Archive for the ‘Silver’ Category:
Gold, Silver, Platinum…W.T.F.?
Brad Stafford here in place of Adam Hewison and I have a great new video for you. I’m sure many of you read that title and your mind went in the gutter, but today I’m going to show you a whole new meaning for this acronym and how it applies to gold, silver, and platinum.
These three markets have a lot of volume, government implications, and technicals lining up for potentially great trades. Gold makes a record high, then pulls back. Silver is inching towards an all-time high level and platinum is making people rethink their decision to go with a white gold wedding band.
Where do you stand in these markets and maybe more importantly, where should you stand?
Click here to find out what W.T.F. really stands for and what does it have to do with gold, silver, and platinum?
You’ve got to watch the video to find out.
http://www.ino.com/info/503/CD3336/&dp=0&l=0&campaignid=3
Brad Stafford
Director of Marketing
INO.com & MarketClub
loading...
loading...
Gold & Silver Bounce vs. Falling Dollar as China’s Monetary Tightening “Runs to Stand Still”
By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF GOLD regained a third of yesterday’s 2.5% plunge in London dealing on Wednesday, bouncing as the US Dollar eased back and Wall Street futures pointed higher from Tuesday’s 1.0% drop.
By the time New York traders reached their desks, gold priced in Dollars stood little changed from last week’s close at $1137 an ounce.
US crude oil contracts meantime dropped below $80 per barrel as Asian stock markets closed sharply lower, catching up with Tuesday’s late announcement from the Chinese central bank that it’s raising the amount of cash commercial banks must keep in reserve to 16% of deposits.
Domestic lending in China – now the world’s No.1 private consumer of physical gold – grew 32% in 2009. Local reports, quoted by the London Times, say an extra $86bn was lent in the first 5 days of this month.
“The central bank has to keep running to stand still,” reckons UBS economist Tao Wang, because surging exports are sucking more money into China’s economy.
Tuesday’s move doesn’t signal “any sort of serious monetary tightening” overall, he’s quoted by Australia’s FNArena.
In the global gold market, “The news from China’s central bank triggered a wave of selling,” says Tokyo fund manager Tetsu Emori at Astmax Co., speaking to Reuters.
“But the market still looks a bit overbought after active gold buying by index funds, especially at the start of the year.”
Virtual Metals’ new Precious Metal Investment Weekly for Fortis Nederland Bank shows a net increase of almost 0.2% in bullish gold investment on developed-world exchanges for the first week of Jan.
Speculation in US and Japanese derivatives contracts outweighing a slight pullback in gold ETF trusts.
New York’s SPDR Gold Trust – the world’s largest gold ETF – shed another four tonnes of metal to back its shares on Tuesday, reducing the fund’s hoard to its lowest level since mid-Nov. beneath 1116 tonnes.
Silver investment positions also grew by 0.2% last week, the VM Group consultancy says in its new weekly report, as institutional futures trading added to a 20-tonne increase in silver ETF trust-fund holdings.
“With gold pushing lower we are seeing very good physical demand coming through,” says Walter de Wet at Standard Bank in London today.
“As a result we expect the metal to remain well supported around the $1114-$1120 level, but we are also seeing good selling above $1130.”
Ahead of India’s spring wedding season, culminating with the Hindu calendar’s third most auspicious festival – Akshaya Thritiya, falling this year in mid-May – “relatively low prices could prove a good buying opportunity” for jewelers needing to restock their inventory, says one wholesale dealer.
Gold imports to India, formerly the world’s largest private consumer market, fell 18% in 2009 the Bombay Bullion Association said today.
Down to 343 tonnes from an already depressed 420 tonnes in 2008, gold imports rose sharply in December, the BBA notes – up from three to 34 tonnes as 2009 ended.
“Indians are slowly getting used to high gold prices, and that should sustain demand,” says Angel Commodities Broking’s Amar Singh to Bloomberg from Mumbai.
“There’s a consensus that gold will stay high because of inflationary pressures and a weakness in the Dollar.”
Both the Euro and British Pound rose to their best levels vs. the Dollar in four weeks, despite news of a worse-than-expected drop in UK manufacturing output and a full 5.0% contraction in Germany’s economy during 2009.
French, German and Italian investors now Ready to Buy Gold saw the price trade below €778 an ounce – more than 3.0% beneath Monday’s assault on last month’s all-time highs.
The gold price in Sterling dropped 3.5% from Tuesday’s five-week high, hitting a 6-session low beneath £700 an ounce.
Silver priced in Dollars meantime rose 20¢ per ounce to stand little changed for the week-so-far at $18.43.
