Gold Likely to Remain Under Pressure Amid Fading QE3 Expectations

Talking Points

• Crude Oil, Copper Outlook Unclear Amid Clouded Risk Appetite Trends
• Gold and Silver Likely to Stay Under Pressure on Fading QE3 Expectations

Commodity prices produced mixed results in the aftermath of yesterday’s FOMC policy announcement. Ben Bernanke and company upgraded their outlook for the US economy while maintaining a pledge to keep rates low at least through late 2014. The outcome weighed heavily on gold and silveras expected, with store-of-value demand for the two metals evaporating along with QE3 expectations. The behavior of crude oil and copper was more nuanced however, reflecting an unexpected reaction from risk appetite.

Indeed, the S&P 500 surgedin the aftermath of the FOMC announcement, a response that we did not expect. Looking at the US in isolation, the stocks rally seems to make sense. After all, with growth improving and the Fed clearly not interested in impeding it, the landscape appears rather rosy (anunexpected boost from JPMorgan certainly didn’t hurt either).Not all is as it seems however, because although the US recovery is gaining momentum, global output is still expected to contract this year courtesy of a recession in the Eurozone.

Taking this into consideration, the Fed announcement was a mixed blessing at best in that its apparent dismissal of QE3 meant that the US recovery – expected to yield a relatively modest 2.2 percent GDP growth rate compared with the long-run average of 3.4 percent – will be less potent of a counterweight to the slump in Europe than otherwise. These conflicting cues produced a mixed response, with copper following shares higher while crude oil stood barely changed.

Looking ahead, the risk appetite landscape still appears somewhat clouded, with S&P 500 stock index futures flat ahead of the opening bell on Wall Street. Crude oil and copper are conspicuously lower however despite a robust rally in European shares, meaning the risky asset complex is still not of one mind on how to interpret the current environment. We suspect the path of least resistance ought to lead lower, but that is far from confirmed and a high degree of caution appears prudent. Gold and silver remain under pressure as the Dollar continues to press higher amid fading QE3 bets and more of the same appears likely, with the US economic calendar thin on scheduled event risk that could jolt the markets and undermine momentum.

WTI Crude Oil (NY Close): $106.71 // +0.37 // +0.35%

A Bearish Engulfing candlestick pattern continues to argue for near-term losses, with a break below 23.6% Fibonacci retracement support at 106.50 exposing the 38.2% barrier at 104.38. Prices are carving out a downward-sloping chart pattern that can turn out to be a bullish continuation Flag or a bearish falling Channel, depending on follow-through from here. Near-term resistance lines up at 107.67.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1674.10 // -27.22 // -1.60%

Prices followed a bearish Dark Cloud Cover candlestick pattern below resistance at 1719.76 identified yesterday with a drop through initial support at 1686.57, the 23.6% Fibonacci expansion. Sellers are now challenging the 38.2% Fib at 1667.71, with a break below that aiming for the 50% expansion at 1652.68. The 23.6% level has been recast as near-term resistance.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $33.41 // -0.25 // -0.74%

Prices remain locked between the 23.6% and 38.2% Fibonacci retracements at 32.97 and 34.59, respectively. Overall positioning broadly favors the downside absent a daily close above 37.48, the February 29 high and peak of a Bearish Engulfing candlestick pattern. A break above 34.59 initially targets 35.66, while a push through support exposes the 50% retracement at 31.67.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.902 // +0.064 // +1.67%

Prices continue to consolidate above support in the 3.696-3.713 region marked by the 38.2% Fibonacci retracement and the late October top. A Bearish Engulfing top candlestick pattern continues to broadly call in favor of a downside bias. A break below immediate support exposes the 50% level at 3.606. Near-term falling trend line resistance lines up at 3.924.

Daily Chart - Created Using FXCM Marketscope 2.0

Platinum could well be next gold for investors

By Daryl B ChapmanAre you worried about your future? Do you want to stay on top of your finances? With so many people losing their jobs because of economic downturn, people are becoming more realistic on how they are managing their finances. They are looking for secured alternatives to keep their money.

Financial experts believe that because of the unpredictability of the economy, people should learn how to budget their money wisely. The expenses should not be more than the actual earnings or else they will end up loaning in banks and debts may increase if people are not so careful. One way to protect wealth is to invest in a good investment vehicle. One of the best investment vehicles is venturing in rare collectibles like platinum.

Platinum is a popular choice among coin collectors and investors alike. It is very rare and its supply is limited. For this reasons, many are opting to obtain this metal as part of their portfolio. Platinum as investments can come in various forms from coins, bars, bullion to futures. Aside from the reasons mentioned above, why should people venture in platinum?

Currently, platinum is one of the most expensive metals in the global market. It is even more costly than Gold and silver. If you have the budget, then invest in platinum. However, if your budget is limited, you can start with coins because they are more convenient to have. The price of platinum is sometimes even double the price of gold. However, when the economy is down, the price can go down as well.

If you are going to conduct a study about platinum, you will find out that platinum can also be found on the moon and the meteorites in outer space. Only a small portion is found in the phase of the earth. Eighty percent of which are found in South Africa, eleven percent in Russia and the remaining six percent in North America.

