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May 30: Gold and Silver Rise Over 1% More

Chris Mullen
|
Thursday, May 30th
 

Close

Gain/Loss

Gold

$1413.80

+$19.00

Silver

$22.74

+$0.28

XAU

109.49

+5.25%

HUI

278.82

+5.75%

GDM

831.09

+5.55%

JSE Gold

1511.14

+151.44

USD

83.03

-0.59

Euro

130.42

+1.03

Yen

99.34

+0.51

Oil

$93.61

+$0.48

10-Year

2.124%

UNCH

T-Bond

141.53125

-0.09375

Dow

15324.53

+0.14%

Nasdaq

3491.30

+0.69%

S&P

1654.41

+0.37%

 
 

The Metals:

 

Gold popped up to $1410.53 in Asia before it fell back under $1400 in London, but it then rose to as high as $1417.80 in New York and ended with a gain of 1.36%. Silver surged to as high as $23.085 and ended with a gain of 1.25%.

 

Euro gold rose to about €1084, platinum gained $25.50 to $1479, and copper rose a couple of cents to about $3.32.

 

Gold and silver equities rose over 5% by late morning and remained near that level for the rest of the day.

The Economy:

 

Report

For

Reading

Expected

Previous

GDP

Q1

2.4%

2.5%

2.5%

GDP Deflator

Q1

1.1%

1.2%

1.2%

Initial Claims

5/25

354K

340K

344K

Pending Home Sales

Apr

0.3%

1.5%

1.5%

 

Tomorrow brings Personal Income and Spending, Core PCE Prices, Chicago PMI, and Michigan Sentiment.

 

The Markets:

 

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

 

Oil turned higher after the Energy Information Administration reported that crude inventories rose 3 million barrels, gasoline inventories fell 1.5 million barrels, and distillates rose 1.8 million barrels.

 

The U.S. dollar index fell on worse than expected economic data.

 

Treasuries ended lower after today’s $29 billion 7-year note auction sold at a yield of 1.496% with a bid to cover of 2.7.

 

The Dow, Nasdaq, and S&P climbed higher on the outlook for continued stimulus from the fed.

 

Among the big names making news in the market today were RBC, Costco, Dish, and Pinnacle.

The Commentary:

 

It looks as if we have FINALLY got some sort of catalyst to propel gold through that big round number overhead resistance level at $1400. Based on what I am seeing this morning, it began with the steep slide in the Japanese stock market, with further help from the very disappointing GDP growth number that came out this AM.

To start - the Nikkei fell 5.2% on Thursday, as investors over there are suddenly having concerns about the overall effectiveness of the "inflation" program that has been implemented by the political and monetary authorities. That fall in stocks resulted in a strong safe haven bid into the yellow metal. Keep in mind, that heretofore investors have chosen to ignore gold or outright sell it short as they put investment capital to work in better returning equity markets. If anything upsets that apple cart and begins to cast the least bit of doubt that the strategy is not going to be effective moving forward, we will see money flow out of stocks.

 

Secondly - the US economy was revised downward in growth for the Q1 2013 from last month's reading. Instead of the 2.5% reported last month, the number was revised lower to 2.4%. That took some of the steam out of the "TAPERING" talk that has been everyone of late. As most of the readers of this site are aware, gold has been under pressure ever since that TAPERING talk began to gain some credence. Today's revision was a reminder that this economy remains quite weak with tepid growth and is still very susceptible to downward pressure. Growth numbers will need to do more than this to provide any factual basis for a curtailing of the Fed's QE program.

I should further note here that the "deflator" number that was used by the BEA was 1.18%. The BLS has a December-March inflation number of 2.10%! That is no mean difference! The lower the deflator number used (another way of saying this is that the lower the rate of inflation employed by the statisticians), the better the headline number for growth comes in. IF the BLS number had been used instead of the 1.18% reading, the growth reported would have been even lower!

