Recovery in gold prices
New Delhi, May 18: Gold prices rose by Rs 163 to Rs 29,065 per 10 grams in futures trade today as speculators enlarged their positions, taking positive cues from global markets.
At the Multi Commodity Exchange, gold for delivery in August recovered by Rs 163, or 0.56%, to Rs 29,065 per 10 grams, with a business turnover of 258 lots.
Similarly, the metal for delivery in June also shot up by Rs 158, or 0.55%, to Rs 28,685 per 10 grams in 2,177 lots.
Analysts attributed the recovery in gold prices at futures trade to a firming trend overseas on speculation that the US Federal Reserve may announce more stimulus measures for the economy after an unexpected contraction in a regional manufacturing gauge and turmoil in Greece may boost demand for precious metals.
Meanwhile, gold spurted by $34, or 2.21%, to $1,574.30 an ounce in New York yesterday.
What affects gold prices in India?
India, May 18 -- Other than basic jewellery demand, there are two other factors that affect gold prices in India? International prices
Gold works on price parity, which means 10g of gold has the same value all over the world, hence international prices are important.
Hedge: Other than for its ornamental purpose, gold has been used as an investment asset. This is because gold can be used to protect against any depreciation in other financial assets which happens at times of uncertainty. This is why historically gold has been used as currency.
Dollar dynamics: Moreover, gold is used as a hedge against movement in the US dollar, which means typically gold prices move inversely to change in strength or value of dollar.
Exchange-traded funds: Globally, demand for ETFs has increased. Typically, funds are required to maintain the value of ETFs sold in the form of physical gold, driving up overall demand.
Rupee vs dollar
As imported gold is valued in dollars and then converted to a rupee value for consumption, the rupee-dollar exchange rate is important. Thus, even though international gold prices have corrected in the last 2-3 months, domestic gold prices have risen, because the rupee depreciated around 8% against the dollar since February this year.Published by HT Syndication with permission from Hindustan Times.
PRECIOUS-Gold rallies from rout on technicals; dead-cat bounce?
* Gold almost hits 100-week moving average for first time
since 2009
* Bullion notches largest one-day gain since late January
* Tentative physical buying returns
(New throughout, updates prices and market activity)
By Josephine Mason
NEW YORK, May 17 (Reuters) - Spot gold rallied more than 2
percent o n T hursday for its largest one-day gain since January,
as technical buy signals and a decline in regional U.S. factory
activity more than offset deepening despair over the euro zone.
After flirting with a bear market on Wednesday, down more
than 20 percent from its September record, bullion bolted more
than $20 higher just after Philadelphia Federal Reserve data
showed a contraction in factory activity in the U.S.
mid-Atlantic region. The data rekindled some hope the Fed would
plow more money into the system to stimulate the economy.
The 10 a.m. EST spike was conspicuous in both scale and
volume, with prices surging $24 in 20 minutes as the typically
marginal Philly Fed data also set off new technical buying after
gold nearly hit a key December low.
"Sometimes the market just needs a trigger," said a floor
trader.
Spot gold bounced over 2.6 percent to an intraday
high of $1,579.70 in brisk late morning trade and was up 2.29
percent at $1,573.56 per oz at 4:50 p.m. EDT ( 2050 GMT).
Bullion traded just shy of a key technical long-term support
at the 100-week moving average of $1,515 per oz, a level it
hasn't crossed since January 2009, when the market was in the
throes of the global economic crisis.
But with the euro and U.S. stocks in decline and Greece
still on the brink of leaving the euro zone, many traders saw
the gains as little more than a "dead-cat bounce", slang for a
small but temporary rally that follows significant declines.
"When the move to the upside is so elastic, it suggests a
lot of people caught at the wrong side, but also confirms the
medium negative trend," Milko Markov, investment management
analyst at SK Hart Management LLC, said.
That is up almost $50 since gold plunged around $1,527 on
Wednesday, which was its lowest level since December.
Technicals showed gold was deep in "oversold" territory on
Wednesday, with its 14-day relative strength index (RSI) at 22.
A market with an RSI of 30 or below is considered oversold. It
had recovered to 37 on Thursday.
U.S. gold futures jumped 2.8 percent to an intraday
high of $1,579.8 an ounce, their largest one-day increase since
October last year, and settled up 2.5 percent at $1,574.9. On
Wednesday, the contract had plumbed a multi-month low of
$1,526.70.
Trading was frantic as investors ran to cover their short
positions.
"I was worried. $1,527 was a huge support area and it felt
like if it went through that, gold would get demolished," said
the floor trader, who cautioned that the rally may run out of
steam and prove only a temporary blip in a down market.
