Tuesday, February 07, 2006

 

Gold Prices Take 'Neccessary Retracement'

Market Watch reports on the sell-off so many have expected. "Gold futures dropped as much as $14 an ounce Tuesday to trade at the lowest level in almost two weeks, but most analysts see the weakness as only a temporary setback in the metal's climb to $600. 'It finally looks like we're in for a little bit of profit taking and a necessary retracement,' said Dale Doelling."

"Gold for April delivery fell to a low of $560.50 an ounce, its lowest intraday level since Jan. 26. It last traded at $561.80, down $12.50, or 2.2%. Prices for April gold may fall to the 50-day moving average of $537.40, Doelling said, adding that the level offers 'very strong chart support.' Even so, 'the overall market trends remain intact,' he said, with a fall to the support level taking the market back to 'oversold territory.' That would likely set up 'the next leg that would finally see gold testing that $600 resistance level.'"

"'There is huge demand out there at the lower levels still, with the funds holding, but prepared to sell on the fall, that's what consolidation is about,' said Julian Phillips. 'The resolution of these pressures can only make a market healthy.'"

"March silver traded down 26.8 cents, or 2.8%, at $9.49 an ounce. Rounding out the metals action, April platinum lost $9.60 at $1,066.60 an ounce, and sister metal palladium saw its March contract drop $21.80 to $291 an ounce."

"Over in the equity market, metals-mining indexes lost ground along with the metals futures."

As of this writing, spot gold is off $19, or about 3,5%. And the Amex Gold Bugs Index, HUI, is down over 7%.

Comments:
ben, you might have a bit of notoriety if the housing bubble bursts right as the metal zoom off! get ready for that CNBC show.
 
I am curious to know if any readers have never been throught one of these sell-offs. It can be very volatile, with up and down swings. I remember holding silver when it would move 70-90 cents each day!

The stock prices are another noteworthy issue. It is not unusual for mining shares to double the percentages of the physical metals up and down. More risk, but potentially more reward.
 
Every gold-analyst seems to say the same thing right now: We're due for short-term retrenchment but the year looks great. I call that one hell of a buying opportunity.
 
Well... thanks to this board I was mentally prepared for today. What's your guess on when/where this will bottom? I'd like to buy a few more silver Eagles...
 
Stay long precious metals

"This silver ETF announcement is a true win-win for silver investors. (If) their silver ETF becomes effective, the impact on the price of silver will be great. That’s win number one, obvious and straightforward.

"But if ... this ETF never sees the light of day, that will be a big win as well for silver investors. Why? Because it will prove for all to see just how critical the supply/demand and inventory situation is in silver. If the government says no way to this ETF, it will be for one reason only – there is not enough real silver in the world to fund it."

Psychology of a Falling Dollar 2/07/06
 
Johnthelaw-

I've heard the argument that "there's not enough silver in the world to fund a Silver ETF" before, but its always seemed extremely strange to me. Are there any prior examples of the government disallowing an investment vehicle because it would increase competition?
 
Reuters is calling today's sell-off the biggest one day drop in 13 years. Funny hoq when something falls the "analysts" are quick to point out that it's just profit taking. I'm gonna call BS on that. It's got more to do with the price of oil dropping lately, and to a limited extent the strenght of the USD.

It will be really interesting to see how it all unfolds in the next few weeks. I have no clue what is next, but of course am bullish long term. In the meantine I took the opportunity today to buy back in today.
 
An e-mail from my cousin.

The preliminary scuttlebutt I've been reading is the drop was caused
by Japan. The major banks there started heavily shorting gold the
past few days and now the government there is selling massive amounts
of gold ostensibly to pay down debt. Supposedly it will last for
another week. So they make money with high gold prices and the
shorters make a lot too. The good news is they will probably cover
those shorts sooner or later. The bad news is if gold breaks $540,
look out below.

Silver's recent breakout has already been negated. A horrible drop on
that today. Looks like we'll see eight buck silver again soon.

The good news is your gold buying opportunity could look even better
by week's end.

For those of us holding gold and silver stocks...well more pain could
be in store. For now, the sellers and paper shorters are once again
in charge.
 
Thanks for the tip, wmbz.
At least my yen has recovered.
 
Well, today's correction was brutal to say the least. The sharpest drop I ever seen since I have been following the market. In the big picture, which IMO remains bullish, it does not matter much; most of my positions were established more than a year ago. For those who have been looking for an opportunity to jump in, this looks like it (not an investment advice; do your homework). If physical gold drops a bit more, then I will buy.
 
