Gold Bounces to Start the Year
Gold prices seem to be benefiting from a double negative. It is well known that the short position on the Comex has climbed significantly over the past two months. Anticipation for continued sliding prices due to the Fed’s tapering plans and the Fed’s deflation worries had reached such widespread acceptance that it has been hard to find any bulls. The GLD ETF continued to lose deposits as the last days of the year invited tax sales. Money managers will certainly keep a keen eye on Fed action over the next few months. With the US stock market indexes reaching for new highs regularly, it is difficult for traders to hold onto positions that do not appreciate at such an accelerated level. Of course, it all seems to be fashion that chooses the assts that appreciate. Stock prices have been climbing on the two pronged argument that the US economy is improving and the Fed’s stimulus program will continue, albeit at a slower pace. The measures of a better US economy have been on shaky ground for over a year. The optimism that there will be improvement is greater than any evidence to such a view. The equities price appreciation from the stimulus program comes in the face of a Fed that is so worried about deflation that they promise to keep rates near zero through 2015. At some point extremely low rates will rebalance asset prices. Although, due to leveraged trading money managers have the upper hand in pricing, the physical gold market has not waned. It has merely shifted from the west to the east. Despite the RBI restrictions on gold imports, demand for gold remains very high in India. Add to that the competition the Chinese are giving for metal in the bullion market and a less bearish picture begins to take shape. With the lower prices, production numbers are certain to drop over the next few months. If central banks continue on their path of building gold stocks, the supply demand picture of the physical metal will begin to influence prices higher again. Technically, The longer term charts are tempting the downside and will likely keep pressure on prices for the first quarter of the year. Spot gold needs a close above 1225 today to see prices begin to scare shorts into covering. Buy stops will most definitely be found near 1337 to help drive an upside move to test 1250. A failure to close above 1225 will not be as bearish as a negative close for the day. If prices swing lower on the day, new short sellers should be anticipated.
|Last||GCG4 1216||SIH4 1991||
ETF: GLD Deposits: 798.22 tonnes unch Comex GC O.I. : 381,536 -111 ETF: SLV Deposits: 9,958.64 tonnes unch Comex SI O.I.: 132,681 +1612 GC/EU 891 GC/SI 60.92 PL/GC 1.1392 GC/WTI 12.40
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