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- Chart of interest - Gold
- Chart of interest - gold, technically perfect?
- Charts of Interest - Copper & the USD Index
- USD/JPY and JPY crosses - is this the retirement trade?
- Stunning Gold Chart - Gold on the Cusp of a Strong Rally?
- Physical Gold - the major new trend
- Pullbacks in the Gold market are healthy
- For those that haven't already, it's time to Buy Gold
- New Account - Physical Gold & Silver
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Viewing entries tagged with 'Precious Metals'
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BBY (NZ) Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
The decade long rally in Gold has been in a wide ‘flat bottom triangle’ consolidation for nigh on a year now. My main premise has been that the Gold market is sitting ‘long’ and that there would be very little oomph from any further Fed action. As such I have been looking for a potential shake out to the downside.
My view is in jeopardy as the precious metals have put in very good performances over the last few days. Recall Gold and Silver were amongst the biggest beneficiaries of the U.S.money printing programs previously.
Given developments the Gold charts are particularly interesting.
Fig 1) – 10 year Gold chart
Fig 2) – A closer look. US$1,660.00 looks a key level.
Two nights ago Gold dropped sharply, stopping out many of my ‘long Gold’ clients. The move through the previous low of US$1,651.00 was particularly sharp with stop losses at that level done with significant ‘slippage’ at $1,647.00. That slippage tells me, quite clearly, that my clients were not alone and the market on the whole was caught out on the drop (caught long).
This is classic market behaviour. If market participants are all sitting long then they are sellers on their next transactions, thus inhibiting moves higher. Now a large amount of those longs have been forced out. Clearly the implication to me is that the market is now free to move higher…….
With that in mind take a look at the chart.
1) The move down from the US$1797 high to the $1625 low was a prefect ‘Fibonacci’ 61.8% of the previous rally ($1527 to $1797).
2) The latest 3 week pull back is again a perfect ‘Fibonacci’ number, this time a 76.4% move (my favourite ratio which I have observed often occurs before big moves – the depth of the move often confounding the most ardent bull – as is my base case here).
3) Yesterday’s low stopped on the rising trend line from the aforementioned lows.
A closer look
No doubt this analysis is all a bit over the top for most of you but the end result could be a good buying opportunity with clear trading parameters if you are a gold bull (USD bear) like me.
In the wake of the FED’s FOMC announcement this morning these charts bear close scrutiny.
The FED have pledged to keep the money spigots wide open, to pay for their US$85 bio per month of various securities purchases, until the labour market improves to 6.5% unemployed goal. i.e. the song remains the same.
We know that the majority of data from around the world, last night’s U.S. GDP excepted, has been strongly on the improve lately so is Dr. Copper (recall Gartman says it has a PHD in economics), ready to break higher just as the USD Index drops below support?
With the EUR/USD rampaging higher, Gold and Silver again looking strong I suspect these support/resistance areas will be broken in due course and create very tradable moves.
The USD/JPY has attained the state that I refer to as ‘trending’. Price pushing up hard and fast against spaying Bollinger Bands . The ‘morning star’ rejection of lower levels that I documented on the 10th of November has been a wonderful indicator.
From observing this technical state in the past I’ve noted that ‘pullbacks against the trend can be quite sharp but they are usually brief by time’ (24/48 hours).
This pair, in my opinion has been incredibly depressed for a number of years, and it could really fly going forward. Why not 100+?
For a bit of perspective (and showing my age) this pair was at 250.00 when I started in FX and had been at 360.00 in the late 1960’s.
What about Gold (the store of value as central banks globally attempt to inflate their way out of trouble) versus the JPY? Check the 1 year consolidation break out!
And NZD/JPY ? The Christchurch rebuild will make NZ’s economics look unlike any other western economy and on the other side of the ledger Japan’s problems (which I’ve documented many times recently) undermines the JPY. 100 on this cross anyone?……………………….and you get paid to hold it!
A trade weighted type portfolio of each of these pairs may be vastly rewarding going forward.
For a very long time Gold has been considered a commodity, however since the GFC and the massive money printing conducted by the world’s central banks, the modern view is to consider Gold as money i.e. that classic store of value when everything around it is being debased. To whit Gold has been rising steadily as Copper (the Dr with the PHD in Industrial Activity) has been declining just as steadily.
Given that Gold was one of the main beneficiaries of the first few rounds of QE and the world’s central banks have again, over the last few months, embarked on another easing frenzy one could expect that Gold will begin to rise again.
In that context this long term chart of Gold, as measured against its 55 week moving average, makes for very interesting reading.
Since the 2001 low of US$255.00 oz the 55 week moving average has done a simply amazing job of defining the major trend. Now the recent sharp drop to US$1.672 oz very much looks like the low made in April 2009 before Gold embarked on a massive 122% rise. (This was the same period that my Mr Silverballs rode NZ$1,500 to NZ$1,000,000 in Silver using the leveraging capabilities of the BBY Online system).
Further hardening my resolve that Gold may be on the cusp of another strong rise after a 13 month consolidation, the weekly bounce off the 55 week m.a. was a ‘bullish engulfing week’.
Chart 1 – The 55 week m.a. documented.
Chart 2 – A closer look at the recent bounce.