UK investors wanting to buy silver saw the price drop 4.5% from this week’s three-decade high.
Western government bonds meantime ticked lower as European stock-markets held flat after yesterday’s drop, pushing 10-year US Treasury yields up to 3.74%.
The Obama White House said today that last year’s $787bn stimulus helped save two million US jobs.
The House of Representatives last month approved an additional $155 billion package for government jobs creation.
Federal Reserve bank presidents Charles Plosser and Richard Fisher – neither of whom now vote on US monetary policy – said in separate speeches last night that unemployment will not decline until late 2010, but the central bank must still beware the “inflationary pressures” of leaving interest rates at zero.
In an interview with The Guardian published today, Bank of England policy-maker Andrew Sentance notes that although “there will be quite a lot of spare capacity and slack to take up” in the UK economy, “that is not the only influence on inflation.”
“Inflation didn’t fall as sharply as people expected last year, and in the short term it is going to go above its [2.0%] target,” says Sentance, calling the UK’s £200bn ($320bn) Quantitative Easing a Success.
UK inflation was last pegged at 1.9% per year on the Consumer Price Index. It hit 2.7% annually on the Retail Price measure ex-mortgage repayments.
Base Rate has been held at 0.5% since March last year. The gold price in Sterling has risen 9.0% since then, hitting a series of all-time record peaks above £700 an ounce.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2010
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
loading...
loading...
The Federal Reserve Is Openly Telling You to Buy Gold and Silver
At the end of last year, I began writing about what I saw happening as the Federal Reserve started assuming the liabilities of the investment banks and the federal government began deficit spending at an unprecedented pace.
I’ve been calling these changes the “End of America” because I believe the fiscal policies of the U.S. will result in a massive devaluation of the dollar and the end of the U.S. dollar as the world’s reserve currency
To get an idea of why I’m concerned, have a look at a chart James Bullard, president of the Federal Reserve Bank of St. Louis, included in a recent presentation to the National Association for Business Economics.
 |
What you see here is Bullard’s estimate of the future growth of Federal Reserve assets.
A lot of people seem to have forgotten something that is very much on Bullard’s mind: The growth of the Fed’s balance sheet isn’t nearly finished. In fact, the Fed has only completed purchasing about half of the $1.75 trillion worth of assets it has promised to buy. The assets are mostly mortgages and mortgage-related securities.
Even though these direct purchases are unprecedented, that’s only about 10% of the story. Since the beginning of the crisis, the Fed has lent, spent, or guaranteed $11.6 trillion.
That includes providing a backstop on the entire system of mortgage finance in the United States, a system that currently shows nearly a $1 trillion loss.
Since the expansion of its balance sheet got started in earnest last fall, the trade-weighed value of the dollar has fallen -15%. Keep in mind, the Fed’s assets form the base of our monetary system. The more it grows, the more money and credit become available to the banking system. And the faster the money supply grows, the more likely the value of the dollar will continue to fall.
As Bullard points out, a doubling of the monetary base won’t necessarily cause an immediate doubling of inflation… But suppose it takes 10 years? The average inflation rate would still be 7% a year. If inflation does grow to this average level, at least a few of those years will see inflation running at or near double digits.
Nothing in our financial markets is prepared for this kind of inflation. Inflation at these rates would cause the average multiple of earnings for equities to fall by at least -50%. Likewise, we would see high-yield corporate bonds yielding at least 20% — double what they are now. And U.S. Treasuries would probably see their yields triple. The destruction of wealth in the bond markets would be unprecedented in modern finance.
It’s going to happen. I guarantee it.
My forecast only assumes the Fed’s actions don’t continue past what’s been announced so far. My bigger concern is what happens if Congress decides the Fed did such a good job fixing the housing bubble that perhaps it should lend a hand on health care or the entitlement time bomb? Although a small handful of people have been writing about the enormous fiscal challenges that all the Western democracies face over the next decade, I’m sure most of today’s equity investors don’t really understand what lies ahead.
Consider these numbers: Right now, today, without counting any of the unfunded liabilities of our government (which are very real obligations, by the way), our national debt is $12 trillion. There are roughly 100 million American households. So that’s a national debt of roughly $120,000 per family. That’s more than the average American owes on his mortgage.
Think about what this means in terms of interest payments. Even with interest rates at all-time lows around the world, the U.S. will spend almost $400 billion on interest to service our existing national debt — that’s a 3.3% interest rate. Currently, the U.S. takes in roughly $2 trillion in taxes, half of which come from income taxes. So the interest on our debt is already consuming 20% of all tax receipts, or 40% of all income taxes.
