LONDON (Oct 28) Gold declined for the first time in six sessions in London as the biggest weekly gain since August spurred some investors to sell the metal. Silver headed for the largest weekly advance since September 2008.

Gold reached a five-week high today after European leaders yesterday agreed on new measures to tackle the region’s debt crisis. Federal Reserve policy makers, who meet next week, and the Obama administration are considering additional steps to boost the U.S. economy and cut unemployment.

“Gold’s had a good rally, and a small pullback would be healthy for the market,” Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva, said today by phone. Still, “people won’t give up their safe-haven investments,” and that will support prices, he said.

Immediate-delivery gold fell $6.90, or 0.4 percent, to $1,737.95 an ounce by 9:38 a.m. in London. The metal reached $1,752.82, the highest level since Sept. 23, and is up 5.8 percent this week. Gold for December delivery was 0.5 percent lower at $1,738.50 on the Comex in New York.

Bullion is in the 11th year of a bull market, the longest winning streak since at least 1920 in London. Prices reached a record $1,921.15 an ounce on Sept. 6 as investors sought to diversify away from equities and some currencies. The metal is up 22 percent this year.

1 Trillion Euros

European Union leaders meeting until the early hours of yesterday agreed to boost the region’s rescue-fund capacity to 1 trillion euros ($1.4 trillion), crafted a second aid package for Greece, and persuaded holders of Greek bonds to accept a 50 percent writedown on the country’s debt.

“The European debt deal should help gold in two ways,” Jim Pogoda, an investor in Summit, New Jersey, and a former precious-metals trader for Mitsubishi International Corp., said by e-mail. “For the non-believers, safe-haven buying should keep the market well bid. For those thinking that impediments to growth have been lifted, the further stimulus should be viewed as gold-positive as well.”

Silver for immediate delivery rose 0.5 percent to $35.2925 an ounce after touching $35.6875, the highest price since Sept. 23. The metal is up 12 percent this week.

 

 

24hgold.com 


OCTOBER 28, 2011 

 

Gold fell sharply last month and it made many investors nervous. That’s because the decline was so fast and steep. But now gold is again on the rise. So what’s happening?

Gold was due for some sort of downward correction following its sharp rise. This sell-off reflected a lot of pent up pressure because the market had held up so well, and for such a long time, surging higher and higher without a normal downward correction.  The slowing global economy added fuel to the fire.

Gold and silver were dumped for cash.  This is similar to what happened in 2008.  Nevertheless, these were still downward corrections within major bull markets.

So far, we’ve seen a 16% decline in gold and 28% in silver. These were the biggest declines since 2008 when gold lost almost 30%, which was the worst correction in the bull market so far.

MAJOR TREND IS YOUR FRIEND

Again, we’d like to emphasize the importance of the major trend. It’s truly our friend, and we’ll stay invested as long as it remains intact.
   
 We’ve found over the years, it’s most profitable to buy and hold during a major uptrend. This is hard to do, especially when you first buy because the price will probably go lower before it heads higher.

This is part of it. The sweating out process, but with a plan. We’ve been recommending gold since 2002. It took several years before it was looking better, but we stuck with it, by measuring the major trend and going with it.

BUBBLES… WHERE?

The current bull market in gold will turn 11 years old next February. This incredible run has been historic because gold has gained each year since 2001. It even ended 2008 on an up-note. And this year is unlikely to be an exception as its gain is still in the double digits, so far.

Chart 1provides a good example of this bull market in gold compared to two famous bull markets of the past… the huge gold run in the 1970s and the tech bubble in the 1990s. Here you can see that this current bull market has been modest in comparison, but gold is on track to jump up in a frenzied rise in the years just ahead.

Meanwhile, gold could still decline further in the upcoming months.  But once the current downward correction is clearly over, you should be well positioned and ready for the train to take-off. Use any weakness to buy the gold and silver you’ve been wanting to buy, but were waiting for a good opportunity.

HOW FAR DOWN?

Considering today’s uncertain times, anything could happen.  For this reason, our bottom line recommendation for new positions is to buy gradually over this month and next in order to average in at a good price.

Many people have been worried about this gold decline, but look at it as a healthy thing.  It’s down 16% so far from its record $1900+ high, which has been a small decline compared to the tremendous rise it’s had since 2008. 

In perspective, gold rose almost 170% since its lows in 2008.  That’s 170% in three years! And gold’s steepest decline since then has been the current one at 16%.

This was a rise we call a C rise when gold rises in the strongest intermediate leg up in a bull market.  In fact, the bull market’s strength is reinforced when C rises hit record highs (see  Chart 2A).

The last C rise, from April 2009 to Sept 2011 was phenomenal.  It lasted longer than any other C rise over the last 10 years, and it was much stronger.  Gold gained almost 120% in 2½ years without much of a decline to speak of.  So you can understand why we say the 16% decline has so far been moderate.

We say so far because gold’s indicator still has room to fall further before it’s oversold (see  Chart 2B).  For now, gold has been holding steady above $1600, but if gold closes below $1594 (the low in late September) and stays there, then we could see gold fall further to its next support near the $1550 level.

But it doesn’t stop there.  In a worst case decline, we could see gold test its 65-week moving average.  This would be a normal occurrence for a D decline, which is what we’re calling the decline that is currently underway (see  Chart 2A). Although unlikely, should this happen, the bull market would still be intact, and you should then buy with both hands.

