Gold Could Possibly Bounce Next Week - Allen Sykora and Debbie Carlson

(Kitco News) - After spending the first two weeks of the year weaker, gold prices could be ready for a bounce, especially if the markets return to worrying about European debt.

February gold futures prices settled at $1,360.50 an ounce on the Comex division of the New York Mercantile Exchange, down 0.6% on the week. March silver futures settled at $28.32 an ounce, a fall of 1.2% on the week.

Several successful bond auctions this week by economically shaky southern European countries – Portugal, Spain and Italy – temporarily eased some of the fears about sovereign debt among peripheral nations. That took away some of the safe-haven demand for gold, said Adam Klopfenstein, senior market strategist with Lind-Waldock. Further asset allocation as investors finished rebalancing commodity indexes also caused some movement out of gold.

China’s central bank announced a rise in the reserve-ratio requirement, due to take effect on Jan. 20, which also pressured prices on Friday.

But once the impact of the Chinese move fades, the market could start worrying again about the longer-term European structural debt problems. This is likely to become a background factor offering support again, Klopfenstein said.

“That’s going to give gold more flight-to-quality buzz. I think gold is going to approach $1,400 next week,” Klopfenstein said. “Anything from there will be based on market momentum. But I do think we’re going to have a strong rally next week.”

He described this week’s European bond auctions as “delaying the inevitable,” or further crises.

“Until we get a clear resolution of the European debt situation…that will be in the backdrop,” Klopfenstein said. “And as long as that is the case, gold will be well supported. I don’t expect a major drop below $1,350.”

Spencer Patton, president and founder of Steel Vine Investments, also doesn’t see the European debt situation going away anytime soon. “There’s never been an unsuccessful auction in the past, but rates are still too high to be sustainable. Even in countries that got bailed out, auctions are successful, but rates are unsustainable to float debt,” Patton said.

Charles Nedoss, senior market strategist with Olympus Futures, looks for gold to bounce next week on technical-chart factors, since the market is range-bound but currently closer to support underneath the market than the resistance above. Furthermore, he said the dollar index looks technically negative, and further declines would be supportive for gold.

February gold has been turned back lately from chart resistance at the 10-, 20- and 50-day moving averages, which all lie roughly in the area from $1,384.50 to $1,388.50, he said.

But at the same time, the metal is showing signs of holding support on the basis of a weekly chart, Nedoss said. This includes last week’s $1,352.70 low, which roughly coincides with the 20-week moving average around $1,350.

“I think we’re starting to get to the low end of the range here and start to work higher next week,” Nedoss said, although there might be a “fight” once it gets back to the daily moving averages currently in the $1,380s. “I think eventually – maybe not next week but over the course of the next couple of weeks – we’ll take those levels out and we’ll see the dollar (index) take out the 79.00 level.”

Patton is keeping an eye on a possible head-and-shoulders formation on February gold charts. He said it’s not a perfect technical chart pattern, but he points to two left shoulder tops from October and November, the head being the high from early December and the right shoulder the late-December/early-January highs.

The neckline of that asymmetrical pattern comes in around $1,360. If that is broken, Patton said prices could fall to $1,300. Beneath that level trendline support is at $1,280.

Those would be good buying opportunities, if prices fell that far, and he expects buying to come in if a break like that occurred.

Silver’s short-term outlook is a little more tenuous, he said.  Currently it’s holding above chart support around the $28.20 to $28 area.

“I’m more concerned about silver than I am about gold. The charts seem to suggest a topping pattern – maybe it’s a window into gold,” he said.

Patton said support for silver does not come in until around $25, a level where it broke out of resistance. That means silver could fall further if downward momentum were to pick up. Trendline support comes in at $21. “Silver is more volatile than gold and it could fall another 10% - I think it could test $25,” he said. “If it does, it would be a good buying opportunity.”

 

Source: http://www.kitco.com

Silver still one of the best performing assets this decade

Silver had a truly spectacular year, in 2010. The price increased from $15 an ounce to just over $31 an ounce, an increase of a whopping 106% in US dollars. And, no matter what currency you look at the price of silver increased anywhere from 60% to as much as 266% (Venezuela Bolivas). Since the bull market in silver began in 2003, the price has increased by as much as 775%. If we use the same example I used to illustrate the gains in gold, then an investment of $100,000 in silver would now be worth around $700,000! By comparison, over a ten year period, an investment of $100,000 in gold would now be worth $560,000 and an investment in bonds yielding say 8% per annum over a ten year period would be worth approximately $216,000. You don't have to be rocket scientist to see which investment has been the best performer.

