Gold and silver price consolidation

... and how it gears miners

Last post has been focussing on the price consolidation of gold. Only few quotes below $4000/Oz seemed to indicate a bottom, while $4400 seemed to be a solid ceiling.

Gold and mining price consolidation

Are precious metals and miners on a protracted slide and was the January peak a rosy dream ending in a rude awakening? Or was this rude awakening the inevitable consequence of a speculative bubble leading to a parabolic price rise?

Are the summer doldrums a thing of the past?

Gold first broke above $2400/Oz on 17 May 2024. Staying above that threshold was not evident. It lasted for three trading days.

The summer minimum

Demand for gold for jewelry tends to ease during summer. Jewelry producers and  mints allow for their staff to take a summer break. Unless there is any other pent up demand, gold prices are usually weaker during summer.

Gold bottoming at the December 2017 low

Unlike after previous FED rate hikes, precious metals don't quickly bounce up but continue their losing strike. A stronger USD is only part of the story.

Review of gold price volatility

You find the newest article on this subject at: Review of Gold Price Volatility: 1973-2017

It’s often heard that gold takes the staircase up, but the elevator down. A gold rally would then consist in a gradual process of relatively small but consistent daily upward moves. The gold cartel (bullion banks and investment banks, backed by the FED) would not allow gold to rally over 2% daily.

Once ignited, swoons in precious metals are thought to aggravate by forced liquidation of future long positions and the redemption of leveraged products and bullion ETF’s...

All of this is a mixture of facts and myths, causes and consequences, hidden motives and secrecy, misinformation, manipulation and opportunism. While I can do very little about most of those, I will try to clarify some of the facts in order to eliminate a few of the myths.

SPDR Gold ETF - GLD: adding to demand... or to supply?

The decision of the London bank HSBC plc to close its gold vaults, as revealed by Andrew McGuire, has been the talk of the weekend. HSBC is the custodian of the SPDR Gold ETF - GLD. Last year GLD has transferred most of its gold to these vaults.

The stealth gold recovery rally

Ever since bottoming in the morning of June 28, gold has been hesitantly drifting higher. The short first week of July, with American and Canadian exchanges closed for the national day, the yellow metal lingered on, apparently challenging its June 28 bottom. Gold closed the short week down 1%, however without closing below $1200. Ever since we seem to experience a stealth gold recovery rally. Until this morning, $1300 seemed to be a firm resistance for gold. After a few failed attempts, we're now vigorously steaming up higher.

Volatility in the gold market

It’s often heard that gold takes the staircase up, but the elevator down. A gold rally would then consist in a gradual process of relatively small but consistent daily upward moves. The gold cartel (bullion banks and investment banks, backed by the FED) would not allow gold to rally over 2% daily.

Once ignited, swoons in precious metals are thought to aggravate by forced liquidation of future long positions and the redemption of leveraged products and bullion ETF’s...

All of this is a mixture of facts and myths, causes and consequences, hidden motives and secrecy, misinformation, manipulation and opportunism. While I can do very little about most of those, I will try to clarify some of the facts in order to eliminate a few of the myths.

Who is talking silver down?

From its 2012 bottom level to the $35 attained intraday, silver has rallied over 32%. This is almost the double of the mere 17% gold rallied from its $1537.5 bottom (LME fix) to an intraday close to $1800. Yet in a different perspective, gold is currently quoting at less than 10% below its all time high, while silver needs another 30% rally before coming close to its April 2011 peak level.

But again, in this kind of game, it's not long term trends that count and even less fundamentals. For short term gain, only short term moves are of any importance. On two consecutive occasions, Daniela Cambone of Kitco News, hints at rumors on an imminent correction for silver.

Crédit Suisse Global Investment Returns Yearbook 2012

The "Crédit Suisse Global Investment Returns Yearbook 2012" was released last week, which deserves a rapid posting. The yearbook highlights three subjects:

The real value of money
Whoever is determined in thinking a research paper endorsed by a major financial institution can only by a Siren song supporting fiat currency, may need to reconsider.

Just a quote from the introduction:

With international efforts to avert recession, fears have grown about the monetary policy and debt overhang. Sentiment fluctuates between deflationary concerns and inflationary fears and the demand for safe-haven assets has surged. This article examines the dynamics and impact of inflation and examines how equities and bonds have performed under different inflationary conditions.

Currency matters

Investing in global equity rather than just domestically reduces portfolio volatility. Equities tend to outperform following periods of currency weakness, which suggests that more unhedged cross border exposure can be desirable at those times. Contrary to equity, cross border bond investment can add to portfolio risk primarily through currency exposure.

Measuring Risk Appetite

... attitudes towards risk oscillate periodically from over-exhuberance to excessive pessimism and back again. In Feb 1998, Crédit Suisse lauched the Global Risk Appetite Index ...