• Gold: 1,197.80 -9.45
  • Silver: 14.33 0.02
  • Euro: 1.175 -0.003
  • USDX: 94.242 0.33
  • Oil: 71.12 0.87

December 18: Gold and Silver Fall Almost 2%

Chris Mullen
|
Tuesday, December 18th

 

 

Close

Gain/Loss

Gold

$1672.80

-$25.20

Silver

$31.64

-$0.57

XAU

162.53

-1.53%

HUI

432.75

-1.43%

GDM

1260.87

-1.58%

JSE Gold

2231.01

+11.53

USD

79.35

-0.21

Euro

132.26

+0.64

Yen

118.76

-0.45

Oil

$87.93

+$0.73

10-Year

1.827%

+0.064

T-Bond

147.3125

-1.34375

Dow

13350.96

+0.87%

Nasdaq

3054.53

+1.46%

S&P

1446.79

+1.15%

 
 

The Metals:

 

Gold fell $36.70 to $1661.30 by early afternoon in New York before it rallied back higher in the last couple of hours of trade, but it still ended with a loss of 1.48%. Silver slumped to as low as $31.35 and ended with a loss of 1.77%.

 

Euro gold fell to about €1265, platinum lost $9.50 to $1592.50, and copper fell slightly to about $3.64.

 

Gold and silver equities fell over 2% by about 2PM EST before they bounced back higher in late trade, but they still ended with about 1.5% losses.

The Economy:

 

Report

For

Reading

Expected

Previous

Current Account Balance

Q3

-$107.5B

-$104.2B

-$118.1B

NAHB Housing Market Index

Dec

47

47

45

 

"Fiscal cliff" deal closer, but gaps remain Reuters

Tomorrow at 8:30AM EST brings Housing Starts for November expected at 875,000 and Building Permits expected at 876,000.

 

The Markets:

 

Charts Courtesy of http://finance.yahoo.com/

 

Oil rose along with the Dow, Nasdaq, and S&P as the U.S. dollar index dropped on signs of progress in the negotiation over the fiscal cliff.

 

Treasuries remained lower after today’s $35 billion 5-year note auction sold at a yield of 0.769% with a bid to cover of 3.72.

 

Among the big names making news in the market today were Facebook, Samsung, BofA, Airbus, ConocoPhillips, Cerberus, Apple, and Nielsen.

The Commentary:

 

Apparently we now live in world in which lawmakers squabbling over how to avert tripping over an anthill instead of plunging down into the abyss gives reason to buy stocks while selling nearly anything that appears to be a safe haven.

I find it ironic to say the least that the market analysts continue to be so fixated on the non-sensically named, 'fiscal cliff', when the country is on track to have a national debt of over $20 TRILLION by the end of the next 4 years and how many more trillions in unfunded liabilities. Economic growth is so anemic that the Fed will be conjuring the sum of $1.02 TRILLION into existence over the course of the next year in order to buy mortgage backed securities and US Treasury obligations with the sole purpose of keeping interest rates ultra low so as to encourage additional debt. Yet everything is okay now because Obama and Boehner are talking and moving closer.

Oh well, it is what it is and there is not much sense in even looking at things in bewilderment anymore. The new era of "PRINT YOUR WAY TO PROSPERITY" apparently is now fully entrenched in this generation.

Just look at the following chart of lumber - this market is forecasting a big recovery in the housing market. Ultra low interest rates are apparently predicted to have their intended effect.

 

Here is the point in this; one cannot be successful as a trader by arguing with the markets. As I have said many times on these pages and elsewhere - they are going to do what they want to do no matter what you or I or anyone else thinks.

The problem that many of us who are long term gold bulls have is precisely that - we are "LONG TERM" thinkers. In the meantime, our markets today have become completely short-sighted forums. Hedge fund algorithms respond to short term signals and then take over. Remember, there is little thinking involved at this point in the markets - they are governed by computer algorithms and those things will either buy or sell based on the short term signals that they get. Get on the wrong side of them and your trading career will be a short lived one. Instead, learn to either get out of the way if a support or resistance level is taken out or be prepared to weather the storm that will then follow.

Take a look at the bond market. Here is the long bond chart. Notice how this safe haven has been thrown out in favor of equities as money flows out of bonds and back in stocks based on the assumption that the fiscal cliff deal, combined with the Fed's easy money policy, and other decent news from abroad has traders currently expecting a recovering economy. Thus, no need for safe havens and back into equities for gains.

 

This is precisely what the Fed intended when it announced its plans - it wants the stock markets moving higher to boost consumer confidence so that the consumer will take on new debt. Also, businesses love a stock market moving higher as it inflates the price of their shares.

The breakdown in the bond market has sent the price moving down towards the bottom of a 5 month or so trading range. It is interesting to say the least to see this move lower in bonds, particularly with the announced $40billion/month purchasing program, QE4, being just recently announced. That program however is not targeting bonds of this duration however. Still, if longer term rates continue to rise it is going to work crosswise to the Fed's purpose of deliberately pushing rates lower to not only spur more consumer spending but also to keep the US government's borrowing costs obscenely low.

Take a look at the Japanese Yen - another favorite SAFE HAVEN which has obviously severely fallen out of favor. Most of this is due to the new political situation in Japan in which traders expect a strongly negative Yen policy to be FORCEFULLY advocated by the new governing powers. Still, that in itself does not completely explain the weakness in the Yen. Just like the bonds are being discarded in favor of equities, the Yen is being discarded in favor of currencies with a closer relation to risk assets.