As compared to the annual production of Gold which is 82 million troy announces,Platinum only has a yearly production of five million troy ounces. Given that information, the supply of platinum is considerably diminishing and with the high demand of platinum in the global market, the price of this rare commodity is estimated to rise significantly.

Based on statistics, China, India and other Asian countries are the biggest consumers of jewelries today. There are even reports that China's demand for platinum jewelry has doubled in just one year. These countries are very interested in acquiring platinum for their jewelry production because characteristically, platinum has Silver blue color making it ideal and very in demand in the jewelry industry.

As mentioned previously, platinum as investments come in different forms. If you are a first time investors, you may start with coins and bullion. Coins and bullion are easy to transport and if you are saving on storage you can just keep it at home, locked in a secured cabinet or safe. 

Once you feel the need to upgrade you can simply advance to more complex and sophisticated investment options in platinum like Platinum stocks, mutual funds, ETFs and futures. These investments can provide promising returns, however they are not recommended for beginners because these can investments are complicated and very risky.

If you are looking for an investment vehicle to venture on, why not invest in platinum? But before you do, analyze your budget and know everything about platinum by continuous research. Good luck!
Courtesy : EzineArticles.com

 

Barclays: Physical buying picks up following Wednesday sell off in gold

LONDON (Commodity news world): Physical demand for gold has picked up following the sharp mid-week drop in prices, says Barclays Capital in a research note.

“Strong buying from Asia emerged and volume traded on the Shanghai Gold Exchange jumped to its highest since end January,” Barclays added.

“February had been a weak month for physical demand across key regions and Turkey's import data for February confirmed the weak start to the year with gold imports down to 2.06 (metric) tons from 2.96 tons in January,” Barclays continued.

Meanwhile, holdings in the SPDR gold exchange-traded fund were unchanged at 1,293.68 metric tons Thursday. Analysts note that holdings reflect trades settled on the third business day, thus any redemptions from Wednesday would be reported early next week.

Emerging market demand may pick up after sell-off in gold: HSBC

LONDON (Commodity news world ): Emerging-market demand for gold may pick up after Wednesday’s sharp sell-off, said HSBC in a daily research note.

According to HSBC, gold and silver fell as the dollar rose when Federal Reserve Chairman Ben Bernanke, appearing before Congress, stopped short of signaling readiness to conduct another round of bond purchases.

“The inability of gold to clear USD1,800/oz in recent days, the sharp increase in net long speculative positions on the Comex since the new year, and the paucity of emerging-market buying in recent weeks left gold vulnerable to a selloff, which dragged silver lower in its wake,” HSBC added.

“Declines of this magnitude, however, often attract emerging-market buyers and may also interest potential central-bank buyers. Buying from these quarters could soon staunch the decline.,” HSBC said.

“Furthermore, monetary policy remains accommodative not only in the U.S. but in other nations, the USD is still dogged by structural weaknesses, according to HSBC currency research, and global oil supplies remain vulnerable to geopolitically led disruptions. These factors should help reignite the gold rally, we believe,” bank concluded.

Gold to average $1700 in Q1, $1875 in 2012: Barclays

Gold has been impacted by softer investor demand amidst positive physical demand and prices could average $1700 per ounce in the first quarter of 2012, according to Barclays Capital. The yellow metal will average $1875 in 2012, it said.

“Gold is in search of its next catalyst, but near-term hurdles persist in the form of dollar strength and profit-taking. It bodes well for prices that the physical market remains responsive and the broader external environment positive, given negative real interest rates, concerns over currency debasement and inflationary pressures longer term.”

Barclays Capital notes that macroeconomic factors are supportive of gold, additional QE would be supportive of gold prices as is the interest rate environment which is positive for the yellow metal. A quick resolution to Greek crisis is difficult. Moody’s has downgraded the sovereign credit rating of six European countries, including Italy.

Technical Strategy from Barclays Capital : Neutral. Gold is holding within a 1700/1750 range while momentum studies unwind from stretched levels. We are bullish and would prefer to buy dips against the 1640/1670 area. A move above 1752 would confirm that the next leg higher has begun toward our target near the 1800 range highs. Support: 1700/1670; Resistance: 1803/1763 Medium term: Neutral 

Gold: How to invest safely in this financial crisis?

By G. Paul Avalos
Investors who prefer to own physical Gold that they can see and touch have multiple ways to achieve that comfort level. But when stacking up the choices, bullion appears to have the edge over coins for investors who also think about selling as much as acquiring.

“Everyone should keep a little physical at hand,” said Adrian Ash, head of research with London-based BullionVault. “The problem with using coins or small bars for the bulk of your precious metals is threefold: cost, liquidity and security.”

Either way, it’s clear buyers who want physical gold have an array of purchase options to pick through. And these choices come at a time when buyers clamor for owning the real thing.

“We’re seeing an increase in demand by investors for gold ownership in all forms,” said William Rhind, managing director of ETF Securities US.

