Tuesday, January 30, 2007

 

"Bullish Technical Picture" For Gold: Grandich

The Associated Press reports on currencies. "The dollar slipped against the other major currencies Tuesday ahead of the Federal Reserve meeting that could offer insight on the future direction of interest rates. The Fed began a two-day meeting Tuesday to decide whether to adjust its key interest rate."

"The bank has kept rates unchanged at 5.25 percent for the past four meetings after a string of hikes that lifted the dollar. The currency has suffered at times from speculation that the next move will be a rate cut. 'Clearly there's some doubt creeping into the market as to whether or not the outlook for U.S. interest rates remains quite as robust as has been discussed of late,' said David Jones, chief markets analyst at CMC Markets in London."

"In afternoon New York trading, the euro bought $1.2961, up from $1.2956 late Monday in New York. The British pound rose to $1.9615 from $1.9595. The dollar fell against the Japanese currency, sliding to 121.62 yen from 121.94 yen. n other trading, the dollar bought 1.2518 Swiss francs, down from 1.2531 late Tuesday, and 1.1804 Canadian dollars, down from 1.1822."

From MarketWatch. "Gold futures closed higher Tuesday for the first time in four sessions, finding support from strength in oil prices and recouping much of the previous session's loss before this week's Federal Reserve decision on interest rates."

"Gold's 'resting from the over-bought condition created last week when $650 was penetrated,' said Ned Schmidt, editor of the Value View Gold Report. 'Now, as everyone knows, [the] gold market is waiting for the FOMC decision.'"

"Gold for February delivery closed up $1 at $644.20 an ounce on the New York Mercantile Exchange after touching a high of $646."

"'Consolidation should see gold spend more time in the $640-$650 area with oil prices again providing a certain degree of market direction, while technical support should be found at the $639 trendline,' said James Moore, an analyst at TheBullionDesk.com."

"But overall, bullion prices have been 'lacking fresh leads ... as the market beds down ahead of the' meeting of the Federal Open Market Committee, the Fed's policy panel, said economists at research firm Action Economics."

"It appears that gold has moved into 'its most advantageous technical position in quite some time with key long-term resistance of $650 now in clear sight,' said Peter Grandich, editor of the Grandich Letter. 'A close above $652 should give cause to momentum players to get along gold and a spike up to $700 is not out of the question,' he said."

"Other metals finished mainly higher on Tuesday, with the exception of March palladium, which fell by $3.70 to close at $341.25 an ounce, extending its $6 loss from the previous session. March silver climbed 12.5 cents to end at $13.375 an ounce and March copper futures closed up 1.95 cents at $2.5615 a pound. April platinum added $5.90 to close at $1,180.60 an ounce."


"'The market will also continue to monitor oil prices, as recent volatility in the crude market did spill over into other commodity markets, including gold,' according to Action Economics. Crude-oil futures rallied to a three-week high Tuesday after a report said Saudi Arabia is planning to cut production by another 158,000 barrels a day beginning Thursday, and that the kingdom has cut almost double the amount it agreed on at two recent meetings of OPEC."

The Street.com. " In addition to added speculative positions, at least part of the story involved transactions by currency dealers. 'I've seen evidence that some 'carry trades' in Asia are being unwound, and that's having a spillover into the gold market,' says Neal Ryan, director of economic research at New Orleans-based coin dealer Blanchard."

"The 'carry trade' involves selling short a low-yielding currency, such as the yen, and investing the proceeds in the government securities of a higher-yielding one, like the dollar or euro. The same theory is used for gold carry trades, with unwinds leading speculators to buy back short bullion positions."

"Turning to the technical analysis perspective, at least one observer sees a setup in the charts for a strong move up. 'A very bullish technical picture has developed,' says Peter Grandich, editor of The Grandich Letter, who notes that gold prices have withstood a stronger-than-expected greenback, as well as falling energy prices."

"Crude oil prices have declined about 10% since the beginning of the year, while spot gold prices have remained steady. Some investors purchase gold as a hedge against a rising price level, and the robust performance of bullion, despite the likelihood of reduced inflation concerns, looks encouraging for the bulls, Grandich explains."

"In the official sector, the European Central Bank announced net sales of 36 million euros of gold and receivables last week, or about 2.3 tons. The transaction reflects selling by one bank in the ECB system and purchases by another, with the latter no doubt encouraging the bulls."

Comments:
Anyone holding their breath over the FOMC meeting? Thought not.

