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Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week

By: Chris Mullen, Gold-Seeker.com


-- Posted 28 January, 2011 | | Source: SilverSeek.com

 

Close

Gain/Loss

On Week

Gold

$1340.80

+$21.90

-0.14%

Silver

$27.90

+$0.89

+1.71%

XAU

199.71

+0.46%

-0.20%

HUI

509.69

+1.17%

+0.97%

GDM

1507.52

+1.10%

+0.66%

JSE Gold

2521.47

-20.76

-2.82%

USD

78.14

+0.44

UNCH

Euro

136.13

-1.20

-0.04%

Yen

121.77

+1.08

+0.56%

Oil

$89.34

+$3.70

+0.26%

10-Year

3.329%

-0.056

-2.55%

Bond

121.4375

+0.71875

+1.12%

Dow

11823.70

-1.39%

-0.41%

Nasdaq

2686.89

-2.48%

-0.10%

S&P

1276.34

-1.79%

-0.55%

 
 

 

The Metals:

 

Gold fell as much as $11.10 to $1307.80 in Asia before it rebounded back to almost unchanged at $1318.19 in early New York trade and next fell back to $1310.70 by about 9:30AM EST, but then surged back higher for the rest of the morning and ended near its midday high of $1346.74 with a gain of 1.66%.  Silver fell as much as $0.63 to $26.38 in early Asian trade before it also rallied back higher in New York and ended near its late session high of $28.013 with a gain of 3.3%.

 

Euro gold climbed to over €986, platinum lost $3.25 to $1789.50, and copper climbed a few more cents to about $4.36.

 

Gold and silver equities rose over 2% by midday before they fell back off a bit in afternoon trade, but they still ended with about 1% gains.

 

DAVOS-Newmont expects gold to rise as a hedge, demand  Reuters

Huge gold position liquidated by Hedge fund -WSJ  ibtimes

 

The Economy:

 

Report

For

Reading

Expected

Previous

GDP-Adv.

Q4

3.2%

3.7%

2.6%

Chain Deflator-Adv.

Q4

0.%

1.5%

2.1%

Employment Cost Index

Q4

0.4%

0.4%

0.4%

Michigan Sentiment - Final

Jan

74.2

73.2

72.7

 

All of this week’s other economic reports:

 

Pending Home Sales - December

2.0% v. 3.1%

 

Durable Orders - December

-2.5% v. -0.1%

 

Durable Orders ex Trans. - December

0.5% v. 4.5%

 

Initial Claims - 1/22

454K v. 403K

 

FOMC Rate Decision - January

0.00% v. 0.25%

 

New Home Sales - December

329K v. 280K

 

MBA Mortgage Purchase Index - 1/21

-12.9% v. 5.0%

 

FHFA Housing Price Index - November

0.0% v. 0.2%

 

Consumer Confidence - January

60.6 v. 53.3

 

Case-Shiller 20-city Index - November

-1.59% v. -0.84%

 

Next week’s economic highlights include Personal Income and Spending, Core PCE Prices, and Chicago PMI on Monday, Construction Spending and the ISM Index on Tuesday, ADP Employment on Wednesday, Initial Jobless Claims, Productivity, Unit Labor Costs, Factory Orders, and ISM Services on Thursday, and January’s job data on Friday.

 

The Markets:

 

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

 

Oil rose markedly on worries over unrest in Egypt that sent both the U.S. dollar index and treasuries higher.

 

The Dow, Nasdaq, and S&P fell on geopolitical concerns and on disappointing earnings reports.

 

Among the big names making news in the market Friday were Chevron, LinkedIn, Ford, Sara Lee, Honeywell, and Boston Scientific.

 

The Commentary:

 

Dear CIGAs,

 

Last evening during the Asian trading session, front month gold dipped into the $1310 region where it uncovered considerable buying interest. The buying was large enough to absorb the selling pressure that carried over from the poor performance of yesterday’s trading session. Once gold was able to punch through the $1317 level, there was additional buying that came in which looked like a combination of shorts booking profits as well as some bottom picking. That buying took it up through $1320 which then began sparking short covering. Their forced exit provided further upward progress which then enticed additional buying as locals began looking gunning for the stops above $1330. Around 10:00am Central time, they reached $1330 but were unable to get to the stops. Apparently however some additional recruits came in and on the second approach they took it out. That forced another wave of short covering taking prices to $1340 with more short covering taking the metal up towards $1350.

 

There is no doubt that some of the buying in gold is tied to events in Egypt and across some of the other nations in the Middle East. There are many nervous investors who are eying that tinderbox of never ending troubles and are concerned about these demonstrations spreading and moving into the OPEC nations. That is the reason crude oil was up nearly $4.00 a barrel at one point.

