Technical Outlook Near Term

Mon March 28--April gold futures etched a marginal new all-time high on the daily chart last week, with the March 24 push to an intraday high at $1,448.60 per ounce. However, the bulls failed to defend the push to those higher levels, as the market closed slightly lower that session. Follow-through selling tugged prices even lower March 25.
In the very short-term, the bulls are on the defensive in the gold market. A sloppy, but potential "double top" pattern is seen on the daily chart, from the March 7 and March 24 daily highs. In order to actually "confirm" the bearish potential of that possible pattern a close would be needed below the intervening low or in this case the March 15 low. While that is not the near term forecast, traders simply should be aware of the possible double top.
A look at daily Bollinger bands reveals that through last Friday, the market remained trapped between the upper and middle Bollinger line. The middle line, currently around $1,421.80 will be important to monitor very short-term. If the bears were to press the April gold contract under the middle Bollinger line, it would open the door for near term declines toward the lower line, currently around $1,396.30.
The daily relative strength index (RSI) remains negatively positioned for the very short term, which could support any near term bearish attempts.
Looking at the gold market from a top down approach, the longer-term primary technical trend remains solidly bullish. However, in recent months, the intermediate term trend has shifted into a neutral or sideways bias.
Since November 2010, the gold market has largely moved sideways within a large intermediate term trading range, though early March did see the bulls press the top of that range to marginal new highs just below the $1,450 zone. Very broadly speaking, one could define the medium term range between $1,450 and $1,309.10, the January 28, 2011 low and the lowest price traded since late September 2010.
Markets very often shift into sideways consolidative types of modes as a form of "correction." From late July 2010 into early November 2010, gold bulls thrust the market sharply higher over that several month period. Several months of subsequent sideways or consolidation action is not a surprise and can actually be healthy for the longer-term bull trend.
Finally, drilling down to the very short-term trend for April gold, the near term bias is down in the wake of the retreat off the new high seen March 24. Very short-term gains would be needed back above $1,438.10 to target a retest of the $1,448.60/1,450 zone.
If short-term support at $1,419.50, the March 22 low is broken, the gold market will be vulnerable to additional minor near term declines, with major support at the March 15 daily low at $1,380.70.
Jim Wyckoff  exclusive to Kitco

Lets Get Physical......just not yet

Whether or not the Libyan situation does not come to a quick resolution, the attitude on display by the US Fed is that it (or at least four of its member presidents) is in no hurry to extend or expand the QE2 program. Messrs. Fisher, Plosser, Lockhart, and Evans are all of the opinion that every good thing eventually does come to an end, especially if the risk it entails outweighs its benefits. The FOMC meets one week from today to discuss all of this, and more. The post-meeting language is likely to be parsed with at least as equal a degree of intensity as was the one that was issued in early November of last year, when the good ship QE2 was set sailing on the US economy’s rough (at the time) seas.

The trend towards hiking interest rates is hard to miss, (but by a few holdout commentators who envision “easy money” as basically an everlasting proposition, and one which will perpetually fuel “To Da Moon!” spikes in commodities). Bloomberg reports that The Bank of Thailand and Bank of Korea will each raise key interest rates this week by a quarter percentage point. As well, Malaysia may also be approaching the end of its pause in boosting borrowing costs.

Such moves will come on the heels of seven already-in-place hikes by India’s central bank and by a recent string of similar tightening actions by China’s PBOC. This coming weekend may also bear watching as China announces inflation levels and possibly what it might do about them. Of course, the 900-lb gorillas at the moment remain the ECB and the Fed. When they too commence this campaign, well…let’s let someone with long-standing market experience frame that concept at this time: Value View Gold Report’s Ned Schmidt.

Says Mr. Schmidt in his latest “Gold Thoughts” issued on Monday: “Gold is today the preferred precious metal when compared to Silver. That might not, and likely will not, prevent it from going down when the Federal Reserve folds in June. That June time period is becoming of increasing importance. The current era of free money, quantitative easing, by the Federal Reserve is scheduled to end in June. Should the ECB raise rates in April, Federal Reserve will come under increasing pressure to abandon free money policy.

Mr. Schmidt, a 30+ year veteran observer of precious metals markets (and one whose ultimate price targets for gold are actually quite lofty, BTW) also correctly notes that: “Free money has been driving financial markets. Should that era of free money begin to end in June, considerable realignment of investment market values seems likely. Silver is simply the most obvious one. Deferring the investment of idle funds, and perhaps taking some profits, might be wise until the June poker hand has been played.”

Such level-headed caution is closely related to the observations tendered to the UK’s Telegraph this morning by at least a couple of UK financial advisers; Messrs. Patrick Connolly, of AWD Chase de Vere, and Martin Bramford of Informed Choice. Mr. Connolly notes that "there continue to be bullish statements and bold predictions about gold and the assumption that the returns seen over the past decade are now the norm. There were similar sentiments in 1999 about technology stocks, and the belief that the only way was up. It's easy to forget that gold prices can go through prolonged downturns. During the Eighties and Nineties, the price of gold fell by 70 percent" while Mr. Bramford opines that "investors are understandably concerned about inflation at present. But there is a real risk that those now buying gold are doing so at the top of the market and will end up making losses when prices fall."

So much for the “this time it’s different” propositions in (over)abundant supply out there. The only difference is that the Internet has now made it possible for practically everyone to be heard, whether or not they have something of value to offer.

