Gold Ends Near Steady In Lackluster, Pre-Holiday Trading

Gold prices ended the U.S. day session near unchanged Tuesday. Chart consolidation was a featured in a ho-hum trading session as it appears U.S. traders are focused upon the upcoming Thanksgiving holiday Thursday. The U.S. dollar index hovering near a four-year high continues to provide a bearish anchor for the precious metals. February Comex gold was last up $1.10 at $1,197.70 an ounce. Spot gold was last down $0.80 at $1,198.00. March Comex silver last traded up $0.175 at $16.61 an ounce.

There was a heavier slate of U.S. economic data released Tuesday, highlighted by the second-quarter report on gross domestic product. The GDP report came in at up 3.9%, on an annual basis, which was well above market expectations for a rise of 3.3%. Gold saw an initial dip on the GDP figure, but then quickly rebounded on short covering and bargain hunting on the dip.

Other U.S. data released Tuesday included the U.S. house price indexes, the Richmond Fed business survey, and the S&P/Case-Shiller home price index. The Richmand Fed survey came in on the weak side of expectations, which on this day somewhat offset the stronger GDP report.

U.S. markets activity is likely to start to wind down Wednesday, ahead of the Thanksgiving holiday on Thursday. Typically, Friday finds one of the lightest-volume trading days of the year for U.S. markets.

In overnight news the OECD again warned that economic stagnation in the European Union is problematic for the entire global economic system. The OECD urged the European Central Bank to enact still more monetary policy stimulus measures.

The market place is looking ahead to Thursday’s OPEC meeting. Some believe the beleaguered oil cartel could reduce its overall daily oil production quota, or at least call for strict adherence to existing quotas, most of which are ignored by OPEC nations. Nymex crude oil futures are trading not far above the recent three-year low. This could be a “make-or-break meeting for OPEC—or at least its most important meeting in years. Saudi Arabia and Iran will be the key players at the OPEC meeting.

The London P.M. gold fix was $1,199.00 versus the previous London A.M. fixing of $1,202.25.

Technically, February gold futures prices closed near mid-range again today. Bears still have the overall near-term technical advantage. Prices are in a 4.5-month-old downtrend on the daily bar chart. However, the bulls are working on establishing a near-term uptrend from the November low. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,225.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at last week’s low of $1,174.70. First resistance is seen at Monday’s high of $1,204.50 and then at last week’s high of $1,208.20. First support is seen at today’s low of $1,190.00 and then at $1,186.70. Wyckoff’s Market Rating: 3.0

March silver futures prices closed nearer the session low but did hit a four-week high early on today. The silver bears still have the overall near-term technical advantage. Prices are in a four-month-old downtrend on the daily bar chart. However, the bulls are working on establishing a near-term price uptrend from the November low. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at last week’s low of $15.93. First resistance is seen at today’s high of $16.755 and then at $17.00. Next support is seen at Monday’s low of $16.305 and then at $16.16. Wyckoff's Market Rating: 3.0.

March N.Y. copper closed down 380 points at 296.80 cents today. Prices closed near the session low and closed at an eight-month low close today. The bears have the solid near-term technical advantage and gained more power today. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at last week’s high of 307.20 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the October low of 295.00 cents. First resistance is seen at 300.00 cents and then at today’s high of 302.45 cents. First support is seen at the November low of 296.30 cents and then at 295.00 cents. Wyckoff's Market Rating: 2.0.

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The 6 PM Recap With Gary Wagner: Having It Both Ways (Not!)

Having It Both Ways (Not!)

Third quarter U.S. GDP was revised upward to show that the economy expanded by 3.9%. Consumer sentiment, however, fell during November. These two data points seems to be contradictory, when in fact, behind the consumer’s thinking lies an unfortunate reality.

Wages are stagnant. That will cast a damper on anyone’s view of his or her personal economy. Worse, it means that there is more borrowing pressure on struggling families. Even worse than that, the subtext is that more and more wealth is being concentrated in the hands of the few. That does not bode well for a consumer society – and we say this not from an ideological but rather practical viewpoint.

The dollar fell on that news in part, but also on the foot dragging by the E.U. on their stimulus program. The dollar was also dinged by an upbeat report from the Bank of Japan about their country’s generally more positive prospects.

More news is due out tomorrow on the U.S. economy, although given the truncated trading day we’re not sure how much that will mean to market movement.

Weekly jobless claims, durable goods, personal income, the Chicago Purchasing Managers’ Index, new home sales and pending home sales are all on deck.

Also on the minds of traders are the OPEC meetings that are scheduled to start Thursday. West Texas Intermediate crude is threatening to settle below $74 per barrel. And that’s with no push from a higher dollar, which makes oil cheaper. Brent oil is going to close below $79, a figure once thought inviolable.

