Shelter From The Storm

The half- and quart-point losses on the Dow and S&P 500 look positively like a day at the beach compared to the rest of the world’s exchanges. And the modest rise on the NASDAQ seems like Thanksgiving, Christmas and Fourth of July rolled into one.

European indices were down anywhere between 2 and 2.5%, but the real shellacking took place in Asia early today where Shanghai was down 5.3% after having been down 6% early on.

Gold seems to have burst to the forefront on the Asian flight from risk. Gold is behaving in relation to the stock markets just the way it ought to. When sledding gets rough, traders head for the safe haven play.

A weaker dollar market is beginning to experience a bearish tone that seems to be overtaking the greenback, helping also to push gold higher.

Oil was rebounded a touch today, finding its feet on assessments that it is oversold and there is money to be made – at least in the short term – on buying dips. But it is in a scary place now. We may see $55 before you know it.

A number of other fundamental forces are at work. One by one, the peripheral energy producers – Russia among them – are feeling the pinch of the fall in prices. Venezuela is already rushing into a whirlpool (Of course, what could one expect with gasoline at 4 cents a gallon?) But Russia and the central Asian republics formerly in the Soviet Union are key, even if minor, players in the world’s overall economy.

This is a tough call, but we also think that the release of today’s Senate torture report doesn’t help stability worldwide. It casts doubt on the integrity of the United States and how its government functions. No one wants the world’s largest economy in turmoil, nor does anyone want it attacked again.

Let’s turn one more time to safe havens and Asia’s problems. China is finally admitting to the world that its economy is slowing. They officially claim growth will be 7%, but more realistically it is at 5%. This is due to a decline in both exports and imports. There is still a credit crunch in China and it is about to get worse – much worse. Bank reserves requirements are going to be raised and that doesn’t spell good news for business or the consumer.

It is probably coincidence, but an interesting one, that China is allowing more gold to be imported. Hmmm

Wishing you as always, good trading,

Gary Wagner

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Gold Sharply Up on Safe-Haven Demand, Short Covering; Bulls Gain Technical Momentum

P.M. Kitco Roundup: Gold Sharply Up on Safe-Haven Demand, Short Covering; Bulls Gain Technical Momentum

Traders and investors were spooked a bit Tuesday due to several world developments—and the gold and silver markets were keen beneficiaries. Gold and silver prices ended the U.S. day session sharply higher and hit six-week highs Tuesday. Safe-haven demand, short covering and bargain hunting were featured in the yellow metal. Importantly, Tuesday’s price action on the charts is the strongest evidence yet that the gold and silver markets have put in near-term bottoms, if not major lows. February Comex gold was last up $37.00 at $1,232.00 an ounce. Spot gold was last up $28.30 at $1,233.00. March Comex silver last traded up $0.849 at $17.125 an ounce.

World stock markets were under pressure Tuesday, led by sharp declines in Asian shares, as “risk-off” trader and investor attitudes were prevalent in the market place. The falling price of crude oil remains in the spotlight of the market place this week. The big drop in oil prices recently has traders and investors uneasy--even though lower gasoline prices at the pump will support economic growth by increasing consumer spending in other areas.
Nymex and Brent crude oil futures prices hit five-year lows Tuesday. Brent fell to $65.37 a barrel and Nymex fell to $62.25. Both markets have rebounded from their intra-session lows. 

Asian stock markets saw strong selling pressure Tuesday from a move by Chinese officials to tighten regulation of its domestic bond market. And in the European Union, notions that Greece could pull out of the union if more liberal leaders are elected added to the anxiety in the market place.

The other element mentioned as somewhat unsettling was a report that the Federal Reserve at next week’s FOMC meeting could sound a more hawkish tone on U.S. monetary policy.

The World Bank on Tuesday forecast the Russian economy to contract by 0.7% in 2015. The Russian ruble continues under pressure this week and is at a record low versus the U.S. dollar. Reports Tuesday said the Russian central bank is adding more gold to its reserves as the ruble deteriorates.

The London P.M. gold fix was $1,227.00 versus the previous London A.M. fixing of $1,206.50.