It seems obvious to me this money will never be repaid — could never be repaid. The only real question is how much of a “haircut” our creditors are willing to accept in terms of the loss of purchasing power of the U.S. dollar. So far, inflation remains relatively benign. Our creditors don’t seem to be losing very much. But we know this will change and could change rapidly, as the Fed continues to expand its balance sheet with less and less creditworthy assets. At what point will our creditors finally decide they can’t finance any more of our deficit spending because we’re simply not worth the risk?
No one in Washington realizes you can’t borrow money endlessly. By the time Barack Obama leaves office (assuming he is reelected), the national debt will likely exceed $20 trillion. What will our creditors charge us to finance this debt? How will our debts compare to the value of our economy? It is impossible to know what will happen. But here’s the one thing that seems most obvious: Our borrowing costs will go up, a lot.
At some point in the next few years, our creditors are going to stop believing in our ability to pay our debts in honest money. I don’t know what will break first, but we can’t go on printing money to prop up our banks and spending money we don’t have to prop up our culture of entitlement.
And I don’t believe there’s any way to avoid it — certainly not with the political system we have in place right now. To protect yourself, you’ll have to be very good at managing your assets. You also need to make sure to take the advice we’ve been issuing for years: Buy and hold plenty of real, honest money that cannot be debased by the government. Buy and hold plenty of gold and silver.
– Porter Stansberry
Founder
Stansberry and Associates Research
loading...
loading...
Silver Stock Report: Risks of Silver in an IRA
(Confiscation, bankruptcy, & theft risks!)
Silver Stock Report
by Jason Hommel, October 22nd, 2009
A summary of the main risks:
1. Custodian theft risk
2. Custodian bankruptcy risk
3. IRA rule change risk
4. Confiscation by government risk
5. Third party common theft risk
6. Lack of IRA benefits risk
7. ETF custodian risk
8. ETF sponsor risk
9. Confiscation by government risk
1. Custodian theft risk – All IRA money must be held by a broker, who is the custodian of the IRA account. If you keep up with the news you occasionally hear of brokers who clean out client accounts, and disappear. The largest of such thefts are in the Billions.
2. Custodian bankruptcy risk – The company that is the IRA custodian may go bankrupt. In theory, IRA accounts are safe from such bankruptcy, but only if the custodian was playing by the rules. Companies go bankrupt also, and drain their own employee 401k accounts, too.
3. IRA rule change confiscation risk – The Federal Government, early last year, was contemplating forcing investors to put IRA money into government bonds, “for the safety of the investor” of course.
4. Confiscation by government risk – At present prices, a government confiscation order of silver or gold seems unlikely, due to the relative size of the markets. IE, the $1-2 billion silver investment market is too small to signify anything to the budget of the USA government.
Furthermore, it’s unlikely given that the government continues to mint and sell Silver Eagles and Gold Eagles, which can be held in an IRA. Gold Eagle sales are also under $1 billion in the USA.
However, defaults, meaning, the failure to deliver metal, and the massive rise in precious metals prices that follow, happen when they run out of metal, not at certain prices. If the past is any indication, they will run out of metal, while metals prices are still relatively low, and then the price will take off.
I think a confiscation order will be made for several reasons, and will have several effects. It will first be used to let JP Morgan off the hook for their massive precious metal delivery requirements, and it will let them “cover and pay out” all such precious metals over the counter contracts in paper cash, while paper cash prices are low.
Second, a confiscatino order can be used to confiscate the precious metals in all private, non-bank, warehouses where there are storage programs that honestly have the metal. The banking establishment hates competition, and may wipe it out by executive order.
Third, after obtaining precious metal by theft of those institutions who honestly held it for third parties, they can continue their price manipulations for a second season.
5. 3rd party theft risk – Pooling money or metal together into one place always increases the risk of theft by regular and common robbers & thieves. When asked why they robbed banks, the famous robbers said, “Because that’s where the money is.”
Which one of the following is more safely held and harder to steal? Is 10 million oz. of gold in one place safer, or 10 million oz. of gold held by 10 million armed individuals safer?
6. Lack of IRA benefits risk – The whole point of putting money into an IRA is to let it increase in value, tax free. There are no capital gains taxes when you sell in an IRA, but there taxes are when you “cash out”, at which point, the IRA money is counted as real income. If income taxes ever increase to 80-90%, as they did during the Great Depression, then nearly all of your “tax free gains” will go right back to the government, and you will not significantly benefit from the capital gains in your IRA accounts. (ROTH IRAs are an exception.)