Gold coins, the smallest of the physical units, can be bought in some surprising venues, said New York City-based attorney David Ganz, a past president of the American Numismatic Association and an expert in the gold market over a period of decades.

“There are even machines at airports that have them,” Ganz said. “I was at an airport in South Africa where I saw them. Cape Town has vending machines where you can buy gold in about half-ounce increments.”

Many vending machines for gold have also popped up in Europe and Asia.

Yet the precise form of gold ownership might not matter as much as making sure to be an owner of the metal, Ganz opined.

“I’m a strong proponent of gold ownership, whether in bullion form, ingots, bars, rounds, an ounce or more, or coins,” Ganz said.

The channels of ownership have proliferated along with the remarkable jump in the price of precious metals such as Gold and silver. This may seem something of a throwback to the past in an era of gold and Silver ownership through financial instruments like ETFs.

“The advantage of coins, bars and bullion is they are physical,” Rhind said. “The disadvantage of an ETF is it is not tangible. You can’t see or touch or hold the gold.”

Experts also point to advantages and disadvantages in owning coins compared with bullion.

“They are very different products,” said Sharlene Dozois, a marketing director for Kitco Inc., a Canadian retailer in bullion and other precious metals products. “Coins are more of a collector’s item. Bullion is more of an investment product. But you can argue that the coins can grow in value with time.”

Overall, ownership of coins is a good idea, Ganz noted.

“Coins have a numismatic value,” Ganz said. “This is true of coins that are intended to be bullion. You know what is the mint, what is the condition, and there are people who collect them.”

Coins themselves are offered in multiple categories when it comes to investment goals. Some gold coins are more appropriate for numismatic-oriented investors.

“The public generally does not have the experience or the knowledge level to buy numismatic coins,” said Walt Breitinger, president of Breitinger & Sons, a commodities futures brokerage. “Investing in numismatic coins is a subspecialty that would require an enormous amount of homework to be undertaken to be done properly.”

Buying bulk gold coins, or purchasing bullion, is a different matter altogether.
“The most popular bulk Gold coins include Krugerrands, Canadian Maple Leafs and American Gold Eagles,” Breitinger said. “These have been mass produced in such quantities that they tend not to retain much numismatic value.”

Typically, these kinds of coins contain one ounce of gold. Their weight varies a bit, depending on the amount of Copper melded with the coin. During the first 11 months of 2011, the spot price for American Gold Eagle coins ranged from $1475 to $1810.

Investors also need to consider the availability of potential buyers when the time comes to sell coins, compared with selling bullion.

“Bullion coins are very liquid, but not as liquid as a 100-ounce bar,” Breitinger said.

With a bullion coin, buyers also face a markup in price when they buy the coin and a markdown when they need to sell. That markup could be $20, $30 or even $40 an ounce, which can be a noticeable additional cost even on an $1,800 purchase.

And on the selling side, investors should be braced to see the flip side.

“When they walk back into the shop to sell, the shop owner who’s buying the coins has to make a profit too,” Breitinger said.

“The owner is keeping an inventory, there is risk of theft, of robbery, of fraud. There is also the risk that somebody might have sold the dealer a gold coin that is really a gilded piece of lead.”

Plus, ubiquitous market forces can to come into play.

“There is the risk that the price might move the wrong way at the wrong time,” Breitinger said. “The owner has all kinds of risks in the business.”

Owners will often add 5 percent to the price of gold so they can harvest a small profit when they sell a gold coin. In contrast, somebody trading 100 ounces of gold bullion might have to employ a markup of $1/oz. to make a profit.

Investors who own coins face risks beyond the price discounts and markups linked to the retail market. These other risks are why BullionVault’s Ash suggests using storage outside one’s own country.

“Keeping it all at home also risks becoming a victim of history,” Ash said. “History is littered with people who rightly feared severe trouble in their own country, but then made the mistake of not owning Gold overseas.”

Ash points to the current turmoil in Zimbabwe, and economic and political upheavals in Argentina in 2001, Yugoslavia in the 1990s, Vietnam and Cambodia in the 1970s, Nazi Germany in the 1930s, the United States during 1933 and Russia in 1917.

“When people needed it, they could not release the value of their gold, because it had become contraband,” Ash said.

Either way, though, risks are present whether buying coins or their bulkier cousin, bullion.

“Anytime anybody buys physical gold, there is the potential that they are not buying pure gold,” Breitinger said. “Counterfeit coins or counterfeit bullion are things that have happened quite a bit through history.”

Regardless of what method investors pick, the trend of steadily rising gold prices remains their friend.

“I am certain that if you take all the gold in the world that has been mined and refined from the time of the Lydians to the present, melt that into a giant ingot the size of the Washington Monument, it would only go up about two-thirds of the way,” Ganz said. “There is not that much gold available. But there is a lot of demand.”

Yet even that isn’t a guarantee of future profits.

“People are concerned that paper currencies could continue to decline, compared with commodities in general. That could make buying precious metals more popular,” Breitinger said. “But it’s also possible we could see a deflationary swing. In that case, people who own paper money would wind up as winners and the price of gold would decline.”




Source: Hard Asset Investor