Technically, February gold futures prices closed nearer the session high and hit a six-week high today. Price action today produced a bullish upside “breakout” from the recent choppy trading range and the bulls gained good upside momentum today to strongly suggest a near-term market low, and possibly a major market low, is now in place. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the October high of $1,256.20. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,184.00. First resistance is seen at today’s high of $1,239.00 and then at $1,250.00. First support is seen at $1,221.00 and then at $1,210.00. Wyckoff’s Market Rating: 4.0

March silver futures prices closed nearer the session high and hit a fresh six-week high today. Prices also scored a big and bullish upside “breakout” from the recent choppy and sideways trading range, to suggest a near-term, if not a major, market low is in place. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the October high of $17.825 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at this week’s low of $16.165. First resistance is seen at today’s high of $17.23 and then at $17.50. Next support is seen at $16.81 and then at $16.50. Wyckoff's Market Rating: 4.0.

March N.Y. copper closed up 405 points at 292.55 cents today. Prices closed nearer the session high and scored a bullish “outside day” up on the daily bar chart today. Short covering was featured. A lower U.S. dollar index today also supported copper. A bearish pennant pattern has formed on the daily bar chart. The bears still have the firm overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 300.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the contract low of 277.75 cents. First resistance is seen at today’s high of 295.05 cents and then at 297.50 cents. First support is seen at 2.9000 cents and then at today’s low of 286.55 cents. Wyckoff's Market Rating: 2.5.

By Jim Wyckoff

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Gold Rally Fueled By Safe-Haven Buying, Short Covering As Equities Tumble

By Allen Sykora

The second straight selloff in equities, combined with a U.S. dollar on the back foot, has prompted some investors to return to the gold market.

Gold prices hit their highest level in more than six weeks Tuesday, on a combination of safe-haven buying and short covering.

As of 10:57 a.m. EST, gold for February delivery rose $35.60, or 3%, to $1,230.50 an ounce on the Comex division of the New York Mercantile Exchange. The contract peaked at $1,239, its strongest level since Oct. 23.

March silver  rose 83.4 cents, or 5.1%, to $17.11 an ounce. It peaked at $17.20, its most muscular level since Oct. 30.

George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures, cited a weaker dollar, sagging equities and traders starting to factor in potential inflation.

“The weaker equities – two days in a row – are of course a flag for the funds,” Gero said.

The Dow Jones Industrial Average was down by 171.60 points. The euro rose to $1.24216 from $1.23166 late Monday.

“There is a huge asset switch,” said one New York-based desk trader. “Stock markets overseas took a hammering overnight, and our own is down….It’s also dollar-related. The dollar is getting hammered the worst in a while.

“It’s just the crowd rushing from one asset class to another.”

Some safe-haven buying is occurring, the trader said, pointing out that U.S. Treasury bonds are also sharply higher. Much of the move in gold is also traders buying to cover short positions, or previously placed bearish bets, he added.

“It’s a combination of things, but it was mostly set off by the weakness in equity markets overseas.”

Tim Gardner, managing director for global metals with TD Securities, said the afternoon London gold fixing of $1,227 an ounce was the highest since Oct. 28.

“Why all the buying?” he asked rhetorically. “There appears to have been some changes in asset allocation, with money flowing out of equities and into safe-haven sectors. Gold, which had been trading with a bearish bias the past month, has seen bouts of short covering, but it feels that some fresh longs may be buying into momentum trades.”

By Allen Sykora

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Dec 09 Revolution in Lighting Underway Bob Moriarty

