GOLD

[Samirofi]

Silver continues the positive maneuvers 17/07/2013



Silver price continues its attempts to surpass 20.05, which represents the neckline for a double bottom pattern that appears in the image, while the EMA50 keeps supporting the price from below.
Therefore, our positive expectations remain valid on the intraday basis, waiting for main targets begin at 22.00, while achieving them requires holding above 19.30
Expected trading range for today is between: 19.30 support and 21.50 resistance.
Expected trend for today: Bullish

[Samirofi]

Is Gold Making a Comeback?

Gold and leading gold ETF SPDR Gold (NYSEMKT: GLD) have recently rallied, but they haven’t performed well during most of the year: During 2013, the price of gold declined by 23%; the price of GLD fell by 22.9%. Moreover, GLD’s gold hoards plummeted by more than 30%.

Is gold making a comeback? Is time to reconsider investing in this precious metal or gold companies?

One of the main concerns for investors who purchase an ETF that follows a certain commodity is the Contango/Backwardation in the future contracts that could lead to decay and thus slash the profits of investors who purchased these ETFs in case the commodity rose during the period. The chart below shows the normalized prices of gold and t GLD during the past year.



As seen, the two data sets are closely linked and in sync during the period. This means, GLD didn’t experience roll decay. For a good explanation of ETF decay you can check out on Fool’s site

One factor that could determine the future course of gold is the Fed’s next move


Will the FOMC ease its asset purchase program?


During the year (up to date) the Federal Reserve has been purchasing $85 billion of mortgage backed securities and long term securities treasury bills. This program kept long term interest rate from rising at the beginning of the year but in recent months long term interest rates have sharply increased. One reason for the sharp rise in rates is the strong hints the FOMC and Ben Bernanke provided: Bernanke hinted the Fed may taper its asset purchase program in the coming months and end it by the first half of 2014. How does this relate to gold prices?

• The asset purchase program augments the U.S money base, which raises the concerns for inflation. Gold is still considered by many as a safe haven investment against inflation.
• Long term treasury yields and gold tend to be correlated. The drop in long term treasury yields led to a rise in demand for gold as stipulated from Hotelling model. Paul Krugman explains this relation on his blog. If the Fed will slow down its asset purchase program the long term interest rates will continue to pull up, which may pressure down gold price. The chart below shows the developments of the long term treasuries yields and price of gold in the past couple of years. As seen, the price of gold tumbled down in the past month while long term treasuries yields sharply rose

The asset purchase program may have pressured down the US dollar against leading currencies, which could have also kept the price of gold from falling.

But the Fed continues to provide different perspectives regarding its next move. Therefore the high uncertainty with respect to the FOMC’s monetary policy is likely to keep the volatility of gold price high in the coming months.

Looking further into the future, however, the ongoing progress of the U.S economy and forthcoming changes in the Fed’s monetary policy, the price of gold is likely to resume its downward trend in the near future. But the U.S isn’t the only one that affects the price of gold. Let’s turn east.


China and India


Despite the recent developments in the U.S, the demand for gold (the physical metal) continues to rise: China’s imports of gold are rising; the tax hike on gold imports in India has curbed the demand for gold in this country, but overall during the year so far India’s demand for gold is much higher than last year. Moreover, the recent pull back in the price of gold is likely to grow the demand for gold in these countries. The strong demand for gold is likely to keep the price of gold from tumbling further down.


Gold producers


The recent drop in the price of gold is likely to substantially slash the profit margins of gold companies. Gold producers such as Newmont Mining (NYSE:NEM) and Yamana Gold (NYSE: AUY) haven’t done well in the stock market during 2013– despite their recent rally in the stock market. During the year, shares of Newmont Mining plummeted by 38%. The stock price of Yamana Gold plunged by 39%. One factor that will determine these companies’ profit margin is the cost of producing gold.


Cost of production


The direct cost of production for these companies is expected to rise in 2013 compared to 2012. Specifically, Newmont estimates it all-in sustaining cost of production per ounce of gold will range between $1,100 and $1,200 during 2013. The company projects its total gold production will range between 4.8 and 5.1 million ounces, which isn’t far from the total production recorded in 2012 – 4.98 million ounces. Moreover, at the current pace the company’s gold production in 2013 might even be below 4.8 million ounces. Since the current price of gold is roughly $1,300 per ounce, the company is likely to further slash its production.


Newmont has already taken measures to cut down on operational expenses: The Company has recently announced it will cut by one third its workforce in Colorado.


For Yamana Gold the production cost is lower: The Company estimates its all-in sustaining cost of production per ounce of gold will reach $800 in 2013. Such a low cost of production should be reflected in the company’s profit margin: In the first quarter of 2013, Yamana’s operating profit was 30%, which was higher than Newmont’s profit margin of 26.5%. Yamana also estimates its gold production will rise by 20% in 2013 compared to 2012. This means, Yamana may not suffer as much as Newmont will in 2013.


Nonetheless, if the price of gold will dwindle below $1,000 these companies might start losing money and thus might be better off not extracting gold.


Take away


The recent rally of gold might continue in the near future, but I still think that neither gold nor gold producers are about the make a comeback. Moreover, if the price of gold will resume its downward trend and fall below $1,000, gold companies could start losing money and might be better off leaving the precious metal underground.

[Samirofi]

Will India’s Silver Imports Further Rise?

July 16, 2013


Silver imports in India have sharply increased at the beginning of the year. According to one report, in the first five months of 2013, silver imports to India rose by 26% compared to the first five months of 2012. If this trend will persist it could keep the price of silver from further plummeting. But the Indian government has been trying to curb the growing demand for gold and silver by imposing higher import taxes. So far it seems to work.


During the first five months of 2013 India imported 2,400 tons of silver, which represented a 26% gain in imports compared to 2012. India is among the top importer of silver in recent years. With the recent sharp drop in the price of silver to its lowest level in years, the demand for silver is likely to sharply rise, which will further augment silver imports to India. The sharp drop in gold and silver prices has already resulted in India cutting its import tariff on both gold and silver.


At the current pace, India may import nearly 5,800 tons of silver during 2013, which will be the highest levels of silver imports in recent years even before 2008.
But at the same time, India’s policymakers have been trying to curb the growing demand for gold by augmenting the import tax on gold and silver from 6% to 8%. This has led to a drop of 70% in gold and silver imports during June compared to May.



So the direction of silver imports in India is still questionable. If India’s policymakers keep imposing higher taxes it could curb down the demand for precious metals. But if gold and silver prices will continue to fall, the discount will pull up the demand for these metals. My guess is that the market could prevail, especially if gold and silver will resume their downward trend.

[PCMNewsdesk]

[PCMNewsdesk]

[Samirofi]

Gold tests the support 18/07/2013



Gold price tested the critical support level 1270.00, which represents the protection factor to keep our suggested positive expectations in our last reports, which allows us to continue in preferring the bullish trend on the intraday basis, reminding you that our targets at 1300.00 and extend towards 1340.00

Stochastic negativity explains the reasons for the sideways and negative last trading.

Expected trading range for today is between: 1250.00 support and 1340.00 resistance.

Expected trend for today: Bullish

[PCMNewsdesk]

[PCMNewsdesk]

[PCMNewsdesk]

Speculators increased their net-long position by 56 percent to 55,535 futures and options by July 16, the highest since June 4, U.S. Commodity Futures Trading Commission data show. Short contracts fell the most since November after reaching a record the previous week.

[PCMNewsdesk]