A June options expiry in the COMEX futures market also
helped support the metal as many investors consider the current
gold price a good entry point, analysts said.
On the broader commodities market, the Thomson
Reuters-Jefferies CRB index, a global benchmark for
commodities, was down 0.13 percent. Gold also outperformed U.S.
equities, with the SP 500 stock index on track for a fifth
straight day of losses.
Gold, traditionally a safe-haven asset, this month had been
shunned by investors who turned to the dollar instead, leaving
gold to move in tandem with riskier assets such as equities,
industrial metals and oil.
But that relationship abruptly broke down on Thursday.
"Since yesterday we have seen more interest come through
from physical buyers ... because prices have come down
substantially," said Afshin Nabavi, head of trading at MKS
Finance.
"But there is more upside than downside risk for gold at the
moment as the political situation is very jittery with tension
in Iran and economic problems especially in the euro zone.
People will want to buy physical gold again. Those who went out
since December are now waiting for prices to stabilize before
getting in again."
Since last year, many investors have unwound bullish bets in
gold, cashing in the metal to cover losses in other markets,
after the turmoil in Europe raised the prospect of a recession
that threatens the global economy.
But in China, gold demand hit a record high in the first
quarter due to investor worries over inflation and property
market curbs, the World Gold Council said on Thursday, bucking a
lower trend in global consumption.
PHYSICAL BUYING
"Evidently, some buying on the dips emerged above December
lows also with fresh physical inflows with prices starting to
look attractive," VTB Capital said in a research note.
"Some physical interest is welcome, but much more serious
buying out of Asia needs to emerge for us to see a sustained
recovery. For now, the investor community remains spooked and is
unlikely to return to the market with full vigour unless we have
a monumental credit event in Europe or a pronounced dollar
retreat."
Investors will keep an eye on the euro zone debt crisis,
which was hurting the single currency. International Monetary
Fund chief Christine Lagarde warned of "extremely expensive"
consequences if Greece were to leave the euro zone, a once-taboo
possibility that European leaders have begun to discuss openly.
Investors also focused on Spain, whose borrowing costs shot
up at a bond auction after economic data confirmed the country
was back in recession and reports that nationalized Bankia had
suffered an outflow of deposits hammered its share price.
Silver bounced by over 4 percent to an intraday high
of $28.32, its largest one-day rise since February. It had
fallen for eight days in a row, its longest losing streak since
a 10-day decline that began in late August 2008. By late
afternoon in New York, it was up 3.25 percent at $28.02.
Platinum was up 1.74 percent at $1,450 an ounce,
while palladium rose 2.31 percent to $600.50 an ounce.
(Editing by Jonathan Leff, Dale Hudson, Bob Burgdorfer and
David Gregorio)
Gold Prices Rise More Than 1%
"A lot of blame for the move has been laid at the door of (Thursday's weaker than expected)Philly Fed numbers, but I think the market was overcooked on the downside and having held above $1,522 was ripe for a bounce."
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However, a lack of major volume in the market meant the move did not change his negative view of gold, he added.
The euro recovered from a four-month lows against the dollar to move into positive territory, taking some pressure off gold, though concerns over a Greek euro exit and instability in the Spanish banking system meant confidence was weak.
Gold bucked the trend in the wider markets to trend lower, with European shares falling 0.6 percent and oil prices slipping to their lowest this year.
The metal's relationship to heightened risk aversion has been rocky since the start of the euro zone crisis. It rose to record highs last year in part because investors were buying the metal as a safe store of value, but as the dollar and treasuries found greater favor as havens, it slipped back along with the euro.
Its price fall to its lowest since January has tempted investors back, however.
"Yesterday, gold defied a stronger dollar, weaker equities, and another raft of negative EU headlines (to rise). It felt like the gold market of yesteryears," UBS said in a note.
MOMENTUM KEY
"To see a return of gold reacting positively to macro stresses is indeed refreshing, but it is still far too early to make any firm conclusions from here that gold has indeed turned the corner," it added. "Momentum will be key, and follow-through buying will have to kick in to encourage investors to jump in."
"More importantly, gold's reaction function will have to consistently exhibit its safe haven properties, and do so for some time to attract strategic buying."
Gold Prices Fade on Greek Political Gridlock
On Thursday, poor economic results out of the US supported the case for further monetary easing. The Philadelphia Federal Reserve Bank reported that its broadest measure of manufacturing conditions dropped from a reading of 8.5 in April to -5.8 in May. Additionally, the Department of Labor delivered disappointing results, with jobless claims flat at 370,000.