If OPEC somehow corrals its members into cutting production, prices could temporarily go back up. If constituent members of the struggling cartel go their own way and keep producing however much oil they want, prices will continue to drop. If prices do go back up, they won’t stay there long. The big-dog in just about everything else, the United States, is expanding its output steadily and grandly.

So, we have the equities mostly up on the day. Oil and the bond yield are down. The dollar is down. Gold is barely up, and has struggled to find direction. All the other outside influences tell us gold ought to be lower. But it isn’t.

End-of-the-month position squaring is at work, as well the peace-of-mind factor. Who wants to be worried while sitting with their bellies stuffed and your least favorite uncle who lost everything in ’08, give you advice on trading?

Very few people on the New York desks believe us.

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Nov 25 The Clock is Ticking in Switzerland Peter Schiff

The Clock is Ticking in Switzerland

Peter Schiff

For most of my career in international investing, I had always placed a great deal of faith in Switzerland's financial markets. In recent years, however, as the Swiss government has sought to hitch its wagon to the flailing euro currency and kowtow increasingly to U.S.-based financial requirements, this faith has been shaken. But this week (November 30th) a referendum in Switzerland on whether its central bank will be required to hold at least 20% of its reserves in gold, will offer ordinary Swiss citizens a rare opportunity to reclaim their country's strong economic heritage. It's a vote that few outside Switzerland are following, but the outcome could make an enormous impact on the global economy.
Traditionally, the Swiss franc had always attracted international investors looking for a long-term store of value. That's because the Swiss government had always kept sacred the idea of conservative central banking and fiscal balance. When the idea of the European common currency was first proposed, the Swiss were wise to stay out. They did not want to exchange the franc for an unknown and untried pan-national currency. The creators of the euro had suggested that it would become the heir to the strong Deutsche mark. Instead, it has become the step-child of the troubled Italian lira and the Greek drachma. In retrospect, the Swiss were wise to take no part in the experiment.
But the decision of the Swiss government in 2011 to peg the franc to the euro, in order to prevent the franc from rising, has meant that the nation has adopted the euro de facto. In order to effect this peg, the Swiss government has had to intervene massively in the currency exchange market to buy and stockpile euros, thereby weakening the franc. The raw numbers are so staggering that rank and file Swiss have taken notice. Over the last few years the Swiss economy has stagnated along with the rest of Europe, and Swiss citizens have come to understand that the current policy will require an open-ended commitment to keep doing more of the same. This frustration has given birth to the referendum movement.
In 1999, Switzerland became the last industrial nation to go off the gold standard, a system that had served the world well for centuries. At that time, the Swiss National Bank held about 2,600 tons of gold, representing about 41% of its total currency reserves. By the end of 2008 its gold holdings had dwindled to just 21% of reserves. And as of August this year, they had fallen to just 7.9%. The raw tonnage has fallen over that time to just 1,040 tons, a 60% decline from 1999.
But the real action can be seen in the Swiss National Bank's holding of foreign currencies, mostly the euro, which now sits at a whopping 453 billion francs' ($495 billion). That's about 56,000 francs ($61,000) per man, woman and child in the country, almost 90% of which have been accumulated in just the past six years. The stated aim of all these purchases is to depress the value of the franc against the euro. Currency valuation directly translates into purchasing power, which means that the Swiss are poorer for these efforts. For a family of four that means the Swiss government has diverted almost $33,000 worth of purchasing power every year for the past six years to citizens of other European countries who had mistakenly adopted the euro. That's a lot of money, even for a rich country.
Swiss politicians have said that purchases have been needed to protect the citizenry from falling prices and from the diminished exports that would result from a rising currency (In my latest newsletter, read how this central bank concern about deflation is strictly a 21st century paranoia). Putting aside the evidence to suggest that the Swiss economy has prospered under a rising currency, this idea assumes that exports are a means, rather than an end. The purpose of exports is to pay for the stuff that you import and consume. There are many things that the Swiss people want that they don't make. To get those things, they export the things that they do make (i.e. watches, chocolate, cheese, etc.). The beauty of a strong currency means that you don't need to export as much of the stuff you make to get the stuff you want. In other words, you don't have to work as hard to enjoy greater consumption. Swiss living standards could have been much higher today if Swiss bankers and politicians had not tethered the franc to the euro.
A 20% gold reserve requirement would severely limit the ability of the Swiss government to continue its pegging policy. In order to reach the new target reserve levels, the Bank would either have to sell hundreds of billions of currency reserves or buy thousands of tons of gold on the open market. Critics contend that this would be a disaster for Switzerland. But the large amount of gold reserves before 1999 did not weigh on the Swiss economy. In fact, before that time, it was the envy of the world. While other countries were undermined by the promises politicians made with a printing press, the Swiss economy prospered thanks to the discipline provided by gold. Economists and politicians who are urging the Swiss to reject the proposal make the case that inflation is a prerequisite for growth, but many Swiss know that that is a lie.
While the pundits see little chance of success for the gold vote, I am encouraged by the recent results of another recent Swiss referendum that rejected the imposition of what would have been the highest minimum wage in the world. Swiss voters were smart enough to understand that an arbitrarily high wage costs would simply destroy employment opportunities without offering any tangible benefits in return. Perhaps they will be equally wise about the usefulness of sound and stable currency.
As an American, I envy the choice that the Swiss have given themselves. If successful, the vote could be seen as the first major counterattack against the forces of fiat currencies and unlimited global QE. A successful outcome may also mean the requirement for the Swiss government to buy gold would add significant demand in the gold market and should thereby help put the metal back on track.