Revolution in Lighting Underway

Bob Moriarty

Resource sector investors have been battered and bruised in the past three years as they watched the masses investing in the DOW and the S&P do well for no apparent reason. With the general stock market looking very toppy in the major averages it begins to look as if the choices for our investment dollars are few.
It’s never true. There is always opportunity somewhere. I went to a conference in Los Angeles in early December that brought it home to me. I had talked to the head of ForceField Energy (FNRG-Nasdaq) on the phone a couple of weeks back. The company sells and installs light bulbs. How boring. I met with him in LA and he briefed me.
Boring is good. A revolution is going on that will change our energy consumption in a major way. Some people are going to make a lot of money if they act now.
We all grew up with incandescent bulbs that were outlawed in the last couple of years by many countries including the US. Incandescent bulbs were inefficient and had short lifetimes. An incandescent bulb lasts 1000 hours in comparison to compact fluorescents that last as long as 10,000 hours but are more expensive. Due to their use of mercury, fluorescent bulbs are actually less environmentally friendly. An incandescent bulb converts only 5% of the energy input to light compared to 60% for a compact fluorescent.
I was actually shocked to learn that a nominal 60 watt incandescent bulb actually requires 168 watts to use because not only does it consume 60 watts to provide light, the heat it creates requires almost twice the power requirement just to cool the surrounding area. While we are still getting used to the idea of saving money with fluorescent bulbs, another revolution is underway that makes fluorescent bulbs old fashioned.
The LED light or Light-Emitting Diode bulb turns 95% of the energy input into light so saves 50-80% of power in comparison to any other type bulb. Since the energy goes into light instead of heat they save even more money on cooling. LED bulbs last an incredible 30,000 hours. A $2 billion market for LED is estimated to grow into a $25 billion market in ten years. The market is growing by 25% yearly. According to the US DOE, there will be $1 trillion in bulb sales replacing the 2.5 billion bulbs in the US today. It’s a big market.
Management from ForceField saw the opportunity in the LED lighting field two years ago and have transitioned the company from a group selling LED lights to becoming a provider of all sorts of lighting solutions. After trying to gain entry into LED sales, they modified their approach to that of simply buying lighting contractors already in the space.
It would be wrong to think of them as strictly a US company. They have contracts to install and monitor lighting from Mexico to Costa Rico. Company headquarters are in New York but the two existing subsidiaries are in Massachusetts and San Diego California.
Light bulbs are now a commodity item. The cost will continue to come down as technology and manufacturing techniques create more efficient bulbs in the same way Moore’s Law brought the cost of computing down at a 50% per year price for decades. The two companies they bought were old school but did have a history and a background. ForceField is training their staffs and coming up with innovative ways of using financing to close sales.
While it’s true LED bulbs are longer lasting and use far less electricity to use and cool, they also cost more and require installation. ForceField will install and monitor for a piece of the savings. That makes sales an easy job.
This is an area where penetration and reputation are critical. One of the things I like best about the company is that anyone can do what they are doing. They have no competitive advantage or franchise. They have to thrive on how much better they are than the dozens of companies entering the space.
Company President Richard St-Julien is a true entrepreneur and is coming up with inventive ways for customers to finance the transition to more efficient LED lighting. He knows he has to stay on his toes just to survive because not only are the bulbs a commodity item, anyone can sell them. He sells solutions instead and that will always succeed. The company has a $115 million dollar market cap today. St-Julien will continue to buy other lighting distribution and sales companies. The company will continue to be profitable and it will get a lot bigger. At some point they will become the flavor of the day and when they do the price will go a lot higher.
I don’t like their website. It is loaded with information and fails to communicate any of their real story. Over time they will begin to get their story out and when they do anyone picking up shares today will be happy.
I don’t own shares. Do your own due diligence.

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Dec 09 Gold Bull Flag: Is It Real? Stewart Thomson

Gold Bull Flag: Is It Real?

Stewart Thomson

1. Is there a strong bull flag pattern in play on the daily gold chart? For the likely answer, please click here now.
   
2. The US stock market has lost upside momentum, and the falling price of oil threatens to create an “Armageddon” type of event in the junk bond market, yet gold looks and feels superb.
   
3. Please click here now . In addition to the bullish flag pattern, there’s an inverse head and shoulder bull continuation pattern that looks solid. The target of this pattern is the $1275 - $1280 area. Is the Western gold community going to receive an early Christmas present, in the form of another rally in the gold price? These charts suggest they are!
   
4. For a closer look at the gold price action, please click here now. That’s the hourly bars chart, which I use to magnify both the flag and the head and shoulders pattern. A solid rally seems imminent.
   
5. I think the dollar may be about to fall fairly hard against the Japanese yen, and that could help to activate the bullish patterns on the gold charts.
   
6. Please click here now. That’s the daily chart, showing the dollar down again against the yen, in early trading today. Note the bearish non-confirmation event in play on my 14,7,7 Stochastics oscillator. 
   
7. Many gold bears, like Jeff Currie of Goldman Sachs, appear to be somewhat stunned that when gold briefly traded under $1180, it failed to fall quickly to $1050. Instead, while the yen has suffered a truly horrific collapse, gold has rallied back to $1200.
   