Surrounded by Inflation

Yesterday, I told you about The Fed (I prefer to call them the CABAL), now owning more Treasuries than China… there was more in the FT that another reader sent me (Thanks Peter!)… And then Peter, makes has his own view…. When taken together, the message I get is that America's credit quality is slipping to the point that foreigners are losing interest and the Fed has become the purchaser of last resort and is, in effect, propping up a market that would otherwise look a lot sicker. When I have to buy your stuff, and you have to buy my stuff, because "arm's reach" third parties are no longer interested, then one has to worry.”

Couldn’t have said it better myself! Another reader asked me, if I thought the CABAL could decide to buy back all Treasuries… and just print the money to do so… YIKES! That can’t happen! Let’s hope the CABAL knows that, and doesn’t try it!

Then there was this… sent to me by a reader from Forbes titled: How Inflation Is Turning Breakfast Into A Luxury Item… Yesterday, one of our young Jedi analysts at Hedgeye, Kevin Kaiser, sent me a highlight from The Grocer (an industry trade rag) that inflating food prices are making ordinary breakfast items like orange and apple juice a "luxury."

Here are the 6-month price percentage moves in some of the things people need to live with:

• Cotton = +125.7%
• Sugar = +82.6%
• Corn = +59.0%
• Coffee = +41.4%
• Rice = +40.5%
• Oats = +36.6%
• Copper = +36.1%
• Lumber = +33.8%
• Oil = +25.1%

Chuck again… well… I have to wonder if Big Ben is ready to acknowledge inflation is already all around us?

To recap… The profit taking in the currencies that we saw yesterday morning ended, but the rebound in most currencies hasn’t happened… yet… The Pound Sterling is one of the rallying currencies this morning. The markets are pricing in a rate hike for the pound. The BOE meets next week, will we see a rate hike? The ECB meets today, ECB President, Trichet, is between a rock and a… rock… Commodity indexes are above pre-financial crisis levels, are they telling us something? Of course they are! That inflation is all around us!

That’s it for today… Well… this has been one long week! And we still have today and tomorrow to go! Is it just me, or does it seem like the hype for the Super Bowl this year is toned down? Or maybe I think that because I’m not watching ESPN all night long! HA! Actually, I’ve been spending more and more time at night, on my computer, researching, and reading… I had a big chuckle from Conan O’Brien, who joked about the Egyptian Gov’t turning off the internet… He said, “if you want to keep people off the street, turn the internet back on”… HA! I record Conan each night, and then watch the previous night’s show when I get home… He cracks me up! One of my all-time fave Led Zeppelin songs is playing as I get ready to sign off… The Rain Song, from Houses of the Holy… a great song to put on, and zone out! And on that thought, I’ll get out of your hair today… Now go out and make it a Tub Thumpin’ Thursday!

Chuck Butler
President
EverBank World Markets

Silver Eagle Bullion Coins Outpacing Gold Coins

Sales of the U.S. Mint’s American Eagle silver bullion coins since the start of the New Year have not only set a monthly record with a third of January still to go, but demand is so strong that dealers say they could be selling even more if not for limited allocations.
Some report that interest in silver coins appears to be outpacing gold coins at the moment, with many favoring the grey metal as a more affordable investment.
The U.S. Mint’s Web site currently shows that 4,588,000 one-ounce coins have been sold so far this month. This is higher than the previous monthly record of 4,260,000 set back in November, said Mint spokesman Michael White.
“It’s insane,” said Jim Hausman, president of The Gold Center, one of the authorized purchasers of Mint coins, which in turn makes them available to the public. “I just can’t believe this demand just keeps growing for Silver Eagles.”
Back in 1996, coin sales for the entire year bottomed at 3,466,000 ounces, the Mint’s Web site shows. “And they do that now in 20 days,” Hausman said.
David Morgan, independent precious-metals analyst with Silver-Investor.com, pointed out that the demand for silver coins has skyrocketed in the last few years, in particular. “Silver Eagles have become kind of the premier silver investment,” he said.

Mint sales for 2010 are listed at a yearly record of 34,662,500 ounces. This tally is more than triple the 9,887,000 sales from 2007, when precious-metals were already well into a decade-long bull market.
“Whatever comes in goes out the same day,” said Terry Hanlon, president Dillon Gage Metals Division, another Mint authorized purchaser. “We’re moving massive quantities, with noticeably bigger interest in silver than gold right now.”
Some of the interest in silver is because one ounce, around $27.70 as of mid-afternoon Thursday, is more affordable for many investors than one ounce of gold around $1,350. “In general, people are becoming more comfortable owning silver and recognizing silver as a good alternative to buying gold,” Hanlon said.
American Eagle gold bullion coins so far in January have totaled 75,500 ounces, which is down from 85,000 in the same month a year ago, according to the Mint Web site.

Jim's in Agreement with Kitco's Commentary

Strength In Precious Metals Likely To Linger Into Early 2011

 

Strength In Precious Metals Likely To Linger Into Early 2011.

The precious metals rally is likely to continue into the first week of 2011 as the fundamental supports for the markets – concerns of Eurozone debt, fiscal and monetary stimulus in the U.S. and currency considerations – will remain steadfast.
While some market watchers warn that the potential for profit-taking in January is possible, many say strong demand under the market will limit significant losses and won’t change the long-term bullish trend.
Commodities in general saw a strong rally into the last few weeks of the year...