 

As you can see, the Yen is probing into a region of strong chart support. If it cannot muster much of a bounce from this region, chances are that we have seen a major long term top in the value of Yen against the US Dollar. We might even see the start up of the YEN CARRY TRADE in a large way just like we did prior to its collapse in the summer of 2008. One does not see the Yen Carry trade come into being during a period in which market participants are concerned about DEFLATION.

That is why this currency has my attention. Right now it is signaling that there is a move towards risk assets underway. So far this move has consisted almost entirely of equities. But if history is any guide and we see the risk appetite get whetted, look for the commodity complex to follow as money flows will move into the sector in a much larger way to start off the new year. We will see any evidence of this in the charts.

So far we are seeing it in the Lumber market, Cotton market, and the Copper market. We are also seeing it in the Livestock markets. The grains have not experienced it due to the expectations of a very large corn and bean crop out of South America but if these hedge fund computers go berserk in January, at some point we will see some of that money make its way into the grains.

We will keep a close eye on the CCI (Continuous Commodity Index ) as a forewarner of such an occurrence. Today it is sinking lower but if this risk appetite is real, it will find support sooner rather than later. In this sort of environment, it will be tough to be short of anything that looks like a commodity.

We will just have to wait and see what the New Year brings us and then deal with it accordingly.

As for gold, well, what more can be said than it failed to attract the usual strong buyers that have formerly been coming in between $1690 - $1680. They stepped back and as a result, there was an enormous air pocket below the market without any bids of size. Down went the market with locals pushing it along further until they found the sell stops which they did in a big way.

Volume today has been absolutely enormous, especially during a time period in which liquidity begins drying up and volume normally shrinks. That environment allowed the bears to finally reach those downside stops that they have been salivating after. The question now becomes whether or not Asia comes in this evening and begins scooping up gold.

If we truly are seeing a shift towards inflation concerns ( bond market breakdown) gold will stabilize sooner rather than later. I am still watching the HUI for any hint of this but so far, at least in today's session, nothing doing.

 

Gold has attracted some buying here later in the afternoon and is bouncing off its 200 day moving average. That level seems to be a pretty good support region as it also happens to coincide with the 50% Fibonacci Retracement level from the October top near $1800 and the May low near $1530. Bulls will not want to see this level violated without a quick, intraday recovery occurring as it would mean the market will likely drop to $1640 before any serious buying would emerge.

Even with all this flight away from safe havens today, it does seem to me like this downside move in gold has been overdone a bit.- Dan Norcini, More at http://www.traderdannorcini.blogspot.com/

 

GATA Posts:

 

 

New Irish political party presses gold questions

Japanese pension funds seek safety in gold

Queen on gold bars at Bank of England: 'Regrettably not all of them belong to us'

Lawrence Williams: What on Earth's going on in the gold market?

GATA chairman and secretary to appear on RT's 'Capital Account' today

Ambrose Evans-Pritchard: Japan prepares to print money for the whole world

SEC authorizes JPMorgan to use ETF to rig copper market too

Sudan tightens control of gold refining and exports

 

The Statistics:

As of close of business: 12/17/2012

Gold Warehouse Stocks:

10,955,210.403

-175,017.582

Silver Warehouse Stocks:

147,432,196.962

-83,324.06

 

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

 

Product name

Total Tonnes

Total Ounces

Total Value

New York Stock Exchange Arca (NYSE Arca) AND Singapore Exchange (SGX) AND Tokyo Stock Exchange (TSE) AND Hong Kong Stock Exchange (HKEx)

SPDR® Gold Shares

1350.519

43,420,543

US$73,536m

London Stock Exchange (LSE) AND NYSE Euronext Paris AND Borsa Italiana AND Frankfurter Wertpapierbörse (Deutsche Börse - Xetra)

Gold Bullion Securities

139.84

4,496,122

US$7,537m

London Stock Exchange (LSE) AND NYSE Euronext Paris AND Borsa Italiana AND Frankfurter Wertpapierbörse (Deutsche Börse - Xetra) AND NYSE Euronext Amsterdam

ETFS Physical Gold

160.14

5,148,538

US$8,396m

Australian Stock Exchange (ASX)

Gold Bullion Securities

11.16

358,789

US$602m

Johannesburg Securities Exchange (JSE)

New Gold Debentures

42.45

1,364,715

US$2,214m

Note: Change in Total Tonnes from yesterday’s data: SPDR subtracted 0.904 tonnes.

 

COMEX Gold Trust (IAU) Total Tonnes in Trust: 216.51: -0.30 change from yesterday’s data.

 

Silver Trust (SLV) Total Tonnes in Trust: 9,871.29: No change from yesterday’s data.

 

The Miners:

 

WINNERS

1. Gold Reserve

GRZ +5.19% $3.04

2. Solitario

XPL +2.61% $1.57

3. Eurasian

EMXX+2.45% $2.09

LOSERS

1. Aurizon

AZK-6.54%$3.43

2. Timmins

TGD-5.59%$3.04

3. Rubicon

RBY-5.22% $2.54

Winners & Losers tracks NYSE and AMEX listed gold and silver mining stocks that trade over $1.

Please see Yahoo’s Mining/Metals News Wire for all of today’s mining news.

 

- Chris Mullen, Gold Seeker Report

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Additional Resources for today’s Gold Seeker Report can be found:

© Gold Seeker 2012

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