 

It seems to me that the catalyst for the huge amount of unrest in the region of the world was the surge in food prices. One of the things that the wheat market has been watching and anticipating has been Egyptian wheat purchases. They are one of our largest buyers of wheat and there was talk that began last week and continued earlier this week that Egypt was going to be forced into buying a good deal more US wheat in an attempt to make sure that there was sufficient supply for one thing and that they could snag it before its price moved even higher. Their leaders no doubt saw what happened to the government of Tunisia and wanted to nip any potential problem in the bud. Apparently things moved too quickly for them. Regardless, we have been warning that this outbreak of the inflation virus, a virus I might add which has been fed, nourished, propagated and even lovingly caressed by the US Federal Reserve, was going to result in global instability as its effects were primarily being seen in the cost of food. Rising food prices in the undeveloped world are NOT INGREDIENTS for peaceful society.

 

Truthfully, it has happened even more quickly than I had considered it would. I was looking more towards the spring of this year as the price rises work through the global distribution channels. A question for Ben and the boyz at the Fed, (Governor Hoenig exempted), “How do you like your handiwork now?” Is it any wonder that the Chinese are so rightfully disdainful of what the Fed is doing.

 

I will repeat – the Federal Reserve of the US is exporting runaway inflation across the entire globe with its reckless policy of QE. Bernanke has hubristically asserted in his interview on “60 minutes” late last year that “this fear of inflation is overstated”. We need to record this for history to make certain that it is not forgotten or dismissed. Try telling that to the leaders of the nations across the globe who are now dealing with riots and anarchy in their streets. I am sure that they will take comfort from Ben’s words.

 

Some may think I am leveling a bit of an exorbitant charge but one has only to look at price charts of the grains in particular to see that they all bottomed exactly during the month when QE was first announced back in 2009 with many of them accelerating sharply higher when QE2 was then successively announced last year. It did not help matters any that the weather caused sharp falloffs in the supply equation at the exact same time that speculative hot money was entering these markets in a quest for tangibles to protect against the deleterious impact of the inevitable currency devaluation resulting from QE. The deadly cocktail has led to an explosion in price for the basics of life.

 

When the price of wheat effectively doubles in 7 months, corn increases over 90% and soybeans surge more than 55% over the same time span, the quaint notion that the fear of inflation is overstated is stupendous for its sheer brazen audacity in the face of glaring truth.

 

When you tie this surge in food prices to the potential spike higher in crude oil prices if this unrest in the Middle East takes on additional life, it is not difficult to see why the shorts in gold are getting out.

 

In the past, moves higher in the gold price that were associated with political turmoil have tended to be rather short lived but this unrest is occurring against a backdrop of huge amounts of excess liquidity that continues being pumped into the system in an effort to keep it moving ahead; not to mention food prices are not going to drop sharply anytime soon. Talk continues to surface that the Fed will soon begin to withdraw this liquidity as the economy “improves” but the facts are that without these continued injections, there is too much debt in the system which will act as an anchor on any so-called “growth”. In my mind it is akin to injecting a nitrogen and trace mineral enriched solution directly into the root zone of a plant that is potted in a mere one inch of soil. What you create is a monstrosity that cannot be supported and will tip over without getting some support from elsewhere.

 

Changing the subject a bit…

 

I am very impressed with the action of the HUI. As noted yesterday it refused to follow gold much lower even as the metal took out support near $1320. Even though it was down on the day, it remained well above Wednesday’s low. Today’s good showing gives further credence to the idea that it has been sold out and has put in a bottom near the 500 level. The trading session is net yet over as I write these comments but its ability to push past 517 has just about all of the short term technical indicators generating buy signals from deeply oversold levels. I want to see it close above that level (517) as it would shore up the weekly chart seeing that it spiked down towards the 50 week moving average and held. To really cement the bullish cause, it would need to get a weekly close above 530. We’ll see what happens on the close today.

 

Some of you have written to ask me about the current correlation between Gold and the Dollar. As you know, gold has been almost tracking the Dollar in the same direction of late. The greenback moves lower; so does Gold. The Dollar moves higher; so does Gold. This is obviously a change from its historic pattern and one that has to a large extent marked a large portion of this decade long bull market.