It’s not a coincidence that the most powerful C rise in the entire bull market happened once the stronger phase of the bull market began in September 2009.    This tells us that, we want to be ready for next leg of an even stronger phase of the bull market. And with gold currently showing renewed strength, this could happen sooner rather than later.

The bull market is far from being over.  This is accumulation time...

Mary Anne and Pamela Aden

 

 

STOCKS POST MASSIVE GAINS ON NEWS OF EURO ZONE DEAL

Precious metals are up slightly since the mid-day commentary, pushed by a weaker dollar and euro.  However, stocks were the real news makers today, with the S& P 500 gaining 3.43% as it pushes toward its biggest monthly rally in almost 4 decades.

However, consumer confidence has fallen to its lowest level since April 2009.  95% of participants in the survey had a negative view of the economy, and all three components of the survey showed declines.  “Consumer sentiment remains mired knee-deep in the big muddy of an epic housing mess, household deleveraging and a broken labor market,” said Joseph Brusuelas, Senior Economist for Bloomberg.

Lawmakers may be becoming complacent in their efforts to close the federal spending gap, as Reuters reported today that many lawmakers do not think another credit rating downgrade could affect the economy. Congressman Michael Grimm said, “There have been some that think we can absorb another [downgrade] and they hide behind the fact that the credibility of the ratings agencies has been called into question.”  The attitude that the United States is the “cleanest dirty shirt” may cause paralysis in a congress that is divided on such a hot-button issue.

At 4:06 pm (CT) the APMEX precious metals spot prices were:

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EURO DEAL BOOSTS STOCKS U.S. DEBT DEADLINE STILL LOOMS

Overnight trading was fairly volatile for gold and silver while platinum, palladium, and global stocks rallied on the news that leaders in the euro zone have agreed upon a plan to shore up Greece’s debt burden and to contain the debt crisis in the whole region.  In the agreement, private bondholders will take a 50% write-down on their holdings of Greek debt, the European Financial Stability Facility will be increased to over 1 trillion euros, and there will be a recapitalization of European banks.

The weekly first-time jobless claims report showed a drop of 2,000, while the four-week moving average fell closer to the pivotal 400,000 mark.  In a report that was very optimistic for a change, U.S. gross domestic product rose by 2.5% in the third quarter, showing that the economy is expanding at a rate that’s nearly double what it was for the second quarter.  Inflation is also believed to be down to the 2.0% level, which is down from the 3.3% level in the second quarter.

With the ‘good’ news out there, investors tend to be willing to take on more risk in equities.  Nikos Kavalis of RBS said, “Gold has had a mixed relationship with risk recently – euro strength has generally been supportive since the September sell-off.  But more recently we saw the correlation break down and gold trade as a safe-haven asset once again … [I]n addition to the European debt problem, we are getting closer and closer to the November 23 deadline for the U.S. debt reduction deal.  I cannot be bearish on gold at the moment.”

At 8:15 am (CT) the APMEX precious metals spot prices were:

CHINESE AID ALLEVIATES FEAR EUROPE STILL NOT FIXED

Gold made nice gains today, although it has backed off slightly since the Mid-Day Commentary. 

French President Nicolas Sarkozy will speak directly with the head of the Chinese government, Hu Jintao, to appeal to China for an investment in the European Financial Stability Facility (EFSF), the bailout fund organized by EU countries to prevent a euro zone collapse.  The fund has already been expanded from its original scope, and leaders will meet tonight to discuss a further expansion, possibly involving the Chinese investment.  The EFSF has already borrowed hundreds of billions of euros to finance aid packages given to heavily-indebted countries in the euro zone.

According to a World Gold Council report, gold is becoming an increasingly important portfolio balancing tool. “[T]he report suggests that even if investors hold alternative assets, they are no substitute for the protection that a distinct allocation to gold can offer.”  Even a small allocation to gold, by mitigating risk, can consistently increase the returns from a portfolio.

At 4:15 pm (CT) the APMEX precious metals spot prices were:

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SAFE-HAVEN STATUS ‘RE-EMERGING’ AS EURO UNCERTAINTY REMAINS

In overnight trading, gold, silver, and platinum all rose slightly while stock futures gained sharply ahead of a summit of EU leaders taking place today.  Investors seem to be expecting, or at least hoping, that a comprehensive plan will come out of the summit which will deal with the euro zone debt crisis.  German Chancellor Angela Merkel is expected to lead the charge at the summit, as she hopes to beef-up the European Financial Stability Facility to over 1 trillion euros, and come up with a plan to recapitalize European banks.  Also on tap is finally getting Greece’s debt burden under control.

The latest report to come out of Greece is that private bondholders are now expected to share 50% of the burden from Greece’s debt.  It’s uncertain how the other half of the burden will be handled, but this is a significant increase from what was originally agreed upon months ago.  However, indications are that it will remain a voluntary ‘haircut,’ though some aren’t buying in to that just yet.

Gold seems to have firmly recaptured the $1,700 level, as it becomes clear that some investors aren’t sold on the EU summit finally solving the euro zone debt puzzle.  Analysts in London said in a report, “The size of the debt issues [is] unlikely to go away regardless of what policymakers decide.  Given this uncertainty, we are not at all surprised gold is attracting fresh safe-haven buying.”  Natalie Robertson of Australia & New Zealand Banking Group Ltd. added, “Safe-haven status is re-emerging.  Sentiment is still very, very fragile at the moment and today will continue to be uncertain.  Everyone’s waiting on the developments out of Europe.”

At 8:00 am (CT) the APMEX precious metals spot prices were:

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