Even though I have continually urged investors to allocate some of their funds to silver since the price was trading just above $6 an ounce in 2004,  many of these individuals, have preferred to remain in equities, funds, money market and bonds. But, when the price of silver broke above $30 an ounce, many of these same individuals asked if it is now too late to enter the market. While I cannot explain the psychological imprint of these investors, I have seen this behavior many times over the last 30 years or so. These types of investors invariably seem to need the validation of their bankers, stock brokers, accountants etc., before making a decision. Yet, their advisers usually have no knowledge about these markets and are therefore not really qualified to render any advice on their potential or lack thereof.  Then, by the time these investors realize that they have missed out on some major gains, and decide to enter the market, they deliberate waiting for a pull-back that never seems to come. And then, out of pure frustration, they finally enter the market, but only when it is close to peaking.  My point is very simple. Don't make this mistake regarding silver. Despite the massive gains we have seen in the last ten years, this market is still far from peaking and still offers investors huge potential.

As I have already mentioned many investors, who have already missed out on some stellar returns, are now asking if they should enter the market at the current levels. And, as I have alluded to many times in the past, it depends on whether you are a trader who takes a short-term view or an investor who has a long-term time horizon.   If you are a trader, I cannot predict the short-term moves, but if you are an investor I believe that the current pull-back in prices will not last very long and offers a wonderful opportunity to buy some silver. In the long run if you buy now and even if the market pulls back say another $3 an ounce, this is not going to have a major impact on your investment if the price goes to as high as $125 an ounce in a few years' time.

I believe that we will see the price of silver trade at $45 an ounce before the end of the year. On this basis, if you are able to buy at current levels of say around $29 an ounce and my analysis is correct, a return of 55% in 12 months' time is nothing to be laughed at. But, over the next coming years, I sincerely believe that we are going to see prices trade at several multiples of the current price.      

TECHNICAL ANALYSIS

 As the price of silver pulls back towards the medium-term 50 day MA, I believe that we will see prices supported at this level. That being the case, these dips offer more buying opportunities.

 

Source: http://www.mineweb.com

Gold Is Promising For 2011

Gold rose above $1,420 an ounce coming into 2011 within 1 percent of its record high, and silver and palladium hit multi-year peaks, driven by pent-up demand on the first trading day of 2011.

While a firm dollar is limiting gains, expectations for more bad news on euro zone debt, concerns over potential inflation in developing economies and an increased focus on the U.S. deficit are set to maintain surging demand for gold, analysts said.

Pradeep Unni, senior analyst at Richcomm Global Services in Dubai, said fresh highs in gold were “likely” this year after the metal was becalmed over the Christmas holidays, with an initial target seen at $1,455-$1,480.

“Gold (steps) into the New Year with all its current fundamentals intact…. sovereign debt risk, macro uncertainty, concerns over currency stability, medium-term inflation fears as the U.S. Federal Reserve implements Quantitative Easing II, geopolitical tensions and low interest rates.”

Spot gold was bid at $1,420.40 an ounce at 1035 GMT (6:35 a.m. ET), against $1,419.45 late in New York on Friday. The precious metal hit a record $1,430.95 an ounce in December. European trade is expected to remain quiet, with London still on holiday.

U.S. gold futures for February delivery eased 40 cents an ounce to $1,421.00.

Bruce Krasting, former hedge fund manager predicts, that “volatility is going up across the board. If you have the stomach for the swings that are coming across all markets there is a ton of money to be made; balls and timing are all that are necessary.

Gold will be higher a year from now but off its peak. At some time in the fall, gold will be near 1,800 and the New York Times will do a front-page story that gold is on its way to 2,000. That will be the high point of the year.” So watch out you skeptics…cause spot silver has already risen to 30 year peak of 30.72 an ounce higher with our short positioned, Copper right behind as one of the oldest metals used in the development of civilization.

And, copper will continue to rise. This metal will benefit as the poor man’s gold. Why buy an ounce of something for $1,600 when you can have a whole pound of something else for only $5? The logic is compelling only because there is no logic. Increasingly, it will become understood that money does not hold value, but gold, silver and copper does and will.