8. The error in gold market analysis by the bears can largely be explained by their complete failure to predict the recovery of demand in India. The recovery has been spectacular, and I predict it’s not just here to stay, but here to soar, on what I’m predicting will be double digit GDP growth.
   
9. Please click here now. That’s the hourly bars chart for oil. I was a light buyer of oil stocks as oil arrived in the $73 area.
   
10. I’ll be a much heavier buyer at $55 and $40, and I’ll ask the gold community to buy if the price falls there, but the big news about lower priced oil, is related to its powerful effects on the Indian economy and the nation’s current account.
    
11. Please click here now . Indian inflation just fell to a record low. The mafia appears to have some influence on the Indian finance ministry, but under what appears to be substantial pressure from the central bank, I expect India to reduce and possibly completely eliminate gold import duties by the spring of 2015, and perhaps sooner.
    
12. There is simply too much pressure to cut these duties, with smuggling totally out of control, record low inflation, and falling oil prices that could soon turn the current account deficit into a surplus.
    
13. The chop in gold duties will boost government tax revenues. It will take hundreds of thousands of jewellery workers off the breadline, and put them back to work. Most importantly (for the Western gold community), it will boost demand for gold. 
    
14. China is also in the news, and the news is excellent. I think most analysts are seriously underestimating the importance of the Chinese central bank’s decision, made just days ago, which allows more jewellers to import gold. 
    
15. Also, Hong Kong’s top gold industry players have just formed a major link with the Shenzhen jewellery manufacturing area in China, where about 70% of all Chinese gold jewellery is manufactured.
    
16. Please click here now. This new Hong Kong/China gold market synergy is very bullish for gold. It should quickly produce a significant increase in Chinese gold demand. To view the synergy in more detail, pleaseclick here now.
    
17. At the current point in time, gold is clearly a pillar of strength, both fundamentally and technically. While events in China and India revolve mainly around gold jewellery demand ramp-up, America may be set to become a key driver of gold stocks. Here’s why:
    
18. I’ve argued that the Fed would reduce its balance sheet, and that’s in play now. I’ve predicted that the reduction would create a smaller money supply, allowing for a surprising upturn in money velocity. That is happening at the same time as wage pressures grow, and commercial banks are nudged by the Fed to begin making more aggressive loans with their reserves.
    
19. Those reserves exceed two trillion dollars. Alan Greenspan has referred to their potential movement as inflationary tinder, and rightly so.
    
20. Influential economist Mike Ivanovitch is respected in the mainstream financial community. To understand his new views on US inflation dangers, please click here now. Interest rates will rise, but not much, because commercial banks are set to lend out reserves, and flood the system with liquidity.
    
21. Mike ended his discussion with this strong statement: “Equities are still my preferred asset class -- provided the portfolios are carefully reviewed toward a defensive posture. Also, think of putting some of that yellow stuff under your Christmas tree.” –CNBC News, December 8, 2014.
    
22. While most gold analysts are focused on the fear trade, I think it’s too early in the economic cycle for that. Institutional money managers focused on gold bullion ETFs during the 2008 crisis. They saw system risk, and focused on bullion rather than gold stocks. I think that as the inflation I’m predicting begins to appear in 2015, the money managers will focus on gold stocks much more than bullion.
    
23. On that note, please click here now. That’s the daily chart for GDX. The downtrend line has been clearly penetrated, and there’s an irregular drifting rectangle pattern in play. My short term target is $22. It’s tax-loss selling season. As a result, gold stocks are trading erratically, even though gold itself is doing well.
    
24. A nice gold stocks rally should begin early in January. That’s just three weeks away. My suggestion is to put some quality gold stocks under the Christmas tree, and get ready for a super year in 2015!

Stewart ThomsonGraceland Updates

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Dec 09 OPEC Refuses to Cut Production, Oil Plunges off the Chart WolfStreet

OPEC Refuses to Cut Production, Oil Plunges off the Chart

The global oil glut, as some call it, is caused by the toxic mix of soaring production in the US and lackluster demand from struggling economies around the world. Since June, crude oil prices have plunged 30%. It drove oil producers in the US into bouts of handwringing behind the scenes, though they desperately tried to maintain brittle smiles and optimistic verbiage in public.

But everyone in the industry – particularly junk bondholders that have funded the shale revolution in the US – were hoping that OPEC, and not the US, would come to its senses and cut production.