The mining shares are showing some welcome signs of life of late. As you can see on the chart, they gapped higher today but until this index closes through that gap region indicated, I cannot get too excited about their future prospects. To pique my interest, I would need to see two consecutive closes through at least the 290 level. Still, it beats seeing the things dropping to new lows every day! Obviously value buyers are active but we need momentum based buyers to chase these things like they have chased the broader equity markets. That will require a technical chart confirmation that the trend is ready to reverse.

 

There was some news out the other day about the US Dollar losing a bit of its demand as the chief currency for global reserves. The IMF data on that was interesting. I do not know if that might have had something to do with the weakness that we saw yesterday and are seeing again today, but for whatever reason, the Dollar just took out at least one downside support level on the chart.

 

I am using a 4 hour chart as it shows the support level more clearly than just the daily chart. You can see the breach of that level was accompanied by a pretty decent spike in volume which is bearish. The week is not over yet but if the Dollar cannot climb back over that support, odds would favor additional downside early next week.

Don't forget the entire world is LONG DOLLARS and the trade is extremely crowded both among the big hedge funds and the general public. If any more downside technical levels were to get taken out, we could see some pretty serious selling occur in the greenback.

Obviously, any weakness in the US Dollar is going to benefit gold, which is exactly what we are seeing occur so far in today's trading session.

Speaking of gold, clearing $1400 is a big deal on account of that fairly hefty hedge fund short position. We did see some short covering occur on the move through this level. My analysis suggests heavier short covering will occur if the metal can push PAST $1425 with a serious unwind of short positions if price can clear $1440. For analysis purposes, we should start to focus on the August gold contract as the June is entering its delivery period and open interest in that contract month is rapidly dropping. It will also be interesting to note the delivery process itself and see what kind of offtake occurs.

Silver is getting some help from the strength in gold today and the bit of strength in copper is not hurting it either. Until that market clears $24 I cannot get excited about it.

The yield on the Ten Year Treasury note has been all over the place today. Volatility in the US bond markets, while nothing like the madness that has been unleashed in the Japanese government bond markets, is definitely increasing. Interest rates that begin wild oftentimes unpredictable movements have the potential to destroy hedging programs put in place by any entity with interest rate exposure. This is especially true of insurance companies and mortgage companies. Things can get out of hand very quickly and become quite ugly if money flows start getting erratic in that critical sector.

If you want to know how bad it can get, just look at what the Japanese monetary authorities are having to do in order to try to calm the jitters in their bond markets.- Dan Norcini, More at http://www.traderdannorcini.blogspot.com/

 

GATA Posts:

 

 

Canadian mint's gold and silver funds trade at a discount to metal value

 

The Statistics:

As of close of business: 5/29/2013

Gold Warehouse Stocks:

8,055,203.471

+12,241.94

Silver Warehouse Stocks:

165,290,043.300

+380,031.03

 

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

1013.154

32,573,918

US$46,023m

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

Gold Bullion Securities

138.13

4,441,056

US$6,272m

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

ETFS Physical Gold

152.66

4,908,200

US$8,004m

Australian Stock Exchange (ASX)

Gold Bullion Securities

11.16

358,789

US$507m

Johannesburg Securities Exchange (JSE)

New Gold Debentures

42.45

1,364,715

US$2,214m

Note: Change in Total Tonnes from yesterday’s data: SPDR added 0.902 tonnes.

 

COMEX Gold Trust (IAU) Total Tonnes in Trust: 187.22: -0.36 change from yesterday’s data.

Silver Trust (SLV) Total Tonnes in Trust: 9,992.92: -30.03 change from yesterday’s data.

 

The Miners:

 

Centerra Gold’s (CG.TO) suspended operations, Midway’s (MDW) permit, and Santacruz Silver’s (SCZ.V) advance notice policy were among the big stories in the gold and silver mining industry making headlines today.

 

WINNERS

1. Almaden

AAU +15.43% $1.87

2. Banro

BAA +13.46% $1.18

3. Northern Dynasty

NAK +13.36% $2.80

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

Please see Yahoo’s Mining/Metals News Wire for all of today’s mining news.

 

- Chris Mullen, Gold Seeker Report

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© Gold Seeker 2013

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