These three metals remind me of the parable about the three men and the elephant, who had never seen an elephant before and were blindfolded, then asked to describe the new animal based on what they could perceive by touch. One man felt the trunk and said “It seems to be a large snake.” The second man felt the side of the elephant and said “It seems to be built like a wall.” The third man felt a leg and said “It seems to be built like a tree.” Neither had the ‘big picture,’ “As the central banks stimulate their economies for 2011, the ‘big picture’ will be revealed”,” says Regal Assets, “as it will only add fuel to the fire of the growing anxiety over rising inflation, and again bode well for gold.

Gold as a Reserve Currency

“Combining the fundamental factors discussed here and technical signals,” said Krasting, “the euro could break below $1.25 or even $1.20 sometime this year, which could drive gold up towards $1,600 levels. It is worth noting that gold priced in Euros has risen more than 38% so far in 2010, reaching a new record high above €34,475 per kilo, far outpacing gold’s nominal price gain (in dollars) of around 28%.”

“So in a way, gold is treated almost like a second reserve currency, replacing the Euro, and you would have gotten a better return getting into gold via the Euro. If the US dollar shows strength then gold will go to $2000/ounce. If the US dollar shows weakness it will go to $3000/ounce. It clearly points the way to invest, is in gold, which is the safest investment for 2011,” he added.

So, to recap, with the QE2, unemployment, foreclosures, geopolitical chaos and huge global inflation that will all contribute to a strong physical demand for gold, one needs to peak in on silver, which is already inching towards its 30-year peak supported by the strength in industrial metals such as copper. “Copper prices have been very firm, supporting silver as well as palladium,” added Regal Assets, “and that short-covering in silver also helped push prices higher. We expect silver to trade in the range of $30 to $35 this year, with $40 as a potential target. Buying silver isn’t just a way to back up your investments in the New Year. It’s now a profit play, too. And you could be earning real gains with the other precious metal alongside gold. The silver market is small. But the profits aren’t. You can turn silver into golden gains!” Call Regal Assets today, and you’ll have a great year!

 

Source: http://goldcoinblogger.com

2010 Gold, Silver, Platinum, and Palladium Price Performance

 

Precious metals delivered another year of strong performance, with double digit percentage gains for gold, silver, platinum, and palladium.

Palladium led the pack with an increase of 96.77% for the year. The metal is now at a nine year high, with gains attributed to the dwindling stockpiles in Russia amidst increased demand for use within catalytic converters in gasoline powered automobiles. As recently as December 2008, the price of palladium was $164 per ounce, compared to this year's closing price of $791.

Silver had an impressive year with a gain of more than 80%, outperforming gold's rise of 27.74%. With the price of silver moving up faster than gold, the gold-silver ratio continues to contract. This ratio indicates the number of ounces of silver necessary to purchase one ounce of gold. At the start of the year, the ratio was 64.98. At the close of the year, the ratio is 46.04.

The table below shows the last available London Fix prices from 2009, today's London AM Fix price, the change, and percentage change.

2010 Precious Metals Price Performance

	Dec 31, 2009	Dec 31, 2010	Change	Percent
Gold	$1,104.00	$1,410.25	$306.25	27.74%
Silver	16.99	30.63	13.64	80.28%
Platinum	1,466.00	1,731.00	265.00	18.08%
Palladium	402.00	791.00	389.00	96.77%

Although palladium and silver outshone gold this year, gold continues its impressive streak of consecutive annual gains. The price of gold has recorded an annual gain each year since 2001. During the ten year period, the price of gold has risen more than fourfold from $272 per ounce to $1,410.

Source: http://goldandsilverblog.com

Brazilian Gold Mine Robbed

It seems that the current interest in physically backed gold is not limited to investment markets. Last week, it was  reported that a British Colombian gold firm was the victim of an armed robbery. The company in question was the Luna Gold Corp, and their Aurizona Mine in Brazil was attacked early Wednesday morning. The robbery did not result in any employee injuries, but approximately 1,500 ounces--$2 million worth—of gold were successful stolen.

The Target

The Luna Gold Corp identifies itself as a “gold mining and exploration company engaged in the exploration and development of gold deposits and advanced stage gold exploration projects in Brazil.” Currently, their attention is focused on the site that was robbed—the Aurizona gold mine. This mine is only in its initial stages of production and the company anticipates an eventual annual production of 60,000 ounces a year.