So the oil ministers from OPEC members just got through with what must have been a tempestuous five-hour meeting in Vienna, and it was not pretty for high-cost US producers: the oil production target would remain unchanged at 30 million barrels per day.

“It was a great decision,” Saudi Oil Minister Ali al-Naimi said with a big smile after the meeting.

Saudi Arabia and other Gulf states were thus overriding the concerns from struggling countries such as Venezuela which, at these prices – and they’re plunging as I’m writing this – will head straight into default, or get bailed out by China, at a price, whatever the case may be.

Venezuelan Foreign Minister Rafael Ramirez emerged from the meeting, visibly steaming, and refused to comment.

The US benchmark crude oil grade, West Texas Intermediate, plunged instantly. Even before the decision, it was down 30% from its recent high in June. As I’m writing this, it crashed through the $70-mark without even hesitating. It currently trades for $68.51. Chopped down by a full third from the peak in June.

This is what that Thanksgiving plunge looks like:

Nigerian Oil Minister said OPEC and Non-OPEC producers should share responsibility to stabilize the markets. I don’t know what he was thinking; maybe some intervention by central banks around the world, such as the coordinated announcement of “QE crude infinity” perhaps?

Ecuadorian Oil Minister called the decision a rollover. However, the Iranian Oil Minister, whose country must have a higher price, kept a positive face, saying, “I’m not angry.”

The next OPEC meeting will be held in June, 2015. So this is going to last a while. And there is no deus ex machina on the horizon.

It seems OPEC, or rather Saudi Arabia and some of the Gulf States, decided for now to live with the circumstances, to let the markets sort it out. High-cost producers around the world will spill red ink. Governments might topple. Junk bondholders and shareholders of oil-and-gas IPOs that have blindly funded the miraculous shale revolution in the US, lured by ever increasing hype, will watch more of their money go up in thick smoke.

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The 6 P.M. Recap With Gary Wagner: Oil, Unhinged

Oil, Unhinged

Oil continued to careen lower today, both WTI crude and Brent free falling around 4.25%. (Natural gas tumbled even more – 4.65%.) Oil-dependent nations that have been planning poorly are reeling, Venezuela and Russia among them.

Normally, the fall in oil prices would drag gold down with it. They do consistently but not always trade in tandem. That was not the case. The nosedive in oil is so sharp and so noisy that it finally is rattling the equities markets. As a guide to the impact going-going-gone oil prices are having, remember that the energy sector accounts for about 13% of the S&P 500.

The equities were having other problems, though, too. McDonald’s, on devastating same-store sales, fell almost 4%. The burger-meisters can’t seem to find a formula for the new millennium.

Onto this fire was thrown the wreckage of the Japanese economy in the third quarter, which contracted almost 2% (in annual terms).

Many analysts are betting that Japan is already recovering in the fourth quarter. The Nikkei was up ever so slightly, but you can bet gold buying has become appealing to some Japanese investors, if only until the typhoon blows over. The yield on the Japanese 10-year bond is 0.44%.

The dollar, which had been sailing high and mighty, also took a break today, like American stocks.

On a more market-specific basis, gold found some support through short covering moves and some simmering technical momentum that bulls are able to stoke on the back burner.

But, we have been seeing gold swing in a range for a while. Without seriously new fundamental info, we don’t see that changing a whole lot.

Wishing you as always, good trading.

Gary Wagner

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Short Covering Lifts Speculators’ Gold Holdings In Latest CFTC Data

By Debbie Carlson 

Short covering lifted large speculators’ Comex gold futures and options holdings in the latest Commodity Futures Trading Commission weekly data, after a modest increase in gold prices in the timeframe covered by the report, which is for the week ending Dec. 2.

Since funds arrested the slide in their net-long holdings in the past few reports, the rise in net-long holdings have come mostly on the back of short covering, rather than a big build of new bullish positions. Short covering is when market participants buy back previously sold positions and exit the trade.

Fund managers added to their bullish positions in silver, but had mixed action in the platinum group metals. These traders added to their bearishness in copper as they increased net-short holdings. The data includes information from both the CFTC’s disaggregated report and legacy reports.

Metals prices were mostly weaker during the time period covered by the latest CFTC report. Comex February gold managed to buck the weaker price trend, rising $1.60 an ounce to $1,199.40. March silverfell 15.50 cents to $16.456. January  platinum fell $7 to $1,217.50 an ounce. March palladium was the only other gainer in the metals complex, rising $6.90 to $803.75. Comex March copper fell, dropping 8.6 cents to $2.8915 a pound.