 

What I believe is currently at work is a temporary phase during which as fears regarding the overall state of the US economy subside and talk increases of an improvement, the Dollar comes into focus as a result of the massive structural problems overhanging the US economy. That leads to selling in the Dollar as there is no need of it as any sort of safe haven. You will note that as the equities charge higher, the dollar continues moving lower breaking major downside chart support level in the process. That same sentiment that the economy is improving and growth is returning have been leading to selling gold as investors move out of the metal in favor of equities and the “growth trade”. So essentially we have the “risk trade” being moderated somewhat towards the “growth trade”. That is the reason why we can see copper higher while gold moves lower.

 

Such thinking is more short term oriented in nature and is hoping to catch some profits playing the liquidity game using the Fed as a backstop.  Those who macroeconomic view looks past the short term stimulative effects of the liquidity injections will understand that the root causes of our economic woes have not been dealt with and will come back to bite us all down the road. Once one understands that the goal of the Fed is an attempted slow devaluation of the Dollar, they will gravitate towards gold once again and the inverse link between it and the greenback will become more the norm. Even at that, gold can move higher on its own merits as the integrity of many of the world’s fiat currencies continue to be called into question.

 

Today you will note that the Dollar is higher as it gains as a safe haven play. Bonds too are higher (the Fed loves to see this). You will also note that a mere day after S&P downgraded Japanese sovereign debt to “AA-‘, the Yen is sharply higher as it too reverts back to its “safe haven” status. For the life of me I do not understand how any rational human being can see the Yen as a safe haven with their Debt to GDP ration approaching the 200% level but there is nothing rational about our modern markets.

 

Equities have actually moved lower today. I have taken a photograph of their price chart to record it for history since one begins to wonder if this “anomaly” will ever duplicate itself ever again. After all, we live during an era in which the official monetary policy is to create a perpetually rising stock market as a way to generate rising consumer confidence to fuel the giant spending machine. How can it be that the stock market does not know this and dares to move lower in the face of unrest in the middle East? Maybe Goldman and Morgan had their electricity fail them as they moved to windwills for their power source to curry favor with the administration and the snowstorm knocked out the turbines. Their traders probably are unable to slam their usual buy orders into the S&P futures pit. Perhaps after the snowstorms subside….. Hey guys – get a generator if you want to get this thing right.

 

A last note – Eric King and I did our regular weekly metals wrap yesterday instead of today so when you do tune in, we will not be commenting on today’s price action in gold. I hope that this summary will make up for that. Also, if I see anything significant in the COT report today, I will post it up later. Like many of you I am anxious to see how the internals changed with these big drawdowns in the total OI. I am thinking that it is going to show up particularly in the “Other reportables” category.

 

Enjoy your weekend – who knows what we will wake up to Monday morning. A weekend of turmoil in the Mid East can lead to just about anything.- Dan Norcini, More at JSMineset.com

 

GATA Posts:

 

Money's not worth paper it's printed on, China Investment Corp. exec says

Chinese rating agency blames U.S. for debt-depreciating 'credit war'

Gold futures trader's withdrawal spooks market

 

The Statistics:

Activity from: 1/27/2011

Gold Warehouse Stocks:

11,590,700

-

Silver Warehouse Stocks:

104,685,179

+1,008

 

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

1226.546

39,434,686

US$51,997m

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

Gold Bullion Securities

121.34

3,901,253

US$5,215m

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

ETFS Physical Gold

134.41

4,321,452

US$5,773m

Australian Stock Exchange (ASX)

Gold Bullion Securities

14.21

474,841

US$611m

Johannesburg Securities Exchange (JSE)

New Gold Debentures

51.10

1,642,770

US$2,182m

NASDAQ Dubai

Dubai Gold Securities

0.154

4,962

US$7m

Note: Change in Total Tonnes from yesterday’s data: SPDR subtracted 3.035 tonnes.

 

COMEX Gold Trust (IAU) Total Tonnes in Trust: 115.82: -0.73 change from yesterday’s data.

 

Silver Trust (SLV) Total Tonnes in Trust: 10,426.43: -21.27 change from yesterday’s data.

 

The Miners:

WINNERS

1.  First Majestic

AG +7.30% $12.20

2.  Paramount

PZG +6.94% $3.39

3.  Minco Gold

MGH+6.16% $2.24

 

LOSERS

1.  Cardero

CDY -2.67% $1.82

2.  Ivanhoe

IVN-2.43% $27.25

3.  Kimber

KBX -1.61% $1.22

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

       

All of today's gold and silver stock news:

LONCOR STOCK OPTION GRANTS - More
- January 28, 2011 | Item | ShareThis


Acquisition of Securities of Calico Resources Corp. - More
- January 28, 2011 | Item | ShareThis