The whole point of bullion is that it is private. Once it is in your hands, no government has any ability to track it. After all, you could sell your bullion at any time once you buy it, and there are very few reporting requirements on silver or gold sales. There is a cash transaction report (CTR) required if you sell 10 bags of 90% silver, which would be $10,000 in “cash”, and there is a reporting requirement if you sell 25 Gold Eagles at one time. And that’s about it. So, for the majority of people, for the majority of bullion sales, they can sell their precious metals at any time, with no reporting requirement, and thus, it is entirely up to them to volunteer the information about their capital gains that they may have “earned”.
7. ETF custodian risk – Many people put IRA money directly into the ETF’s for convenience, so I will now talk about ETF risks. The ETF custodian is the one who vaults the precious metal. Ok, if you do choose an ETF, please choose CEF, the Central Fund of Canada. They are the only one who I think actually has a good chance that they actually have the metal. But even CEF is not safe, as they are in Canada, and the Canadian government has no gold or silver. Thus, in the event of a Canadian currency crisis, Canada is likely to confiscate the metal in CEF or any other Canadian storage program or bank. Canadian banks, in general, are not more sound than those in the US, they are less sound, in my well researched opinion. Many Canadain banks issue silver certifictes, yet there were many reports of people last year who could not obtain silver at any price from their banks in 2008 during the retail silver shortages.
The SLV and GLD ETF’s in my opinion, are total frauds. The custodian of SLV is JP Morgan, who is the largest silver short at the COMEX, and who has the largest position in over the counter derivatives at over $80 trillion. That’s a tremendous conflict of interest, and a clear warning sign. In my opinion, the silver in the SLV is already “long gone”, or they only have a tiny fraction of the silver on hand. What’s worse is that they can now deliver SLV shares to futures contract holders, and they can deliver futures contracts to back up SLV shares. Ponzi behind Ponzi, fraud backing fraud. The GLD custodian is HSBC, a similar bullion bank with similar positions and problems.
8. ETF sponsor risk – The ETF’s are also at risk if their sponsor goes bankrupt. It could disrupt trading, or the viability of the whole thing. Or, it could be used as an excuse by the custodians to default on delivery of silver, trying to place the blame on the structure or sponsor of the ETF, instead of their own fraud. In fact, the custodians could force the bankruptcy of the sponsor, as an excuse to fail to deliver, or as an excuse to confiscate what little bullion the fund may actually have, and then deliver futures instead.
9. ETF short selling risk – Also, there is the short selling risk, as the EFTs can be sold, naked short, which circumvent the entire point of each share being backed by metal. Shares sold short are not backed by metal deliveries, and can be used to manipulate prices lower. In my opinion, investors who put money into the ETFs are helping to manipulate precious metals prices lower. Demand for physical metals is diverted by these paper alternatives.
9. Confiscation by government risk – Yes, I’m listing this twice, actually, three ways. IRA money is at risk of confiscation by government, simply by being in an IRA. IRA moneies can be forced to be invested in bonds, or they can be taxed at extremely high rates upon withdrawl. But the third government confiscation risk is if the government confiscates the ETFs, as a means to let the custodians who are practicing fraud off the hook, as a method of “bailout”.
Confiscation will never include the government sending thugs to all 100 million USA homes to do room to room, and vault to vault searches. It never has, and never will, not in America, not as long as the people still have guns and working vaults. Government confiscation thugs would get to the 10th house, be blown away, and promptly end the searches. If lazy pot smokers have been able to hide pot from the government for all these years, and the “war on drugs” been a total failure, isn’t that any guide at how much more impossible it would be to take silver or gold from the militant, ready, anxious, wise silver and gold investors, many of whom are veterans? The government would and could only confiscate the silver in known storage locations, such as the ETF’s or other popular precious metals storage programs that actually have the bullion.
If you are comfortable with all these risks, please pay attention to the news on a regular basis so you might be able to take appropriate action at the appropriate time.
I used to have money in an IRA. I no longer do. I did not have to pay the 10% penalty upon withdrawl, because it was in inherited IRA. I cashed out my IRA because I have been paying close attention to the news.
Remember, governments steal. It’s what they do.
That’s the entire point of owning gold and silver. They are the hardest assets to find, and the hardest to steal.
The government is already confiscating money through taxation, and inflation through bank bailouts. The bailouts also indicate that the assets those banks hold have been stolen long ago. To trust them with your IRA accounts, or ETFs, is just begging for trouble.
