Commentary for Friday, April 25, 2014 (www.golddealer.com) – Gold moved up $10.20 today at $1300.70 as Putin ramps up the rhetoric claiming “crimes have been committed” and President Obama returns the favor with his own type of fire brand. Both leaders should be careful what they claim because it is making Europe and financial markets on both side of the pond nervous.
On the positive side gold did test its 100 day moving average ($1279.00) and lived to tell the tale. As far as the Ukraine is concerned if this were the only key prime mover for gold the oil market would be stressing and reaching for higher prices. It is not, so while increased political tensions support gold let’s look for other related factors.
The last few days has seen higher prices in gold caused by increased tension over Ukraine and ECB head Mario Draghi’s comments suggesting further quantitative easing for Europe.
These two factors were enough to stop the generally weaker price trend in gold which began April 14 as gold could not find follow through buying above the $1320.00 mark.
At that point the bears were in charge and gold lost about $40.00 before once again finding closing support above the important $1280.00 mark. This is the second time since early April gold has bounced off the $1280.00 level as short-covering and bargain hunting entered the market.
My bet is that with the last few “outside days” in the price of gold we are seeing a generally short market which is now tired so geopolitical events often have a pronounced impact.
If the Russian situation settles down look for a continued range bound market trading between $1280.00 and $1330.00 with continued bear raids which will test further downside resistance.
This push-pull trading action might continue through the summer months influenced by Europe’s need to fight deflationary forces encouraging the bulls and the Federal Reserve’s commitment to continued tapering of its long standing bond buying program encouraging the bears. Housing numbers this week were off which might cause the Fed to blink. And there is some inflation talk beginning to creep in around the edges of authentic commentary especially in energy and food.
If the Russia-Ukraine problem does not deescalate gold will continue higher and push stocks lower. Keep in mind that we have seen considerable overhead resistance in the $1350.00 range going back to last summer.
This from Allen Sykora (Kitco) – Gold demand is picking up in India ahead of a key festival and should help curb any further weakness in international prices, said analysts with several consultancies. Nevertheless, observers say the festival itself likely won’t be enough to spark a sharp rally considering the continuing restrictions on gold imports into India and recently lukewarm Chinese demand. However, analysts do look for an eventual relaxation of the onerous Indian import rules, which should then help consumption, although they do not see this occurring until sometime after spring elections. The Akshaya Tritiya festival occurs in India on May 2. Additionally, May is considered one of the two “wedding seasons” in the country. “That is typically a strong buying period in India,” said Rohit Savant, senior commodity analyst with CPM Group. This is significant for the market since India historically has been one of the world’s largest consumers and until last year was the No. 1 gold buyer in the world, before being overtaken by China. “What we’re likely to see is limited downside while the buying is going on for that festival,” Savant said.
Silver closed unchanged at $19.68 which should be a red flag as far the higher gold prices are concerned. There is no symmetry between gold and silver these days. If gold was getting ready for a big break to the upside I would expect volume numbers in physical silver sales to be increasing.
Platinum closed up $15.00 at $1423.00 and palladium closed up $9.00 at $811.00.
(Kitco News) –Concerns about potential escalation in the situation between Ukraine and Russia, plus a move back above certain technical chart levels, should support gold prices next week, a majority of participants said in the weekly Kitco News Gold Survey. Out of 33 participants, 19 responded this week. Twelve see prices up, while four see prices down and three see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts. Last week, a majority of the survey participants said they looked for prices to fall this week. As of 11:45 a.m. EDT Friday, Comex gold for June delivery was up about $8 for the week. Renewed worries over tensions between Ukraine and Russia pushed gold prices higher late this week, and several survey participants said they are erring on the side of caution and calling for higher prices next week. “Gold went ‘bid’ as soon as there was violence and death. A diplomatic and political standoff is enough to support gold, but it takes guns going off to propel it higher. It is anyone’s guess as to what happens in Ukraine, but with more violence gold will go higher and without it, steady to lower. The volatility means that gold remains a short-term trading opportunity, not a long-term position play. The rebound from 10-week lows was impressive this week and traders will most likely go home long for this weekend, so I will look for a higher market next week,” said Frank Lesh, broker and futures analyst with FuturePath Trading. Not everyone thinks gold is going go higher, when factoring in all the elements that influence gold. Ira Epstein, director of the Ira Epstein division of the Linn Group, said he’s “in the bear camp, but without a bear position in place.” He said considering inflation in most developed countries is “a non-issue,” stock indexes are higher and world economies are improving, there are more negatives than positives for gold. “The question now is whether or not things heat up enough in the Ukraine to move gold higher,” he said, adding that he doesn’t expect a war over Ukraine, “especially when Europe has no appetite to put its energy supplies from Russia at risk.” A few see prices range-bound. “(It’s a) tough call this week. A strong argument could be made for all three directions. If I had to pick one, it would be sideways,” said Darin Newsom, senior analyst, DTN. “The June contract has posted a strong rally off its test of technical support at $1,265.20, and is poised for a higher weekly close. All this despite weekly Stochastics that remain bearish. This could easily set the stage for a continued rally next week back to resistance between $1,321.30 and $1,334.80. However, for arguments sake, I’ll say that the contract calms down next week and consolidates within this week’s range, so far, of $1,303.50 to $1,268.40.”
The walk-in cash trade into the weekend did have a little buzz for a change and the phones were active but neither was very convincing. No one wants to be short into this weekend because of political tension and our physical sales of large format gold bars (kilo and 10 oz) has jumped higher but no whales as yet.
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