The surrounding areas are believed to be home to other major gold deposits as well, but that is highly speculative at the moment. Unfortunately, the mine is also relatively isolated—located as it is between the two cities of Sao Luis and Belem in Maranhao state.

The Fallout

That isolation rendered the facility vulnerable to the robbers, who gained access to the site and escaped without being caught. More importantly, they escaped without harming anyone.

The company’s statement touched upon this and other fallout from the event, saying “The safety and welfare of our employees is our highest priority and we will ensure that those involved receive appropriate support and counseling. Theft in this manner is disturbing and regrettable. The company is co-operating with authorities and will update the market when information becomes available."

As for the loss, Luna Gold Corp will be filing a claim with insurance while the Maranhao Police continue to investigate the incident.

Source: http://goldandsilverblog.com

Looking for a Top in Gold

Investors and analysts alike are looking at the record prices of gold last year and trying to predict the future. Last year the price of gold rose by more than 27%, contributing to an increase of more than 400% over the past decade.

Another year of double digit gains in the gold price has many experts considering whether prices will continue their upward trajectory, or whether there are warning signs for a potential top. The predictions are as varied as their sources:

1. According to Goldman Sachs, gold will top in 2012 at $1,750 an ounce.
2. John Nadler at Kitco.com predicts that gold will cap by the end of 2011.
3. The CEO of U.S. Gold, Rob McEwen believes that the market is “a third of the way” to a mania.
4. Jim Rodgers estimates that the long bull market in gold will result in a huge bubble for the commodities market as a whole—and he thinks we’re halfway there already.
5. Scott Redler at T3Live.com predicts that if the price gap is truly filled, gold will stay range bound between $1,320 and $1,400 for a time before mustering up a bigger rally.

Everyone is eying the market and trying to decide what it is going to do next so that they can react accordingly. Surprisingly though, most investors do not own their own gold and have never owned it.

According to The Street, you’re much more likely to see people selling gold than buying it. Still, the media excitement about gold prices, not to mention the prices themselves, is generating new investors. The SPDR Gold Shares added 155 tons this year, for example. Longtime investors are waiting for the day when everyone jumps on the bandwagon, resulting in the gold bubble they’re currently trying to predict.

Source: http://goldandsilverblog.com

China 2010 gold output seen above 340 tons

BEIJING (Commodity Online) : China, the world's largest gold producer expects its gold production in 2010 above 340 tons, according to the Chinese Ministry of Industry and Information Technology.

Actual gold output for the first 11 months of the year, according to official figures, was 308.39 tones, up 9.2% on the same period in 2009.

In 2009, China's gold output was 319. 980 tones. This is now the 6th successive year in which the country has raised its gold output.

China also imported 209.7 tonnes of gold in the first 10 months of 2010 - up a massive 500% on the previous year's imports over the same period.

Analysts said China's overall gold consumption, a figure reached by adding mine output to imports, in 2010 could reach close to 600 tones or more - equivalent to around a quarter of global mine production.

China is seen as needing to raise its Central Bank gold reserves to percentage levels near those of major Western countries, which would absorb a substantial amount of the precious metal, but is also seen as being extremely cautious about releasing data on any reserves rise.

In some analysts' views this is because an overt increase in China's gold reserves would have the effect of stimulating substantial price increases in the yellow metal.

All in all this makes China a very substantial player in the global gold market with the capability of controlling the gold price if it so wants to given the trillions of dollars in its reserves.

It is currently gaining ground on India as the world's biggest importer of gold and many think China will surpass India in this respect over the next couple of years - particularly given the Indian nervousness about buying into a rising gold price, a factor which does not seem to be impacting the Chinese investor so far.

Meanwhile, China National Gold Group Corp, the country's largest gold producer, said its operating profit in 2010 reached 3.2 billion yuan ($471 million), more than five times the amount in 2006.

By the end of 2010, the company's reserves of gold resources reached 1,300 tons, up from 275 tons in 2006. Copper reserves reached 8 million tons, up from 1.25 million tons in 2006 while molybdenum reserves increased to 1.4 million tons from 200,000 tons in 2006.

Source: http://www.commodityonline.com