So, what to do? Take it home. Get a home security vault. Vaults work. It’s why they make them. They make many sizes, ranging from a small cash box, to a large gun vault the size of a refrigerator. Bolt the vault down from the inside to wall studs, or to concrete in your garage floor. Maybe disguise the vault with a cabinet. Have multiple vaults if you can afford it, or need it. Get a security system, burgler alarm, & dogs if necessary. Gates or bars outside your home or driveway are another option. it’s very simple, and reliable, and people have been doing that for hundreds of years with great success.
if you are afraid to put one in your own home, consider moving to a better neighborhood. Consider putting a vault in your parents’ or childrens’ home for diversification. You don’t have to give them the combo, if they are nice about it.
Home theft risk is very very small by comparison. Common home theives getting into a secure vault is very, very rare. It’s so rare, they love to put it on the news if it happens, as a way to condition you to trusting the banks.
loading...
loading...
Silver Stock Report: Wisely Avoid Paper Silver Fraud
(if you didn’t lift it, you don’t own it.)
Silver Stock Report
by Jason Hommel, October 12th, 2009
Most silver investors are still deceived by “paper silver”. Over 99% of silver investments are paper silver, rather than real silver.
For proof, see
The Tiny Silver Market, IV October 8th, 2009
The Tiny Silver Market, III October 6th, 2009
The Tiny Silver Market, II October 1st, 2009
If the dollar amounts were represented 1 to 1 by people, then, very few silver investors (1%) have the discernment and wisdom to avoid the paper silver frauds. But fortunately, the wise investors are probably a bit more numerous, since many individual people are not “sophisticated” or rich enough to get trapped by the offers of paper silver.
I’ve had quite a few discussions with people about this, so let me see if I can help.
Many people justify paper silver, saying, “it’s cheaper”. Sure it is. That’s the point! How else would they convince you to buy it? They can’t float on your money if they charge you higher than normal premiums! Look, I can sell you all the silver you like at 5% UNDER SPOT or even 10% UNDER SPOT, if you promise to never take delivery, and never sell. (NOT REALLY, because I’m honest!) What will it take for people to realize that such offers are totally fraudulent?
Many people justify paper silver, saying, “I’m only using it to gain more money, to be able to buy more physical silver”. Of course. That’s the plan of many. But to be able to get a mere 100% more silver, you’d have to expect that the paper silver market will double in size, from about $150 billion to $300 billion, (with no new paper silver investments pushing it up), while the $1 billion physical silver market stays the same, too. Is that realistic? I don’t think so.
Many people justify paper silver, saying, “I don’t have anywhere where I can take delivery, also, it’s too heavy, or I’m in another nation, or I rent, etc.” Sure. I fully understand. I have one question, if I may. If you refuse to take responsibility for providing for the security and safety of your own wealth, please tell me how you expect that your wealth will provide you with the safety and security that you expect from it?
Well, here’s the same question another way. If you knowingly give your money to corporations who have declared openly in their annual reports that they are technically bankrupt and could not possibly have the silver that they claim, due to the problem of the relative sizes of the markets, then why in the world would you expect to be paid off by them, when unsecured creditors do not get paid off in a bankruptcy?
You can’t possibly be protected by silver that does not exist, “held” in the hands of institutions who are technically bankrupt.
You would be better protected if you gave your money to a bum on the street, because at least a bum who has nothing typically does not have a negative net worth, or a short position in silver. Besides, if you give to a homeless man, you are at least lending to God.
[Proverbs 19:17] He that hath pity upon the poor lendeth unto the LORD; and that which he hath given will he pay him again.
But if you own paper silver, you are giving to the rich, who oppress the poor through usury, and whose lack of real silver and gold testifies against them.
[Proverbs 22:16] He that oppresseth the poor to increase his riches, and he that giveth to the rich, shall surely come to want.
James 5
Warning to Rich Oppressors
1 Now listen, you rich people, weep and wail because of the misery that is coming upon you. 2 Your wealth has rotted, and moths have eaten your clothes. 3 Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days. 4 Look! The wages you failed to pay the workmen who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty. 5 You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter. 6 You have condemned and murdered innocent men, who were not opposing you.
The wealthy bankers who oppress through usury have “rotted” gold; they issue more claims than gold exists.
Owning real gold and silver is not unwise, gold is a provision from God, and we are commanded to obtain the real stuff.
Rev 3:18 I counsel you to buy from me gold refined in the fire, so you can become rich; and white clothes to wear, so you can cover your shameful nakedness; and salve to put on your eyes, so you can see.