Gold as a crisis hedge
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The idea that gold will revert to “safe haven” trade, which has not been demonstrated recently, is held by Marcus Grubb, Investment Managing Director at the World Gold Council. He believes if Greece exits the Eurozone and devalues its currency, “gold’s qualities as a hedge against inflation risk, currency depreciation and market volatility” would emerge.
Sharing this view, Tom Essaye, President of Kinsale Trading, indicated that while gold has not recently behaved like a safe haven, it may ultimately strengthen from the European debt crisis. He commented that “if we continue to see a worsening of this Greek crisis you will see money start pushing into gold. Up to this point in the European crisis it has not acted as a safe haven. As we begin to hear things about runs on Greek banks, about Greece being expelled from the euro, I think some of that money looking for a safe haven that has gone almost exclusively into US treasuries and US dollars will begin to circle over into gold. I think that you are going to begin to see some money flow into gold as a crisis hedge, not just from the Middle East but also as this European crisis becomes a sovereign one once again.”
Company news
Gold Fields Ltd. (NYSE:GFI), a top gold producer, reported an earnings decline of 18 percent in its most recent quarterly filing. Gold production issues and reduced gold prices in the South African rand were major contributors to the decline.
Gold Fields’ production level fell six percent for the quarter compared with the previous quarter. The company indicated that operating costs increased over the quarter, “mainly due to overtime worked and major maintenance work over the Christmas period. In addition, more employees were employed, in line with the project build-up.” Earlier in the year the company reported an accident involving three miners; however, none of the miners involved were fatally injured. The price of gold in rand impacts Gold Fields as approximately 50 percent of its gold production comes from South Africa.
Gold Fields maintained its production target range of approximately 3.5 million troy ounces of gold for the current year.
Junior company news
Bravada Gold Corp. (TSXV:BVA) filed an updated technical report on SEDAR concerning an updated PEA at the company’s Wind Mountain property in Washoe County, Nevada.
Goldgroup Mining Inc. (TSX:GGA) filed its latest Cerro Colorado gold mine technical report on SEDAR.
Northern Vertex Mining Corp. (TSXV:NEE,OTCQX:NHVCF) reported the latest drill results from its Phase II drill program at the Moss gold-silver project.
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.
Gold Prices Fade on Greek Political Gridlock originally posted on goldinvestingnews.com
METALS OUTLOOK: Momentum May Carry Gold Prices Higher Next Week
By Debbie Carlson
Of Kitco News
http://www.kitco.com/
(Kitco News) - Momentum may carry gold prices higher next week after the metal bounced off multi-month lows, with market participants watching how events in Europe unfold in the coming days.
Prices were higher on Friday and mixed on the week. The most-active June gold contract on the Comex division of the New York Mercantile Exchange rose Friday, settling at $1,591.90 an ounce, up 0.50% on the week. July silver rose Friday, settling at $28.715 an ounce, down 0.61% on the week.
In theKitco gold surveyout of 33 participants, 23 responded this week. Of those 23 participants, 21 see prices up, while two see prices down, and zero are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.
Several analysts who follow technical-chart patterns said this week’s low of $1,526.70 for the June futures was important to hold and may provide a stronger base of support for the market if prices fall again. These analysts said gold could target $1,625-$1,640 next week if momentum continues up.
Gold prices rallied on hopes for another quantitative easing after the Fed meeting minutes suggested again that the Fed stands ready to act. Further support came from weaker-than-expected data on Thursday, specifically the drop in U.S. leading indicators and the Philadelphia Fed index.
Yet analysts at Barclays said those who only focus on Thursday’s news have too narrow a view as U.S. data is mixed. Thursday’s weaker data “follows strong industrial output and housing starts in April, a rebound in the Empire state manufacturing index and the strongest builder sentiment in five years. Jobless claims held steady, and point to a modest uptick in payroll growth in the May employment report on June 1.”
After two days of sharp gains, some analysts suggested gold might have turned a corner for price direction after recent weakness. They pointed out that gold’s ability to rally Thursday as risk assets fell might signal a new direction for gold, returning it to safe-haven status, but others urged caution, saying that one day does not make a trend.
Edward Meir, commodities consultant for INTL FCStone, said while Thursday’s bounce was “impressive,” he wants more evidence that gold’s recent gains have legs.
“We still are not that comfortable with the European situation, which still has the potential of going off the rails between now and June 17th, at which time the Greek situation should clarify itself,” he said.
Meir and other market watchers said given the unknowns in Greece between then and now, the U.S. dollar should stay stronger and added that time will tell whether gold has become a safe haven on its own or if this week’s action was just a short-covering rally. If gold can gain in tandem with the dollar, it may have returned to safe-haven status, as normally the gold falls versus the greenback because the metal is denominated in dollars.