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Nov 25 Can Gold Extend Its Rally? Stewart Thomson

Can Gold Extend Its Rally?

Stewart Thomson

1. While it hasn’t affected gold significantly, the price of oil has fallen quite dramatically over the past couple of months, and that’s bad news for oil companies. Profit margins are shrinking and layoffs could be coming, if the situation doesn’t improve.
   
2. If oil continues to decline, the shale oil producers could get into serious trouble, and that could send America back into recession.
   
3. Mainstream media promotes the idea that lower oil prices are good for consumers, but most consumers are deeply in debt, and it’s questionable whether lower oil prices are going to lead to any increase in consumer spending.
   
4. All investor eyes should be focused on the upcoming OPEC meeting in Austria. It takes place on Thursday, which is Thanksgiving Day for Americans.
   
5. Please click here now. That’s an oil options chart from Goldman Sachs. It suggests that the price of oil will move up or down by about $3.60 a barrel, as the OPEC production decision is announced.
   
6. Please click here now. This chart shows US oil production reaching nine million barrels a day.
   
7. High prices are needed to keep that production growth in a rising trend.
   
8. Even if OPEC were to announce a major cut in production, that would only create a further rise in US oil production, putting renewed pressure on OPEC to cut production again.
   
9. It’s a self-defeating exercise for OPEC to keep cutting production, while America increases production. Thus, I expect only token action to be taken by OPEC this week.
   
10. How would a failure by OPEC to cut production affect the price of gold? 
    
11. For the possible answer, please click here now. That’s the daily gold chart. Note the position of the 14,7,7 Stochastics oscillator. The lead line is near 80, suggesting the gold rally from the $1130 area lows is “long in the tooth”.
    
12. If OPEC disappoints commodity bulls, I think gold could decline, but only modestly, to the $1170 - $1180 area, and it might do so in anticipation of the OPEC decision.
    
13. For any market to continue to rally in a technically overbought situation like gold is entering into now, it needs a catalyst to do so. Is there such a catalyst on the horizon?
    
14. Well, please click here now. That’s the daily chart of the US dollar versus the Japanese yen. There’s a 14,7,7 Stochastics sell signal in play, and the dollar has definitely lost upside momentum over the past week.
    
15. In the big picture, gold has performed admirably, while both the yen and oil have collapsed. 
    
16. If the yen can begin to rally, gold could gallop higher, to the $1250 - $1255 area, even while being technically overbought.
    
17. It’s important for Western investors not to get overly-obsessed with the fear trade for gold, and ignore the love trade. Please click here now.
    
18. The city of Dubai has long been recognized as the “city of gold”, and rightfully so. Five hundred jewellers are now in forces to build the world’s longest piece of gold jewellery, to promote the industry.
    
19. The love trade (gold jewellery) has always been the biggest and most consistent driver of the gold price. I don’t expect that to change,regardless of what happens in America.
    
20.  The good news is that jewellers in China, India, and Dubai are inexpansion mode, and it’s clear that Western mining stock shareholders stand to reap substantial reward from the relentless growth in gold jewellery demand.
    
21. Please click here now. That’s the daily chart for GDX. It’s performing “according to plan”. There’s clear sell-side HSR (horizontal support and resistance) in play in the $20 area, and the rally has stopped there.
    
22. Simply put, the traffic light has turned red, and the gold stocks sports car has stopped. After a brief rest, I expect higher prices. There’s nothing I see here that is fundamentally negative for gold stocks. Nothing.
    
23. Gold stocks are well supported by the enormous expansion in the global gold jewellery business, and so is silver. To view the daily chart, please click here now.
    
24. Silver tends to substantially outperform gold in the later stages of a rally, regardless of whether that rally is short term or long term. A move above the black downtrend line should attract lots of hedge fund buying, and extend the rally. A two day close above $16.75, should get that job done!

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