Managed-money traders’ net-long holdings rose to 79,497 contracts, the highest since Aug. 26, as they added 3,692 gross longs and cut 9,577 gross shorts, meaning they cut bearish trades and added bullish ones. Producers and swap dealers both bolstered their net-short positions by cutting gross longs and added gross shorts.

As in the disaggregated report, the non-commercial traders in the gold legacy report also added gross longs and cut shorts. They added 4,428 gross long contracts and cut 8,844 gross shorts. They are now net-long 104,751 contracts, the highest since Sept. 2. Commercials are net-short and raised that position by cutting gross longs and adding gross shorts.

Analysts at Commerzbank said based on the CFTC data, fund activity is behind the recent rise in gold prices.

Joni Teves, analyst at UBS, concurred. She said gold's ability to hold near the $1,200 area “over the last three weeks has mostly been driven by short covering, amplified by thin liquidity conditions. After reaching the year's high of 16.30moz (million ounces) in early November, gold gross shorts have consistently declined by 1.50moz per week. Latest CFTC data shows that gold shorts have declined by a total of 4.50moz or 28% to 11.80moz as of Dec. 2, which is the lowest level since the beginning of September. During this period, gold gross longs have increased by 1.00moz or 5%.”

Managed-money traders increased their net-long silver position for the third week, raising it to 14,428 contracts; however, they did it by short covering. They cut 1,573 gross longs and cut 7,176 gross shorts. Producers increased their net-short position by adding more gross shorts than gross longs.  Swap dealers moved to a net-short position by cutting gross longs and adding gross shorts.

For the fifth week, funds increased their net-long silver position in the legacy report, raising it to 20,751 contracts. As in the disaggregated report, non-commercials cut 2,289 gross longs and cut 8,466 gross shorts. Commercials are net-short and increased that position by cutting gross longs and adding gross shorts.

Jonathan Butler, precious-metals strategist at Mitsubishi, said given the sizable short covering seen in silver, the gross short position held by funds is now the smallest since mid-August, “indicating that investors have greater conviction now that silver will not see substantially lower prices in the short term.”

Commerzbank analysts said silver net-long positions rose even higher than the gain seen in gold in, up by a full 58%. “All the same, the silver price actually fell marginally in the period under review, which suggests weak physical demand. That said, the silver ETFs (exchanged-traded funds) tracked by Bloomberg saw inflows of 28 tons during this period, which in turn points to only subdued silver demand from industry. The silver price is unlikely to make any significant gains until this picks up,” they said.

Managed-money accounts in platinum increased their net-long position to 18,439 contracts. They added 382 gross longs and cut 3,134 gross shorts. Non-commercials in platinum also boosted their net-long position, lifting it to 26,796 contracts in the legacy report. They added four gross longs and cut 3,491 gross shorts.

Large speculators’ net-long palladium holdings slightly rose in the disaggregated report to 18,439 contracts. They added 189 gross longs and added 24 gross shorts. However, the palladium legacy report saw non-commercials cut 352 gross longs and add 119 gross shorts, which lowered their net-long to 21,130 contracts.

“The Nymex palladium book bucked the trend and was the only precious metal posting a decline in positioning,” Teves said. “Palladium net longs (fell) …  due to long liquidation and some additional short positioning. Some longs that were established three weeks ago likely took the opportunity to book profits – palladium prices were up as much as $50 between Nov. 20 and 28. As we've mentioned previously, year-end trading is likely to be limited both in size and time-frame, with investors more inclined to book profits quickly.”

Managed-money accounts increased their copper net-short position for the second week. Their net-short position rose to 5,919 contracts, as they cut 3,442 gross longs and added 606 gross shorts. Large speculators in copper’s legacy report added to their net-short position, lifting to 34,190 contracts. These traders cut 4,697 gross longs and added 1,168 gross shorts.

Aakash Doshi, analyst at Citi Research, said concerns about China reflect the build in funds’ net-short copper positions, particularly as copper prices on the Shanghai Futures Exchange fell sharply during the time period covered by the CFTC report. After the reporting window closed, Comex copper prices rose following news of strong November copper import numbers, so “we would expect some short positioning to have been covered, suggesting a pullback in net shorts for the next CFTC report,” he said.