The market has appeared to accept that no rate cuts are coming soon, especially given how nothing (outside of housing) is yet showing stress and gold is sticking uncomfortably close to $650.

What'll be the next real shoe to drop?
 
Subprime implosion continues to grow. If it spreads outside subprime, that is the next shoe.
 
Just trying to produce a pharagraph or two that makes sense. Input anyone?
Reuters reports on the currency markets. "The dollar advanced broadly on Friday, as generally robust data from the U.S. housing and manufacturing sectors provided further evidence the economy is more resilient than many initially thought. That should reinforce the view the Federal Reserve may hold interest rates steady at 5.25 percent this year, and not cut them as previously expected."
a.k.a. cutting rates makes the dollar fall, holding or rasing rates makes the dollar rise, and the US wants China to delink its curreny from the dollar- the stimulus has been ... lowering the value of the US dollar by lowering Fed short term rates, this will lower the value of Chinas' currency causing prices for Chineese consumers and producers to rise while also increasing inflationary pressures in the US, that is, resisted price increases in China work their way through the supply chain. The lower US dollar would stimulate foreign purchases of US goods and increase US domestic growth, that is how you get growth alongside an increase in prices domestically in the US.
OR, intentionally or not, in whipsaw motion, raise the value of the US dollar causing the Chineese currency to go up as well, making Chineee goods more expensive to the rest of the world which would slow the sales of Chineese goods to other nations, namely America and Britan, that is, the exportation of inflation. China is responding by using enviromental controls to lower domestic inflation rather than using Central Bank operations such as slowing the growth in the money supply or delinking their currency to the US dollar. The American consumer must continue to consume, the foregin inflows of Treasury purchases MUST remain at current levels, this is the rock and a hard place the Fed is in. However, the market via domestic inflationary pressures combined with Treasury sales requirements prohibits the lowering of rates, and in fact may require rasing rates which would slow American consumers and slow housing sales further resulting in lower home prices generally. A deflationary spiral ocurs here, short lived or not. This is when gold will fall (momentarily?) this is the last chance to buy, if not, March would be if there is no action against Iran. After that, until the infamous, "crack up boom" the rates go to 20% in a vain attempt to attract foreign inflows of capital and gold goes to $2000 an ounce??? A.k.a. hyperinflation, this is the price the Boomer generation has to pay for allowing the Iraq war to be.
Correct?
 
On a recent thread, I asked about buying gold. Thanks for your response tj, but I would like to know more. I could buy from a local coin shop. Or from Everbank, or from Goldline. The Goldline guy is using a pretty high pressure sales pitch. If I buy more than I intended, today only, there is a special running. They would give me free a 2006 MS70 buffalo. So I call Everbank, and they are totally nonchalant, buy, no buy, mail us an application to open an account first. Goldline guy also claims that on coins (but not bullion), they don't ask for a social security number and therefore it is not reported when sold. I'd like to know more before I buy. Thanks.
 
Goldline guy also claims that on coins (but not bullion), they don't ask for a social security number and therefore it is not reported when sold. I'd like to know more before I buy. Thanks.
# posted by easthawaii : 10:46 AM

I have never and would never give my SS# to purchase Au/Ag.
 
FOMC leaves rate unchanged. SO SURPRISED (NOT).

Yes, rowyerboat, they're between a rock and a hard place. The currency float gambit won't work this time, either, since we no longer make the things we buy from China and we have to import oil & gas.

Like you, I'm thinking a major correction before PMs break loose. A middle east surprise (or a certain kind of market scare) could definitely ruin that, though. No telling when that might be, though.

Only part I might dispute is the role the war plays. I believe economic turmoil (to put it lightly) was all but inevitable even without the war, but the war certainly makes it a stone cold lock.
 
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easthawaii,

Definitely agree with wmbz.

I go to a large, long-time dealer, pay cash, and take physical possession. There is no sales pitch, and the most I've ever given is a barely legible signature. ;-)

Another thing... I don't buy collectible coins, only bullion coins, rounds & bars. "Junk silver" (i.e., old silver content coinage) is good, too. I'm buying for the PMs, not for the coins.
 
Another thing... I don't buy collectible coins, only bullion coins, rounds & bars. "Junk silver" (i.e., old silver content coinage) is good, too. I'm buying for the PMs, not for the coins.
# posted by TJ & The Bear : 1:44 PM

I agree with TJ 100%!
Also unless you really know what you are doing I would stay away from collectible coins, you can get burned in that market.
 
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