“Much will depend not so much on the European debt situation, as opposed to whether the global macro environment starts to deteriorate even further. Such a scenario would help gold’s upside more, as central banks will then be expected to be more aggressive in terms of quantitative easing laying fertile ground for a more sustained advance in gold,” Meir said.
Kaeppel's Corner: Wild-Eyed Speculation for Normal People
Let’s face it, in terms of image, cowboys and traders have really been knocked down a peg over the years. The cowboy used to be the American symbol of a confident, self-sufficient kind of guy. Didn’t need anything from anyone (“Ma’am”). Now if you see someone dressed like a cowboy you tend to think either, a) that the Village People are in town for a show, or b) that “that jerk better not start smoking in here!”
The same sort of goes for traders. There was a time when a floor trader or even an independent off-floor guy represented that same gunslinger persona. On his own, calling his own shots (so to speak), making it on his own or going down with both guns blazing, whatever, the bottom line is you knew you were dealing with a rugged individualist (OK, or at least with a person who fancied himself to be a rugged individualist until his money ran out). Nowadays a successful trader (i.e., one who makes a boatload of money) is more likely to be pilloried as a “greedy, non-fair share paying 1%er, who needs to give back to the society that allowed him to become rich.”
Yes indeed, tough times for rugged individualists.
Still, despite all of this, human nature being what it is (and with no cure in sight) lots of people still have this crazy “hankerin’” to make a lot of money in the financial markets. So even though it is presently out of vogue and frowned upon in certain circles let’s consider one simple idea.
Going for the Gold, er, I Mean Silver
Figure 1 displays a weekly bar chart for spot silver with the latest Elliott Wave count from ProfitSource by HUBB overlaid. As you can see, despite the fact that silver has been in something of a freefall of late, the latest count is still projecting a potential move to sharply higher prices in the months ahead.
OK, this would be a really good time to issue a caveat. So here goes: not all Elliott Wave counts that project sharply higher prices actually pan out. I know that may come as a shock to some and as a disappointment to many but reality is, well, pretty darn realistic at times.
Figure 1 – Weekly Silver with Elliott Wave Count
So one possibility for the true “gunslinger” would be to buy silver futures contracts. Of course, it should be noted that a lot of gunslingers back in the day ended up dead. It should also be noted that since peaking in May 2011 about 81, silver has declined to about 43. With a silver futures contract a one point move in price equals $5,000. To put it another way, a trader who bought at the top and is still holding a long position (may I suggest a course on risk control and money management?) is presently sitting on an open loss of $190,000. Like I said, a lot of gunslingers end up dead.
So perhaps buying a silver futures contract is not your thing. Not to worry. Because the marketing people stay up late. And although many ideas don’t pan out (single stock futures anyone?), others stick and offer great opportunity. For example, ticker SLV is an exchange-traded fund that tracks the price of silver. Therefore buying shares of SLV allows you to profit if the price of silver rises. As I write SLV is trading at $27.24, so to buy 100 shares would cost $2,724 (which for the record, completely eliminates the risk of losing $190,000).
In Figure 2, we can see that the Elliott Wave count for SLV is also projecting a potential rise above $50. So if that were to pan out, a trader who bought SLV around $27 could stand to roughly double his or her money (did I mention that not all Elliott Wave counts work out as projected?).
Figure 2 – SLV with Elliott Wave Count
A Different (Slightly More “Wild-Eyed” Approach)
For the record, I am all for a well thought out approach to investing. But the purpose of this article is to highlight something slightly different. For one of the great things about using options is that they allow you to “try” things that you might normally never consider. For example, most of us would never consider buying a silver futures contract. And let’s be honest here – that’s probably a good thing (if you are confused about this point, please go back and re-read the part about the open $190,000 loss).
A lot more people might be inclined to buy 100 shares of SLV since it is more like buying a regular everyday stock. Still, $2,724 on a shot in the dark may be a little steep for some. Fortunately, there is yet another alternative. Figures 3 and 4 display the particular of the following position:
-Buying 2 January 2014 SLV Calls @ $4
Figure 3 – SLV Jan 2014 Calls
Figure 4 – SLV Jan 2014 Calls
A few things to note about this position:
-The cost to enter the trade and the worst case possible loss is $800.
-This trade gives you until January 2014 for silver to make a move to the upside
-The “delta” on this position is 103 which means that at the moment it is essentially equivalent to buying 103 shares of SLV (but the cost is only $800 instead of $2,700).
-If the Elliott Wave projection did work out (did I mention that they don’t always?), this trade could generate a profit in excess of $4,000 on an $800 investment.