For further information, see the CFTC’s website.

By Debbie Carlson

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Gold Bulls Hang Tough, Despite Dollar

Technical Trading: Gold Bulls Hang Tough, Despite Dollar

By Kira Brecht 

February Comex gold futures are moderately firmer in early New York trading action, despite overnight strength in the U.S. dollar. For now, gold bulls are hanging tough and limited chart damage was seen after Friday's surprisingly strong U.S. non-farm payrolls report

On the weekly chart for February Comex gold futures (not shown here), the market formed a "bullish outside" week and closed higher. That simply means that last week's range exceeded the previous week's high and low and gold closed higher on the week. It is a positive signal on the weekly chart.

On the daily chart, for now, the 20-day moving average at $1,189.40 is holding as strong nearby support for the gold contract. The market fell to touch that level on Friday, but is now rebounding above that area. See Figure 1.

Drilling down to the 60-minute chart, Friday's low at $1,186.40 is important near term support. That floor needs to hold to keep the very short-term outlook sideways, with the possibility for improvement.  See Figure 2 below.

Shifting back to the daily chart, the market has staked out two strong support areas in recent weeks at the November 7 $1,132 low and the December 1 $1,141.70 low. Those can be seen on Figure 1, marked "A" and "B." Both of those sessions saw "wide-bar" days emerge with bullish outside days forming at the final bell.

Buyers are defending gold on dips, and those two lows represent perhaps the bottom of a new short-term range that may be developing on the daily chart.

Daily momentum studies are lackluster. The 14-day relative strength index is mid-range and not showing strong momentum currently. Heading into the holidays and year-end, quiet trading conditions could begin to grip the market.

In the very short-term, as long as the 20-day moving average and Friday's low at $1,186.40 hold firm, sideways to higher trade can be expected. Strong resistance lies at $1,221, marked at point "C." It would take gains through that ceiling to open the door to a fresh buying wave.  

By Kira Brecht

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Fuel Cell Electric Cars: Throwing Down The Glove, Potential Impact on Platinum

As predicted, fuel cell electric vehicles made a broad entrance at this year’s Los Angeles Auto Show and consumers could be seeing these models in showrooms as early as next year.

The advancement of FCEV vehicles could have an impact on precious metals and platinum group metals demand in the long term.

Toyota presented its final version of the long anticipated FCEV -- now called Mirai. Honda, the first to have a series of hydrogen cars (the FCX Clarity) on Californian streets many years ago, showed off its next generation vehicle and Clarity’s successor. To the surprise of some, Volkswagen Group entered the arena with both a lower-end model based on the VW Jetta Wagon and a high end A7 “h-tron Quattro”, the latter clearly positioned as a Tesla alternative. BMW came forward with the proposition that its second generation “I” cars might be powered by hydrogen as well.

The L.A. Auto Show may therefore be remembered one day as a direction-altering event in the history of the automobile, with serious implications to precious metals:

• A boost to electric vehicle (EV) sales – be it battery electric like the Tesla S or fuel cell electric – will reduce the number of new cars needing an automotive catalyst; autocats still amount to about 50% of the world’s consumption of platinum group metals.
• At the same time, as we reported earlier, the market indecision between battery electric and fuel cell electric will decide on whether and how much platinum will be used in new automotive applications. Only fuel cells need platinum, while batteries usually contain a lithium-based chemical cocktail.

Both technologies have positives and negatives alike at this point. Ultimately, convenience in the eye of the mass market will perhaps be more important than the ecological impact of each option. John Voelcker of Green Car Reports, a Tech Metals Insider guest in the early stages of the series, just released an excellent three-part series on some of the more relevant concerns consumers have.

Toyota, Honda and Hyundai all provided answers to ten questions offering insights into the approaches of each company. The series of articles spawned a record breaking series of comments and arguments underlining how emotionally charged the discussion is led by enthusiasts in both camps.

Tech Metals Insider will embark on a journey to answer the more general questions regarding total energy balance, total cost and efficiency in future issues. However, as history indicates it isn’t always the best technology that wins – remember Betamax? Consumers around the world will make a choice, and industry lobbies will try to influence these choices. With FCEVs finally on the market, the game may begin.

Bodo Albrecht

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