Gold Seeker Closing Report: Gold and Silver Gain About 1% Again

The Metals:

Gold climbed $8.38 to $1659.38 in Asia before it fell back to $1642.67 by a little after 10AM EST, but it then rose to as high as $1662.17 in early afternoon New York trade and ended with a gain of 0.67%.Silver slipped to $29.75 in Asia, but it then rose to as high as $30.583 in New York and ended with a gain of 1.53%.

Euro gold fell to about €1293, platinum gained $2.70 to $1520.20, and copper rose a couple of cents to about $3.75.

Gold and silver equities traded mostly slightly higher and ended with modest gains.

The Economy:

Mortgage applications surge on refinancing demand: MBA Reuters

Tomorrow at 8:30AM EST brings Initial Jobless Claims for 1/14 expected at 385,000, CPI and Core CPI for December expected at 0.1%, Housing Starts for December expected at 673,000, and Building Permits expected at 680,000.At 10AM is the Philadelphia Fed survey for January expected at 10.0.

The Markets:

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

Oil erased early gains after midday reports that the Obama administration will reject the application to build the Keystone pipeline across the U.S.-Canada border.

The U.S. dollar index and treasuries fell on better than expected earnings reports and hopes for IMF aid that sent the Dow, Nasdaq, and S&P modestly higher.

IMF Said to Seek $500B Boost to Lending Capacity The Washington Post

Among the big names making news in the market today were Yahoo, Goldman Sachs, BNY Mellon, BofA, and U.S. Bancorp.

The Commentary:

“The HUI continues to lose value against the price of gold bullion as evidenced by a continued deterioration in the ratio of the price of the HUI to the price of an ounce of gold.

We are reminded continually of two things that have led to this abysmal performance of the gold shares which are rapidly losing speculative interest in favor of the ETF.

The first is the risk of investing in companies that are subject to surprises which happened to Hecla and recently to Kinross. Hedge funds and other large investment groups or players seeing this say to themselves, "Why risk this sort of thing when we can get LEVERAGED EXPOSURE" to the gold price by buying the gold ETF on margin".

There is no such risk inherent in the ETF. No one worries about nationalization of the ETF or environmental lawsuits or some bureaucratic agency shutting it down to clean up debris in a mine.

Secondly -this then leads us to the ratio spread trade. Buy the actual metal either through the ETF or the physical stuff (or even the Comex) and take a corresponding short position in some of the mining companies to further minimize the risk of investing in gold.

This shows up in the rotten performance of the gold shares in general as they continue to decline against the price of bullion. Note that the line goes nearly straight down since the beginning of 2011 with a brief exception of a lousy two months last year.

If one wanted to devise a mechanism to deliberately depress the price of the mining shares they could not have come up with a better mechanism to do so than the gold ETF. The lesson in this is that investors must be extremely selective in choosing gold mining companies to invest in and not just blindly throw money into the sector and thereby hope to be successful. As long as the Gold ETF is in existence, the hedge funds are going to use it as the long leg of these spread trades and actively seek out the weaker gold mining companies to short. At this point I am not sure what it is going to take to reverse this trade as traders will stick with a strategy as long as it works and not a day longer. Long suffering gold mining share owners should continue to press management to take the steps necessary to make it more difficult to short their shares successfully. Failing that they can always pray for a takeover or acquisition!”- Dan Norcini, More at http://www.traderdannorcini.blogspot.com/

GATA Posts:

Fox Business interviews Grandich about $2 million gold price bet

At last Financial Times notices that central banks do shady things with gold

Sprott's PSLV launches bid for more silver

J.S. Kim: Last year's price suppression to fuel this year's explosion

The Statistics:

Activity from: 1/17/2012

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

Note: Change in Total Tonnes from yesterday’s data: SPDR added 1.511 tonnes.

COMEX Gold Trust (IAU) Total Tonnes in Trust: 173.18: No change from yesterday’s data.

Silver Trust (SLV) Total Tonnes in Trust: 9,516.75: No change from yesterday’s data.

The Miners:

Ivanhoe’s (IVN) bridge financing and Claude’s (CGR) acquisition of St. Eugene Mining (SEM.V) were among big stories in the gold and silver mining industry making headlines today.

WINNERS

LOSERS

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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Additional Resources for today’s Gold Seeker Report can be found:

• http://www.capitalupdates.com
• http://www.goldseek.com
• http://www.silverseek.com
• http://www.goldreview.com

©Gold Seeker 2012

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