Here are my most important Bible based essays regarding the importance of obtaining real physical gold and silver money, and avoiding paper promises and usury:
- 666: Mark of the Beast 1998
- Gold and Silver in Bible Prophecy December, 2001
- The Great Harlot of Rev 17-18 is Jerusalem, & what that means. October, 2002
- Usury Enslaves Jan 19, 2004
- Freedom from Usury Jan 23, 2004
- Bible Verses on how to Manage Money November, 2005
- The Use of Paper Money Violates All of the Ten Commandments July 2, 2006
- The Stumbling Block of their Iniquity April 9, 2008
- Biblical Political Positions February 7, 2009
- The Pre-Rapture Gold Gathering August 17th, 2009
I strongly advise you to get real gold and silver, at anywhere near today’s prices, while you still can
Jason Hommel
loading...
loading...
Silver Daily Technical Outlook
Comex Silver (SI)
With 4 hours MACD staying below signal line, intraday outlook in Silver remains neutral for the moment and some more consolidation could be seen. Nevertheless, since the break of 17.69 resistance indicate that rise from 12.435 has resumed, current retreat is expected to be contained above 16.785 and bring rally resumption. Above 17.95 will target 61.8% projection of 13.495 to 17.69 from 15.76 at 18.35 next.
In the bigger picture, whole medium term rise from 8.4 is still in progress and should extend further towards 19.55 resistance next. However, note that we’re not seeing a clear impulsive structure from 8.4 yet and hence, we’d treat such rise as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. In other words, current rise from 8.4 is expected to be limited by 19.55/21.44 resistance zone and bring at least one more medium term fall. On the downside, break of 15.76 support will be the first sign of topping. Further break of 12.435 will confirm that rise from 8.4 is finished.
Comex Silver Continuous Contract 4 Hours Chart
Comex Silver Continuous Contract Daily Chart
loading...
loading...
Weekly Fundamental Outlook for Energies and Metals – Industry Experts Raised Demand Outlook on Oil
After the RBA’s rate hike at the October meeting, biggest topic in the market has been ‘who’s the next central bank in the developed world to tighten monetary policy?’. While analysts have diverse opinions on which of RBNZ, BOE, ECB and BOC will be the next candidate, the majority anticipates the Fed to keep its unprecedentedly low policy rate at 0-0.25% until 2Q10 and BOJ’s 0.1% rate will stay even longer.
Interest rate differential continued to pressure USD. The dollar index plummeted to 14-month low at 75.996 Thursday before rebounding as investors took Fed Chairman Ben Bernanke’s speech as hawkish. The dollar index declined -0.7% on weekly basis. Weakness in USD drove demand for commodities and the Reuters/Jefferies CRB Index surged +3.8% to close at 262.55.
Crude Oil
Crude oil price was under pressure amid USD’s rebound earlier in the day. However, price pared losses after the International Energy Agency (IEA) upgraded the demand outlook for 2010 for a third consecutive month. The benchmark contract eventually settled at 71.77, adding +2.6% on weekly basis.
The US Energy Department (EIA) and the International Energy Agency released monthly reports last week. Both agencies revised upward their outlooks on world oil consumptions amid improvement in macroeconomic outlook.
The US Energy Department forecast crude demand will increase to 84.77M bpd in 2010 after a drop to 83.67M bpd in 2009. The 2010 forecast was +0.18M bpd above the projection made in September. However, the Department did not change the forecast on WTI crude oil price which remains to be 75/bbl by December 2010.
The International Energy Agency anticipated global oil consumption would rise to 86.1M bpd in 2010, +1.7% yoy as driven by +3.6% demand growth in developing countries while ‘demand from the world’s developed economies is expected to remain stagnant in 2010 after falling -4.5% this year’. The estimate was +0.35M bpd higher than the projection made in September. IEA also upgraded its 2009 consumption forecast to 84.6M bpd, -1.9% yoy. In September, the agency anticipated the demand will drop -2.2% on annual basis.
2 weeks ago, a meeting was carried out between permanent members of the UN Security Council and Germany, and Iran regarding Iran’s nuclear program. Unexpectedly, the meeting was ‘peaceful’ and the progress was better than expected. Iran agreed to let the International Atomic Energy Agency (IAEA) visit the Qum site on October 25. Moreover, Iran agreed to send most of the LEU stockpiles to Russia for further enrichment and then to France for medical research purposes. The deed aims at lowering Iran’s LEU level to what is required for making nuclear weapons.
The geopolitical tension between Iran and the world did boost oil buying. However, how serious is its impact on oil supply and price? In our view, the disruption on oil production is not that severe and the therefore, the impact on oil price is not too much.
