Submitted by konrad on Saturday, May 4, 2013 - 19:29.
On a day of quiet trading, as traders trickled back in from holidays, a less-than-stellar U.S. manufacturing report coupled with news that China's manufacturing sector also had not lived up to expectations pushed the dollar lower. That helped spur the price of gold upward.
A good housing report did little to stand in the way of today's dollar slide. Housing has been a bright spot for the American economy despite credit being tight for millions of on-hold, wannabe house buyers.
So once again, gold was viewed as a haven, albeit a modest one. (It has a lot of competition, as you will read below.) Meanwhile, silver seemed to reflect the industrial slowdown in the two major economies, although platinum and palladium did not follow suit, something we may attribute to a longer term shortage in both metals that seems not to be near an ending.
Of course, just as U.S. manufacturing slows, in a conundrum we are seeing ever more foreign buying of U.S. Treasury issues, a level now almost $3 trillion. And the pace is picking up.
It isn't quite a paradigm shift, but of late Treasuries have been seen not exactly as an investment, but as a store of value. In general that is not good for gold or silver. That gold is not viewed as being at the same comfort level as low interest bonds is an issue that needs to be explored.
The Treasury play by investors from abroad is helpful to the debt plight the U.S. finds itself in because, as we try to pay off the accumulated debt of 12 years, interest rates are kept low.
Yet this urge to invest in the U.S. has a dark side. It tells us that essentially Europe is in terrible shape and that there is enough instability in China to prompt their central bank to spend enormous amounts on stable American instruments.
As reported by Bloomberg: "The U.S. is standing out as a place of relative growth, strength and stability," Wan-Chong Kung, a bond fund manager at Nuveen Asset Management, which manages more than $100 billion, said in a March 28 telephone interview. "The big, bad outcomes have been avoided."
The even darker side is that the Treasury is busy lending money to large American financial institutions at a small premium above prime but that money is not finding its way into small borrowers' hands. By small we mean people who borrow anywhere between a few thousand dollars for car or appliance purchases to business borrowers who might need several million dollars for expansion, equipment, new hiring, etc.
The appeal of gold as a store of value is eternal even if it has its ups and downs. In the good news column, gold futures are up, and the spot and bullion market ought to follow that into mid-spring.
We all should hope that the pot of Treasury money begins to circulate, so inflation rises in a more productive manner.
As always, wishing you good trading,
Gary S. Wagner
The Gold Forecast
On Skype Gary.S. Wagner
Market Forecast: Light trading activity characterizes today’s market activity. However even in light trading we see safe haven buying continuing to enter into the market, and gold prices finding tentative support at approximately 1600 per ounce. However gold Bulls are certainly not out of the woods yet, as the bearish faction continues to apply selling pressure. What we truly need to see is effective closes above 1600 per ounce, and as you will see in today’s video support is strong there but resistance is still only a short distance away beginning at 1620 to 1635. Although it was a holiday on Friday the CFTC did release its most current commitment of traders report, and below is a link to that report.
Gold: Maintain Long @ 1580 stops below 1585
Silver: no active trade
Gary S. Wagner - Executive Producer