Excellent news, wmbz.

My outlook has always been very long-term, macro oriented. The bullish uptrend is very well established, so ignoring volatility is just par for the course. This just provides further opportunity to accumulate at good prices, the lower the better
 
I expect that Gold will drop much further. There is a possibility of repeating 1976,1977. I think public is not ready yet, for real gold bull. They are still preoccupied with their real estate investments.
For gold to really sustain its uptrend we need public to disbelieve any other investments. We are years from that.
I bet that this drop in price got more to do with new government bond issues than Japan. I see it as one of the last attempts by gov. to trash old gold bugs.
(Thank You GATA for precious education)
 
Mike C: You're depressing me. You make it sound like there will be a prolonged period between the end of the RE Bubble ('06-'08) and the advance of the GLD market.I don't like that talk.
 
austinyankee,

No no no... Mike C is right, but it's all good. I know we all want to see housing prices return to sane levels. However, this is an opportunity to build real wealth, not just a quick buck.

I (for one) believe we're headed for a depression. Bernanke will attempt to hyperinflate around it, but will simply destroy the dollar in the process. Anyone holding substantial PM positions will come out like the Kennedy's.

Regardless, these things will all take time to pass. In the meantime, you've been given the knowledge, opportunity and time to prepare for it. Use it!
 
TJ- I think you're right. the difference between the goldbugs(I'm using that to describe anyone in commodities) is that we think we'll make lots of money slowly. the housing speculators plan to make a ton of dough in 1 year. I'm talking a 10-15 year look at this market.
 
"...will come out like the Kennedy's" Is that supposed to be reassuring? lol
 
While all this was taking place in 1929 the captains of the financial markets had already in anticipation of the depression converted most assets to cash, gold, having sold most of their stocks, Joseph Kennedy, Bernard Baruch, and Rockefeller among them. When the market finally tanked they jumped in and bought, bought, & bought. That was then eventually the cornerstone of their great fortunes in the coming decades.

From: The Depression by Dr. Adrian H. Krieg
 
Regardless, these things will all take time to pass. In the meantime, you've been given the knowledge, opportunity and time to prepare for it. Use it!
# posted by TJ & The Bear : 10:30 PM

TJ, Is correct! This is not an over night rags to riches story. Over the long haul the die is cast. Strenghten your positions as you can.
 
Read Gary Norths piece...

http://www.lewrockwell.com/north/north436.html
 
Austin!
It is not supposed to depress you.
I definitely think of it as a good news.
More time to acquire cheap stocks. I, myself, am looking toward it.
Look how long it took for public to find itself in RE bubble after Nasdaq bubble.
Nasdaq top -yr 2000
RE top- 2005 ?
It is fair to expect gold top in 2010. (?)
It can be in 2008, but it can be in 2012 , if gov. will find the way to postpone crisis (depression?)
That would be final Kondratieff Winter unwinding. Complete debt liquidation.
That thought give me a comfort, that I still got time to put myself in advantageous position.
No rush here now.
But in 2010, just 5 short years from now, I will afford anything.
 
DJ MARKET TALK: Comex Gold, Silver Bouncing On 'Reloading'

1551 GMT [Dow Jones] - A bounce from early lows in Comex gold and silver
appears to be "reloading" in the form of short covering and bargain hunting
after Tuesday's sell-off, says a trader. April gold is down 10 cents to $554.70
after an early low of $548.50, and March silver is up 8 cents to $9.49 after an
overnight bottom of $9.275. "Yesterday was the stampede," says the trader about
a $19.50 sell-off in April gold Tuesday. "People are probably covering some
shorts and viewing this as an opportunity to get long." The trader offers the
view that the correction may not be finished. "But people are reloading," he
adds.
 
Commodities bull market has long way to go: expert(Jim Rogers)

("Gold is still 40 per cent below its all-time high of US$875 an ounce registered in the late 1980s. Silver is still 80 per cent below its all-time peak. Nickel, zinc and copper are among other metals that are likely to see higher prices in future, he suggested.

The global boom in commodities is not limited to metals. Agricultural commodities such as sugar, coffee, soy beans, orange juice and many others are also booming.

'If you want to be in a bull market, it is in raw materials, natural resources and commodities,' said Mr Rogers.)
 
Yeah, whenever I glance at futures, sugar and coffee are usually up.
 
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