Take the invasion of Iraq in 2003 as an example. In Iraq, oil production dropped -36% yoy to 1.34M bpd in 2003. However, oil production in the country had been falling -16% yoy to 2.12M bpd in 2002 and -4% yoy 2.52M bpd in 2001 after making a 20-year of 2.61M bpd in 2000. More importantly, crude production rapidly recovered +50% to 2M bpd in 2004.Concerning oil price, WTI crude rose +6% a week after the war began. However, the rally slowed down and eventually reversed to a fall of -12% in less than 2 months’ time.
Natural Gas
Natural gas price dropped -3.9% to settle at 4.77 Friday. Although the benchmark contract gained +1.1% on weekly basis, outlook remains uncertain and gas price should continue to trade with high volatility.
The US Energy Department forecast that total natural gas consumption will drop -2% in 2009 and -0.2% 2010. There compare to the estimates of a decline of -2.4% in 2009 and 0% in 2010. According to the Department, ‘weak economic conditions continue to hamper the industrial sector, where the most recent data show natural gas consumption is down by -12.4% through July compared with the same period last year. With lower consumption in the residential and commercial sectors as well, natural gas use in the electric power sector continues to serve as the only demand outlet for increased natural gas supplies’.
Natural gas has rebounded strongly in recent weeks. However, we believe price should remain at low level for some more time so as to improve the fundamentals.
US gas storage increased +69 bcf to 3658 bcf in the week ended October 2. The level is +15% above 5-year average. Although the number of gas rigs has dropped more than -50% from its peak in September 2008, recent data form Baker Hughes’s data showed building of rigs over the past few weeks. We believe drilling activities pick up because of rise in gas prices.
On the demand side, the EIA stated that ‘electric power sector continues to serve as the only demand outlet for increased natural gas supplies’. However, further increase in gas price suggests that gas will lose its place to coal and the last resort for the abundant gas storage will disappear. Therefore, we’d prefer gas price to fall more in coming month so that the demand/supply outlook can be rebalanced.
Precious Metals
Comex gold halted the 5-day rally by retreating -0.7% Friday. Settling at 1048.6, the December contract surged +4.4% over the week. Last week’s rally was impressive as gold has broke above the peak made in March 2008 after trading below it for one and a half years. The breach was decisive and price closed above it over the past 4 days.
The retreat last Friday was driven by USD’s strength amid speculations that the Fed will increase interest rate sooner than previously anticipated after Chairman Ben Bernanke’s speech. Investors probably seek more evidence about economic recovery after the RBA hiked its policy rate earlier in the week. In fact, Bernanke’s stance has not changed from what he said in WSJ in July. Meanwhile, a pullback or consolidation in gold price is warranted due to long liquidation. However, we remain bullish on gold price in the long term.
Major reasons driving gold’s rally are weak USD, inflation expectations and minimal sales from central banks.
The Fed has reduced the policy rate to 0-0.25% since late 2008, making it one of the countries offering the lowest funding rates. Last month, USD ‘took over’ Japanese yen as the funding currency for carry trades as the LIBOR rate for USD has dropped below than of yen. G-17’s non-intervening approach to USD’s depreciation and RBA’s beginning of the tightening cycle put further pressure on the greenback and the dollar index will likely resume its long-term downtrend soon.
Although global central banks have been emphasizing that inflation outlook is subdued, investors do not seem to hold the same view. US’ University of Michigan survey showed that consumers anticipated inflation will reach +2.2% in a year, significantly above the current level while UK’s inflation attitude survey by the BOE showed that consumers expected inflation to reach +2.4% in a year.
While IMF’s sales of 403 metric tons gold in coming years does remain as an overhang to gold price, we do not believe it will have any material impact to gold price. As we mentioned before, the sales will be carried out in 4-5 years at market price and the IMF will ensure it will not cause fluctuation in the gold market. IMF’s gold sales will be compensated by gold buying in central banks. Given the huge budget deficits in the US, global central banks have been diversifying away from USD. By August 19, gold sales under CBGA II were 149 metric tons, compared with 358.3 metric tons in 2007/08 and 475.8 metric tons in 2006/07.
Among the above drivers, USD’s weakness is the most prominent one is pushing gold high. In the chart below, the regression line for September data has higher slope than the one for June- August data. This suggests the dollar impact on gold has been stronger than before.
Silver amplified gold’s rally and became the best performer in the precious metal complex last week. In fact, silver price rallied +65% since the beginning of 2009, compared with +21% in gold. Certainly, it was to a large extent a catch-up play as silver plunged -26% while gold gained modestly in 2008. Although gold price has broken its 2008-high, silver, after the +9% rally last week, remained -17% below its record level.
