To no one's surprise, profit-takers and the ultra-cautious sold out positions in gold today after it went above recent highs overnight. Silver was off but did not pull back as much as gold, silver being a bit insulated because demand for it as a true industrial commodity remains brisk as well as other fundamental reasons discussed below.
"Considering we've gone up so fast so far, it's not surprising to see some people take money off the table," said Dave Meger, director of metals trading with Vision Financial Markets, discussing the gold situation.
Adding to today's wobble in gold is anticipation of the scheduled release Wednesday of the minutes of July's FOMC meeting, which will be read by analysts with all the scrutiny of a chronic gambler at a horse race reading a tout sheet.
A good question is this: why take a month to release those minutes? Seems counter-productive. A better solution would be to issue an off-month thumbnail sketch of what's going on in the markets. But... if wishes were horses, beggars would ride.
"People will be looking for the type of language the FOMC comes out with in terms of tapering the QE," said Bob Haberkorn, a senior commodities broker with RJO Futures.
We think this is an off key worry because by now everyone knows tapering will occur and the consensus is that it will be very gradual so the shock won't be too hard on the body economic.
Sentiment has turned positive toward gold, an annual condition that occurs in late August and early September like the swallows returning to San Juan Capistrano. Usually the good ride up lasts into early winter. Part of the reason is that this part of the year is traditionally a time of very strong physical demand in India and other parts of south Asia and southeast Asia; it is also the time of year when western world jewelers are placing and taking delivery on orders for end-of-year products associated with gift-giving holidays.
J.P. Morgan today signaled that gold is a "buy" right now in the near and middle term, a turnaround from positions the company held earlier in the year. We await Goldman Sachs positioning, which has been ultra-bearish. We're guessing they come out neutral to lightly bearish in the next few weeks.
Last week we covered some of the fundamental factors driving silver up. To reiterate, they are, in brief: short covering buying (now an influence that is aging off the list of importance); a renewed interest in coins; exploding interest in silver in India because of their draconian import duties on gold, and finally, a resurgence in the solar panel business, which experienced a shake-out in 2012 into the first half of 2013.
India is fascinating when it comes to the white metal.
India's imports of silver in the second quarter of 2013 surged an astronomical 259% to 857 metric tons. Then July, standing alone, saw imports of 275 metric tons, the second-highest monthly import number in the past five years.
To put the four-month April to July import figures for silver into sharp perspective, 857 tons is the equivalent of roughly one third of the world's monthly production of silver.
This is a a clear case of the law of unintended consequences - people struggling to buy gold in India are now buying silver. India's central bank needs to focus on real ways to strengthen the rupee, not fake fixes that create havoc with small investrs and those who save via precious metals.
Wishing you as always good trading,
Gary S. Wagner
On a technical basis today’s moderate correction confirmed resistance in gold at 1380 per ounce. After the large upside price moves recently this round of profit taking was to be expected. As we are currently plotting a sub count of wave three (minor), it is still too early to tell if we have entered corrective wave four or if this is simply a price dip which is still part of wave three.
On today’s video we will look at support as well as resistance levels currently found in both gold and silver. Although we sent out an alert today highlighting the most recent correction, we have not trailed our stops above the current location of 1350. 1361 is a support level in gold, and whether or not it is significant will be determined as to whether or not markets move higher after testing that intraday low. Silver was only moderately lower, trading seven cents off on the day. Given the dramatic moves we have seen in silver concluding in a for dollar rise, this type of selloff is tepid at best.
Proper Action: We trailed stops higher last Thursday,
maintain current stops
Long Gold @ 1313 Stop Below 1350
Long Silver @ 20.48 Stop Below 2200
Click on chart below to view gallery
This report is now free and publicly available to everyone
Gold Forecast: Proper Action
GLD: On April 12th our stop was hit at $162. We went long at 162.82. Trade resulted in 0.82 loss per share.
Futures: Gold (GC J21) in at 1722.80. Out at at $1728 for a profit of $520.00- per Comex contract.
Forex: XAUUSD in at 1724.40. Out at at $1729 for a profit of $4.60- per ounce.
ETF's: GLD in at 161.55. Out at at $161.90 for a profit of $0.35- per share
SLV in at $24.24. Stop hit at $23.50, for a loss of $1.05 per share
May 2021 (SI K21) in at $26.26. Stop hit at $25.3 for a loss of $0.96 ounce
Forex silver in at $26.17. Stop hit at $25,30 or a loss of $0.87 per ounce
On February 18 we entered a long April Platinum trade. In at $1282. Our stop was hit today (02/26/21) @ at $1217.00
SILVER FUTURES MARCH: Entry at $27.36, and then closed the trade later @ $27.45.
XAGUSD: Entry at $27.26,, our stop was hit at $27.39
We closed our positions in SLV:
First leg SLV: @ 22.95 .out at @ $24.99
Second leg SLV @ 24.60. out at @ $24.99
On Thursday February 4 stops were hit on our long GLD ETF. We entered at 172.14. Our stop was hit at $168.29 (the open on Thursday) for a $3.85 loss per share.