Lincoln Mining: 2010 Year in Review - More
- January 28, 2011 | Item | ShareThis


GEOMEGA RESOURCES INC. RAISES $900,000 IN A PRIVATE PLACEMENT - More
- January 28, 2011 | Item | ShareThis


Gold World Resources Reports on Completion of Financing and Announces New Financing Opportunity - More
- January 28, 2011 | Item | ShareThis


ANATOLIA Ã%u2021Ã%u2013PLER WORK STOPPAGE ENDS - More
- January 28, 2011 | Item | ShareThis


Zazu Completes Non-Brokered Private Placement - More
- January 28, 2011 | Item | ShareThis


Fission Grants Stock Options - More
- January 28, 2011 | Item | ShareThis


Far West Mining Commences Drilling at Santo Domingo - More
- January 28, 2011 | Item | ShareThis


New Dimension Closes Second Tranche of Flow-Through Financing - More
- January 28, 2011 | Item | ShareThis


Vanstar Acquires 11 Mining Claims in the Destor Township - More
- January 28, 2011 | Item | ShareThis


Big Red Diamond Announces That Arctic Star Diamond Samples 2.12% TREO With 79.7% HREO, 1.2% Nb2O5, 0.045% Ta2O5, 8.1% Zr and 1680 ppm Hf - More
- January 28, 2011 | Item | ShareThis


Olympus to Finalize In-Country Value Added Refining of Dore - More
- January 28, 2011 | Item | ShareThis


Gunpoint Plans 6000-Meter Drill Program at Nevada Talapoosa Property - More
- January 28, 2011 | Item | ShareThis


Integra Gold Corp. 2011 Corporate Update - More
- January 28, 2011 | Item | ShareThis


Nature%u2019s Call Enters into Letter of Intent with Silver Producer, First Majestic Silver Corp. - More
- January 28, 2011 | Item | ShareThis


QRS ANNOUNCES APPOINTMENT OF NEW PRESIDENT AND FINANCING TO RAISE UP TO $750,000 - More
- January 28, 2011 | Item | ShareThis


Indigo Increases Moule Drill Program on New Sample Results - More
- January 28, 2011 | Item | ShareThis


IBC Advanced Alloys Vice President of Nuclear Fuel Jim Malone Appointed Chairman of Hathor Exploration - More
- January 28, 2011 | Item | ShareThis


High River Announces Release of Royal Gold Security - More
- January 28, 2011 | Item | ShareThis


Pretivm Expands Management Team - More
- January 28, 2011 | Item | ShareThis


Ryan Gold Defines a Significant Gold-In-Soil Anomaly During the Initial Exploration Program on its Ida Oro Property in the Yukon Territory - More
- January 28, 2011 | Item | ShareThis


KATANGA MINING TO ANNOUNCE FOURTH QUARTER AND YEAR END 2010 RESULTS AND HOLD CONFERENCE CALL ON FRIDAY, FEBRUARY 11, 2011 - More
- January 28, 2011 | Item | ShareThis


Dynacor Gold Mines: Tumipampa Drilling Campaign is Underway - More
- January 28, 2011 | Item | ShareThis


Li3 Energy, Inc. Announces the Initial Results of its Sampling Program at Maricunga, Chile - More
- January 28, 2011 | Item | ShareThis


DAVOS-Newmont expects gold to rise as a hedge, demand - "Newmont Mining Corp (NEM.N), the world's No. 2 gold producer, expects gold prices to rise in 2011 as a hedge and on demand from emerging countries, such as China, its chief executive said on Friday." More
- January 28, 2011 | Item | ShareThis


- Chris Mullen, Gold Seeker Report

 

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Note: This article may be reproduced provided the article, in full, is used and mention to Gold-Seeker.com is given.

 

 

Disclosure: The owner, editor, writer and publisher and their associates are not responsible for errors or omissions.  The author of this report is not a registered financial advisor.  Readers should not view this material as offering investment related advice. Gold-Seeker.com has taken precautions to ensure accuracy of information provided. Information collected and presented are from what is perceived as reliable sources, but since the information source(s) are beyond Gold-Seeker.com’s control, no representation or guarantee is made that it is complete or accurate.  The reader accepts information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action.  Past results are not necessarily indicative of future results.  Any statements non-factual in nature constitute only current opinions, which are subject to change.  Nothing contained herein constitutes a representation by the publisher, nor a solicitation for the purchase or sale of securities & therefore information, nor opinions expressed, shall be construed as a solicitation to buy or sell any stock, futures or options contract mentioned herein.  Investors are advised to obtain the advice of a qualified financial & investment advisor before entering any financial transaction.


-- Posted 28 January, 2011 | |


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