Investor Jim Roger said that silver should have better growth prospect than gold in the precious metal complex as industrial demand on these metals will increase as global economy recovers.
At the end of 2008, gold-to-silver price rose above 80 as silver price plummeted. Recently, the ratio has fallen to around 60. We believe the ratio lies at a fair level now. However, as both gold and silver rallies have been driven by robust investment demands, deeper correction will probably be seen in silver than in gold as positioning in the former is more stretched.
Base Metals
The complex rebounded strongly last week as driven by falling USD, strong equity market as well as some industry specific good news. Alcoa, the largest US aluminum producer, surprisingly reported profits of $77M in 3Q09. Although the figure represented a decline of -33% from the same period last year, it exceeded market expectation of a loss. Concerning demand outlook, the company said the end-market has started to stabilize and demand is improving. Potential production disruptions also helped boost metal prices. BHP, the world’s largest miner has been facing potential strike as its Chilean copper mine as workers demanded for a wage raise. Over 20% of copper-mine output will be affected in 3-6 months.
China will release the preliminary trade data for September and we should see further decline in imports. This remains an overhang for base metal prices in the near-term.
Source: Oil n Gold
loading...
loading...
Silver Daily Technical Outlook
Comex Silver (SI)
With 4 hours MACD crossed below signal line, an intraday top is in place and some consolidation could be seen. Nevertheless, pull back is expected to be contained above 16.785 support and bring rally resumption. Current rise from 15.76 should extend further to 61.8% projection of 13.495 to 17.69 from 15.76 at 18.35 next. However, break of 16.785 support will argue that a short term top is at least formed and will flip intraday bias back to the downside for 15.76 support first.
In the bigger picture, whole medium term rise from 8.4 is still in progress and should extend further towards 19.55 resistance next. However, note that we’re not seeing a clear impulsive structure from 8.4 yet and hence, we’d treat such rise as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. In other words, current rise from 8.4 is expected to be limited by 19.55/21.44 resistance zone and bring at least one more medium term fall. On the downside, break of 15.76 support will be the first sign of topping. Further break of 12.435 will confirm that rise from 8.4 is finished.
Comex Silver Continuous Contract 4 Hours Chart
Comex Silver Continuous Contract Daily Chart
loading...
loading...
Silver Daily Technical Outlook
Comex Silver (SI)
Silver’s break of 17.69 resistance confirms that whole rise from 12.345 has resumed. At this point, intraday bias will remain on the upside and further rise should be seen to 61.8% projection of 13.495 to 17.69 from 15.76 at 18.35 next. On the downside, below 17.30 minor support will turn intraday outlook neutral and bring consolidation. But downside should be contained above 16.785 resistance turned support and bring rally resumption.
In the bigger picture, whole medium term rise from 8.4 is still in progress and should extend further towards 19.55 resistance next. However, note that we’re not seeing a clear impulsive structure from 8.4 yet and hence, we’d treat such rise as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. In other words, current rise from 8.4 is expected to be limited by 19.55/21.44 resistance zone and bring at least one more medium term fall. On the downside, break of 15.76 support will be the first sign of topping. Further break of 12.435 will confirm that rise from 8.4 is finished.
Comex Silver Continuous Contract 4 Hours Chart
Comex Silver Continuous Contract Daily Chart
loading...
loading...
Silver Daily Technical Outlook
Comex Silver (SI)
Silver’s rally extends further today and is set to take on 17.69 high. Break there will confirm rally resumption and should target next key resistance at 19.44. on the downside, below 16.815 minor support will indicate that rebound from 15.76 might have completed. This will in turn indicate that consolidation from 17.69 is still in progress with another fall to retest 15.76 before completion.
In the bigger picture, while a short term top is formed at 17.69, there is no indication of completion of rise from 8.4 yet. Such medium term rise is still in favor to continue after finishing the pull back from 17.69. Nevertheless, note that we’re not seeing a clear impulsive structure from 8.4 yet and hence, we’d treat such rise as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. In other words, current rise from 8.4 is expected to be limited by 19.55/21.44 resistance zone and bring at least one more medium term fall.
On the downside, however, break of 12.435 support will in turn indicate that whole rise from 8.4 has completed. That is, the third wave of the consolidation pattern from 21.44 has possibly started in such case, targeting a new low below 8.4.
Comex Silver Continuous Contract 4 Hours Chart
Comex Silver Continuous Contract Daily Chart
loading...
loading...