Summary
Do most of us ever really think about speculating in silver? Probably not. And among those of us who do, how many will ever actually buy a silver futures contract, or even buy and hold shares of SLV for the long-term? Who knows? But the real purpose of this article (besides ensuring that I receive my next paycheck) is to point out that it is in fact possible to engage in what many would consider to be “wild eyed speculation using those risky options”, with a relatively low dollar risk (in this case risking $800 over the next roughly year and a half).
So for all of you rugged individualists out there, repeat after me:
Yippe Kie Ay!
Jay Kaeppel
Staff Writer and Trading Strategist
Optionetics.com ~ Your Options Education Site
NOTES:
Interested in covered call writing? Log onto www.MoneySteps.com for a free trial. Course videos by Tom Gentile and Monday/Wednesday/Thursday Case Study updates by Jay Kaeppel.
General Moly Inc (GMO) Shares Enter Oversold Territory
In trading on Friday, shares of General Moly Inc (AMEX: GMO) entered into oversold territory, changing hands as low as $2.57 per share. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.
In the case of General Moly Inc, the RSI reading has hit 26.8 — by comparison, the universe of metals and mining stocks covered by Metals Channel currently has an average RSI of 31.6, the RSI of Spot Gold is at 43.4, and the RSI of Spot Silver is presently 35.9.
A bullish investor could look at GMO’s 26.8 reading as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.
Looking at a chart of one year performance (below), GMO’s low point in its 52 week range is $1.98 per share, with $5.06 as the 52 week high point — that compares with a last trade of $2.61. General Moly Inc shares are currently trading down about 5.1% on the day.
According to the ETF Finder at ETF Channel, GMO makes up 1.67% of the Rare Earth/Strategic Metals ETF (AMEX: REMX)which is trading lower by about 2.4% on the day Friday.
See what other ETFs contain GMO »
See what other stocks are held by REMX »
POSCO (PKX) Shares Enter Oversold Territory
In trading on Friday, shares of POSCO (NYSE: PKX) entered into oversold territory, changing hands as low as $76.5196 per share. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.
In the case of POSCO , the RSI reading has hit 28.9 — by comparison, the universe of metals and mining stocks covered by Metals Channel currently has an average RSI of 31.6, the RSI of Spot Gold is at 43.4, and the RSI of Spot Silver is presently 35.9.
A bullish investor could look at PKX’s 28.9 reading as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.
Looking at a chart of one year performance (below), PKX’s low point in its 52 week range is $70.47 per share, with $113.24 as the 52 week high point — that compares with a last trade of $76.71. POSCO shares are currently trading down about 1.6% on the day.
According to the ETF Finder at ETF Channel, PKX makes up 8.24% of the iShares MSCI Emerging Markets Materials Sector Index Fund ETF (NASD: EMMT)which is trading lower by about 2.4% on the day Friday.
See what other ETFs contain PKX »
See what other stocks are held by EMMT »
Big Majority Of Survey Participants See Higher Gold Prices Next Week
Following this week’s bounce from the $1,520s region, most survey participants in the weekly Kitco News Gold Survey expect gold prices to continue to build on late-week gains.
In the Kitco News Gold Survey, out of 33 participants, 23 responded this week. Of those 23 participants, 21 see prices up, while two see prices down, and zero are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.
A solid majority of participants expect prices to rally next week, especially since June gold futures on the Comex division of the New York Mercantile Exchange held the low set on Wednesday of $1,526.70. Many said the sell-off was overdone so the rebound was in due course.
“Gold made everybody right by the end of the week… bulls, bears, and fence-sitters alike can claim victory. Wednesday’s high-volume capitulation selling successfully … was followed by an impressive rally on Thursday that saw the largest one-day increase in open interest (16,000 contracts) in quite a long time. Most of the big changes in open interest the past 2-3 months have been declining so a rise of this magnitude indicates money returning to gold. Examples of technical indicators such as this tend to endure the trend so I look for gold to trend a little higher in the week ahead, settling into a $1,600-$1,625-ish range,” said Ken Morrison, editor and founder of online newsletter Morrison on the Markets.
Those who see weakness next week said they think that gold cannot build on these gains and that the rally was nothing more than a short-term bounce in an otherwise down-trending market. Worries about the eurozone, which have pressured gold recently, remain at the forefront, they add.
There were no participants who were neutral on prices
Follow me on Twitter! If you want to keep up with metals news and features, then follow me on Twitter. It’s free, too. My account is @dcarlsonkitco
By Debbie Carlson of Kitco News; dcarlson@kitco.com
Allen Sykora contributed to this survey.
