Gold price fundamentals remain unchanged

As we head towards 2012, uncertainty and growing pessimism are the dominant themes in the gold market right now. read more

Closing Gold & Silver Market Report – 12/19/2011

ENGLAND SCORNED, BACKS OUT OF IMF LOAN   

Since the Mid-Day Gold & Silver Market Report, precious metals prices have been steady, with some dips through the afternoon. There are concerns for South Korea after the death of Kim Jong Il. There are a number of uncertainties this has presented, including a possible Arab Spring-like event. The European debt crisis has intensified, with England bailing out of the International Monetary Fund vote for funding. All the uncertainty has increased the demand for physical Gold. “We have seen since last Wednesday very good demand for physical (Gold),” said Afshin Nabavi, head of trading at MKS Finance. “It was still continuing this morning.”

Stock markets slipped today over comments made by European Central Bank (ECB) President Mario Draghi regarding the ECB not being able to step in to buy bonds based on the founding treaty of the eurozone. The overall feeling revolves around a need for safety, said PIMCO Chief Executive Mohamed El-Erian. “The ECB has made it very clear that it doesn’t believe in the bazooka. … It believes in the national governments and other institutions getting their acts together first.”

The other concern that presented itself during a three-hour conference call was England’s refusal to participate in increasing the IMF’s resources to help the debt crisis. This places a greater need on Russia or China to help in bailout efforts. The United States is concerned about its exposure to the debt. German Finance Minister Wolfgang Schaeuble said, “Washington cannot make bilateral loans available to the IMF without Congress approving it. … There's no chance of that, and the American government has always made that clear.” There are still plenty of hurdles and difficulties within the eurozone, including Finland’s resistance to how the European Stability Mechanism is run, which could cause issues as early as July 2012.

At 4:03 p.m. (CST), the APMEX precious metals spot prices were:

World Economic Trends and the Future Price of Gold

Gonzalo Lira: About Gold: Don’t Panic!!!

Closing Gold & Silver Market Report – 12/15/2011

IMF FEELS EUROPEAN CRISIS GETTING WORSE

Since the Mid-Day Gold & Silver Market Report, precious metals prices have remained fairly stable. The outlook for gold remains quite strong. The relative strength index for gold remained below average for another day, which points to an attractive buying potential. In a note to its investors, Commerzbank analysts wrote, “Investors with a medium- and long-term view are remaining loyal to gold, and gold ETFs are still showing no outflows. In our view, bargain hunters are soon likely to take advantage of the low price levels.”

In an interview with IMF Director Christine Lagarde the international community was basically put on notice that the European debt crisis could affect all global economies. The issue revolves more around the global community needing to come together versus isolating countries, which just recently happened with England after the EU summit last week. Europe needs to get its house in order to contain the risks being posed. Her most telling comment, “There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding, but escalating at a point where everybody would actually have to focus on what it can do.”

That news should be a bit concerning to Americans as economic data here in the U.S. starts to actually show improvement. The overall good news involving industrial output, unemployment and even auto production has investors feeling more confident. That confidence has led to a slightly higher stock market closing after three straight days of losses. " It looks like we have just hit a clear patch on the road to recovery, where things are going to speed up a little bit," said Mark Vitner, a senior economist at Wells Fargo Securities.

At 4:00 p.m. (CST), the APMEX precious metals spot prices were:

Gold breaks below the triangle, downside risk increases

Gold prices are heading downwards after breaking through the triangle pattern which has been in formation for over 3 months. COMEX  Gold  December contract is trading at $1662/oz as of 4:10AM CT.

-The Euro leaders summit has been disappointing. The upcoming Chinese PMI data will therefore prove crucial as any indication of further contraction could mean lower gold prices since gold is tracking equities and every asset class seems to move in conjunction with each other.

-Technically, gold is still inside the 2 year long trend channel (chart below). Prices are below the 100 DMA (Daily Moving Average) and is closing in on the 200 DMA.

The MACD has broken through the 0 level near the same time prices broke downward from the triangle. RSI is below 50.

The $1580-$1600 level will be crucial since it will possibly be the lower supporting trendline of the uptrend channel (circled). Technical supports are seen at $1625 and $1580. Extended support is at $1460 and $1380.

 

Unless  Gold  does not decouple from equity movements, negative economic news will prove to be detrimental to gold prices. And since market sentiment is strongly negative with regard to the economic outlook, in the short-term, prices may head south.



 

 

The one big reason you should buy gold stocks right now

We've been saying since September that  Gold  producers are undervalued, and here are some data that show just how extreme the undervaluation is.

The  following chart measures the stock prices of major and intermediate gold producers against their Net Asset Value, based on the daily price of gold. In the simplest terms, a company should be worth more as the product it sells rises in price faster than the cost of those sales.

In this case, gold has doubled in price over the past three years while costs have not kept up, dramatically increasing the intrinsic value of a reasonably well-run gold producer. Yet look what the stocks have done when measured against this higher value.

 



 

In spite of a rising gold price, stock prices have steadily fallen. In fact, as the right axis shows,  the industry is currently selling at a 20% discount to its Net Asset Value (as of October 21) – and historically,  Gold  stocks trade at a premium.

Notice that gold stocks hit 1.6 times their NAVs just before the crash of 2008. Gold producers often trade at this level. If I'm right, companies will revert to historical premiums, meaning much higher stock prices than today.

These data don't tell us when prices will rise, nor do they signal that stocks can't trade lower. They are simply telling us that at this point in time, gold stocks represent a true bargain. Someday this won't be the case, and the opportunity to buy at current levels will be gone.


I'm convinced that in a year or two, we'll look back and be very happy with our positions.

 

  Last Updated :  14 December 2011 at 20:05 IST

Gold ETF holdings grows 22% this year

LONDON(BullionStreet):  ETF holdings of gold flourished in 2011 despite occassional price declines and a sizeable cut in holdings by a major investor.

SPDR Gold Trust ETF remained hot favourite among investors this year. The current market capitalization of the GLD ETF is $71.5 billion, an increase of 22 percent over the course of 2011.

At the current price of gold of approximately $1,700 an ounce this represents the equivalent of 1,300 tons of gold.

This makes the GLD ETF holding of gold larger than the gold reserves of Russia, Switzerland, the UK, India and China, at least according to official statistics.

Despite the price declines, ETF holdings of gold have stayed firm and central bank buying continues apace.

Major investor John Paulson had cut his holding in the SPDR Gold Trust in the third quarter, however Paulson remains the largest holder of GLD with a stake worth about $3.5 billion at the end of the third quarter.

Some commentators suggest that any such selling may have been to cover losses in other markets and that long-term investors in gold are retaining their belief in the bull run in gold prices.

Despite the reduction in holdings of the SPDR Gold Trust, the price of gold remains well supported.

 

 

 

 

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Closing Gold & Silver Market Report – 12/13/2011

Forbes: Central Bank Appetite And The Monetary Case For $10,000 Gold

What do you get when you mix negative real interest rates with stimulative money supply efforts by global central banks?  Read More

 

 

Gartman Flip Flops With Gold Support At 200 DMA At $1618/Oz, And Massive Chinese Demand

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