Gold “Buying Opportunity” – Gold Analysts More Bullish On Central Bank Demand

Gold’s London AM fix this morning was USD 1,654.00, EUR 1,250.28, and GBP 1,019.60 per ounce. Yesterday’s AM fix was USD 1,648.25, EUR 1,246.22 and GBP 1,017.88 per ounce.

Silver is trading at $30.16/oz, €23.65/oz and £19.29/oz. Platinum is trading at $1,576.25/oz, palladium at $658.75/oz and rhodium at $1,350/oz.

Gold rose $13.80.60 or 0.84% in New York yesterday and closed at $1,657.60/oz. Gold traded initially sideways in Asia then it dipped downward and recovered  in early European trading.


Cross Currency Table – (Bloomberg)

Support for gold is at $1,624/oz and $1,612/oz and resistance is at $1,663/oz and $1,684/oz.

Gold is some 1% higher on the week in USD and EUR and the higher weekly close would aid the poor short term technical picture.

Gold consolidated on the gains seen yesterday as the downgrading of Spain’s credit rating added fuel to concerns about the debt stricken euro zone. Spain and Italy’s debt servicing costs rose again this morning and the Spanish 10 year touched 6% again.

Gold’s gains may have been tempered by a stronger dollar after the latest easing move by the Bank of Japan. The BOJ expanded the size of its fund for asset buying by 10 trillion yen to 40 trillion yen.

The BOJ may also extend the duration of government bonds it buys to about three years.  

The move saw the yen fall overnight but it has since recovered and is the strongest currency so far today.

While periods of strength can be expected the long term outlook for the yen is poor.

The BOJ looks set to continue debasing the yen for the foreseeable future which will result in the yen falling against gold in the long term. The yen has already fallen by nearly 11% against gold year to date (see chart below).


Gold YTD in USD-White, GBP-Orange, JPY-Pink and EUR-Yellow  – (Bloomberg)

Bullion hit a 2 week high at $1,660.60 yesterday despite somewhat better US housing data and the Fed’s somewhat brighter economic outlook.

The Fed’s promise to use more QE should the economy falter is supporting gold.

The global economic picture remains grim, with euro zone economic sentiment falling more than expected in April and the US job market recovery showing signs of a slowdown.

Apple earnings and the tech boom and indeed possible tech bubble remains one of the primary drivers of continuing irrational exuberance and risk appetite.

The poor and deteriorating economic backdrop is gold supportive.

Gold Analysts More Bullish As Debt Crisis Not Over – “Buying Opportunity”
Gold analysts are more bullish after central banks expanded their bullion reserves and hedge funds increased bets on a rally for the first time in three weeks.

14 out of 28 analysts surveyed by Bloomberg expect prices to rise next week and 9 were neutral, the highest proportion in 2 weeks.

Central bank demand and CFTC data is one of the reasons for their positivity on gold.

Mexico, Russia, Argentina and Turkey were some of the many central banks that added  over 51.8 metric tons valued at $2.8 billion to reserves in March, IMF data show. 

Fund managers raised their long positions by 2.5% in the week ended April 17, according to the CFTC.

Ultra-loose monetary policies of recent years and the problems in the euro zone don’t look like they’re going to end any time soon.

The Fed bought $2.3 trillion of debt in two rounds of QE ending in June 2011. We and other analysts believe that it is only a matter of time before the US embarks on QE3.

The UK saw its first double- dip recession since the 1970s, data showed April 25th, while the IMF predicts the 17-nation euro region will contract.


Gold in USD 1 Week – (Bloomberg)

This week is a fresh reminder of the global nature of the crisis with concerns about the UK, US and Japan remerging alongside Spain, euro and Eurozone concerns.

Gold below its 200 day moving average remains a buying opportunity – especially for people exposed by not having any allocation to bullion whatsoever.

OTHER NEWS
(Reuters Global Gold Forum) – Sales of American Eagle silver coins from the U.S. Mint are on track to hit their lowest monthly rate since July 2008 in April, figures from the Mint showed, at 1.28 million ounces, against 2.542 million ounces in March.

(Reuters Global Gold Forum) – The Shanghai Futures Exchange (ShFE) said it will cut trading commission for various contracts from June 1 in a move to support liquidity. Gold trading commissions will be cut to 20 yuan ($3.17) per lot from 30 yuan per lot, it said.

(Bloomberg) — Economist Gartman Swapping Gold in Yen Trade for Gold in Euros
Economist Dennis Gartman is swapping his gold position priced in yen for bullion priced in euros, he said today in his daily Gartman Letter. 

(Bloomberg) — Gold May Advance Above $1,700, Infinity Says: Technical Analysis
Gold, heading for a third straight monthly loss, may rally above $1,700 an ounce if prices are able to break above a so-called pennant formation, according to technical analysis by Infinity Trading Corp.

The attached chart shows the precious metal trading in a “pennant flag” formation, when the upper and lower trend lines for prices meet to form a triangle or narrow, tapering flag shape, said Fain Shaffer, Infinity’s president. The lower band is $1613, and the upper level is $1,681, he said. Prices may also rally after New York futures yesterday closed above the 20- day moving average for the first time since April 13, he said.

“The market has showed some strength, and we may see a break to the upside,” Shaffer said in a telephone interview from Medford, Oregon.

Yesterday, gold futures for June delivery rose 1.1 percent to settle at $1,660.50 an ounce on the Comex in New York, the biggest gain for a most-active contract since April 12. The 20- day moving average is near $1,651. Prices have dropped 0.7 percent this month.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. 

(Bloomberg) — French Assets in Russian Reserves Rise to 23.8%, Kommersant Says
Russia’s central bank increased the country’s holdings of French assets last year while reducing the weight of U.S. and German investments, Kommersant reported.

The total value of French assets in Russia’s international reserves rose to $117.9 billion at the end of last year, or 23.8 percent of the total, from $79.2 billion in 2010, the Moscow- based newspaper said, without saying where it got the information. The new French investments include $23.2 billion in French government securities and $19.3 billion from Banque de France, Kommersant reported.

Russia’s assets in the U.S. fell by $23.4 billion, while the amount kept in Germany dropped $23.1 billion, the newspaper said. Last year Bank Rossii decreased the amount of state debt in its portfolio while boosting the share of short-term deposits in foreign banks and holdings of precious metals, the newspaper said.

(Bloomberg) — Gold ETP Holdings Drop to 2,389.62 Tons, Lowest Since Feb. 20
Gold holdings in exchange-traded products backed by the metal fell 0.14 metric tons to 2,389.62 tons, the lowest since Feb. 20, data tracked by Bloomberg showed.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS
Gold Analysts Get More Bullish as Central Banks Hoard More – Business Week

Gold inches down after Spain downgrade; dollar weighs – Reuters

Gold climbs on hopes of new Fed bond purchases – Business Week

Gold buying slows after Akshaya Tritiya – Reuters

COMMENTARY
Gold Market Takes Big Cues from The Fed – MarketWatch

Auguries—Public Enemy – Resource Clips

Greyerz – Bankrupt Nations Desperate to Save Financial System – King World News

Jim Grant On The Monetary Priesthood’s "Atlas Complex" – ZeroHedge

Stephen Flood

Stephen Flood is the CEO of GoldCore. He is a former Wall Street equity trader and FinTech expert. He has been involved in the precious metals markets since 2004 and has appeared as an expert contributor on CNBC, CNN, BBC, RTE & Bloomberg TV and has had articles published in the Irish Times, Irish Independent and The Sunday Business Post.

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