QE taper and interest rate increases.  Yellen has made it abundantly clear that decisions will be based on economic readings.  She seems to understand better than Wall St that some of the improvement in the employment situation is statistical sleight of hand.  The unemployment rate has dropped as much or more due to declining participation as new jobs.

That’s not to say my thoughts about the taper have changed.  I think it’s baked in the cake that we get $10 billion monthly reductions until its unwound. There would have to be an enormous change in the readings to alter it and I don’t see that happening.  Most of the blather surrounding Fed meetings is less important than Wall St is trying to make it out to be.

The combined effects of Fedspeak and the Ukraine are amply demonstrated in the above gold chart.  Bullion fell all the way back to $1280 before finding recent support a popping back above $1300.

While I’m comfortable the longer term uptrend is in place it’s important that gold hold current levels.  US retail gold traders are spooked but that can change quickly if a new uptrend is established, especially if NY markets are weakening at the same time.

I noted in a recent Special Delivery that physical demand in China has been more resilient than expected, with demand in the first two months of 2014 up 40% year over year.  The real shift in Chinese demand came after the gold price plummeted last March.  We need a couple of more monthly data points to convince skeptics.  Those skeptics pointed to gold prices on the Shanghai market losing the premium to western prices but that moderated in the past few sessions. Large volumes of gold being imported by China should make the Shanghai market more liquid and naturally reduce divergence between prices on other markets.  It may be that too much is getting read into falling premiums anyway.

The chart below displays the Venture Index from the start of the year.  We may have put in another bottom a few sessions ago, before the gold price itself.  I take that as a positive sign though I’d still like to see more volume.  If this does turn out to be an interim bottom it would be pretty mild compared to the normal post-PDAC drop.  That again would be a positive sign for the market through the rest of the year.

Base metals stabilized before gold thanks in part to a mini stimulus package announced by Beijing.  Both copper and iron ore have seen nice bounces but both are also slated to go into surplus later this year regardless.

Copper wouldn’t need much supply disruption to bounce higher but my comments about potential for sales of metal used as loan collateral remain.  I’m more positive than I was a couple of weeks ago but still cautious.  The good news so far is there is little sign of panic in the Chinese market.  Short term interest rates have dropped again recently and there has been a lot of rotation into emerging markets, both debt and equity.  Much of this is hot money that can turn on a dime but it’s not matching up to the Wall Street narrative.

NY markets saw new highs again but things have looked shakier in the past few sessions.  The selling is concentrated in the momentum sectors that helped drive those markets to records in the first place.  That is not a bad thing. Even bulls were getting nervous about how high prices were getting.

The big danger is that momentum stocks overshoot to the downside when they roll over.  It’s too early to tell but if selling accelerates we could get our 10% plus correction in a hurry.

Junior stocks can withstand weakening major markets if the gold price keeps moving up and the selling is not too abrupt.  Resource stocks at least have the advantage of being undervalued.

Even with calm markets and a higher gold price, juniors desperately need news flow.  That takes money.  February was better for fund raising on the Venture (35% year over year and 120% above January) but things cooled off some recently.  The improvement was even better on the main TSX board (58% yoy for Q1, much of that resource issuers).

The financing window is still open a crack and a couple of weeks of decent junior markets would allow for more placements.  That will give companies the means to start generating meaningful news again.  For the new bull market to stay and grow we’ll need news flow. Stay tuned for companies putting new money to work and looking for new audience.

By Eric Coffin
http://www.hraadvisory.com

Eric Coffin, editor of HRA Advisories, recently sat down with President and CEO of Colorado Resources, Adam Travis, to discuss more about the company, its recent successes and why investors should stay tuned to this story. Click here to download Eric’s interview with Colorado Resources now!

We think there will be more discovery winners but it's still a "show me" market. HRA understands that which is why we are offering you a chance to try out HRA for three months for only $10.00!

    The HRA – Journal, HRA-Dispatch and HRA- Special Delivery are independent publications produced and distributed by Stockwork Consulting Ltd, which is committed to providing timely and factual analysis of junior mining, resource, and other venture capital companies.  Companies are chosen on the basis of a speculative potential for significant upside gains resulting from asset-based expansion.  These are generally high-risk securities, and opinions contained herein are time and market sensitive.  No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer, solicitation or recommendation to buy or sell any securities mentioned.  While we believe all sources of information to be factual and reliable we in no way represent or guarantee the accuracy thereof, nor of the statements made herein.  We do not receive or request compensation in any form in order to feature companies in these publications.  We may, or may not, own securities and/or options to acquire securities of the companies mentioned herein. This document is protected by the copyright laws of Canada and the U.S. and may not be reproduced in any form for other than for personal use without the prior written consent of the publisher.  This document may be quoted, in context, provided proper credit is given. 

    Published by Stockwork Consulting Ltd.
    Box 85909, Phoenix AZ , 85071 Toll Free 1-877-528-3958

    hra@publishers-mgmt.com   

    ©2014 Stockwork Consulting Ltd.  All Rights Reserved.

    HRA Advisory Archive

© 2005-2019 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