I think that this could be one of those very rare occasions where an truly stunning opportunity exists. I have multiple ideas on how to capture any ensuing move should you be interested.
Much has been written about Gold’s dramatic rise in price over the past decade or so and it certainly appears that this trend is set to continue for some time yet.
However within this trend of increasing demand for Gold a new trend, and probably the most important development yet, is starting to take hold and this is the demand for investors to hold actual physical gold.
The significance of this development is that in the early part of Gold’s rising trend the market was to a very large degree driven by the paper market with the introduction of Exchange Traded Funds which tracked and were backed by gold. Investors flocked to these funds and as a result more and more of these types of funds were brought to the market. Such has been the proliferation of these funds that many in the market are starting to wonder if indeed these funds actually hold the amount of gold they profess to hold. There may not be anything in this concern and perhaps these funds do indeed have the amount of gold they say they do but the very idea of being ‘pooled’ with other investors is certainly losing its attractiveness.
According to the World Gold Council purchases of gold bars and coins have increased nearly 100% since 2009, whereas additions to Exchange Traded Funds are down by nearly three quarters in the same time period.
Investors are becoming increasingly concerned about developments in the financial markets and they know that throughout history gold has been a safe haven for their wealth, the more the value of paper currencies are eroded by such things as QE the more valuable their Gold becomes. Now accompanying this increasing fear is the increasing desire to hold their gold in a secure vault in their own name or for some burying it under the floorboards at home is the way to go (not something I would particularly recommend but everyone to their own).
The matter of secure vaulting has also been much highlighted recently as many holders of physical gold have their gold stored in Bank vaults and Banks are notorious for leasing out the gold that they have in their vaults. There have been many cases recently of significant gold investors requesting delivery of their gold, that is supposedly being held in a Bank’s vault, only to be presented with delay tactics from the Bank while the Bank struggles to obtain the Gold to deliver back to its client.
In recognition of this increasing trend in the desire to actually own physical gold in your own name and in a secure commercial Non- Bank vault (no leasing to worry about or pooling of ownership) we at Edge Capital Markets have obtained access for our clients to a Gold purchasing service that was previously only available to wholesale clients, with the accompanying very attractive precious metal prices, of course actual delivery of the metals is available for those who want to provide their own storage at home (spade and extra floorboards not included).
Since the recent and short lived breach of USD1800 on Oct 5 the price of gold has taken quite a tumble, closing today just above USD1700 mark. Once again any precipitous move downwards in the price of the precious metal has produced a myriad of claims from many in the finance community of its imminent demise. I noted that even in the NZ Herald last weekend a well known NZ market commentator had added in his article on a possible property crash that Gold was also showing signs of a bubble (nothing else was included to back up his claim in relation to Gold, he obviously believes that no context information was required). These Market commentators are probably the same people who were claiming that Gold’s run was over when the price fell below USD1550 as recently as May of this year, and other similar calls throughout the past decade whenever Gold has suffered a significant pullback.
I am not saying that this current pullback is necessarily over, after all both the 100 and 200 day moving averages are still quite a way down from here sitting around the USD1650 level thus it is quite possible that this current pullback could target that level, what I am saying is that throughout Gold’s bull run of the last 12 years significant price pullbacks have been necessary (and therefore healthy) for the run to continue over the long term.
With regard the movement in the price of Gold over the past 3 months, it should be noted that the expectation of QE3, followed by the actual announcement of it, caused quite a huge run up in the price. Now of course the market is waiting for the enaction of QE3 to start taking effect, so this latest pullback was not entirely unexpected, even though the severity of it was probably not so expected.
At times like these it is sensible to not panic and to continue to maintain a core holding in Gold, if your expectation (as is mine) that the precious metal has still considerable upside in its future price.
Just remind yourself why you purchased Gold in the first place and reflect on whether any of those fundamental reasons have indeed altered in any way, if they haven’t (and I would suggest that this is the case) then continue to hold Gold and wait to be rewarded for doing so.
Despite the fact that many of today’s financiers treat the subject of gold with nothing short of disdain, whatever your level of wealth gold should be a part of your strategy to increase or protect your wealth over the long term future.
Consequently, the following information is with regard to buying and holding gold for the long term (a number of years) and is not a short term trading recommendation as buyers need to be aware that gold is susceptible to significant price moves both up and down especially over the short term.
The four basic reasons to hold gold are:
- Gold has proven to be a reliable preserver of wealth.
- As well as protecting wealth its been performing extremely well as an investment for the past decade.
- Gold being treated as real money has been normal practice throughout history and likely to be normal practice in the future.
- And very importantly in the current environment it is insurance against financial crises.
So let’s explore more fully the above reasons to hold gold in your investment portfolio:
- Storage of wealth – a common example given is that in the 1920’s a Wall St executive could buy a high quality men’s business suit for USD35.00 which was also the cost of an ounce of gold at that time. Today a high quality men’s suit for a Wall St executive would cost around USD1700-1800 which is the cost of an ounce of gold in today’s prices.
I have also read reports that an ounce of gold bought a Roman senator his toga and sandals 2000 years ago but I am not quite sure how to substantiate this claim.
Despite years of inflation gold has maintained its purchasing power, but the same can certainly not be said for the money in your pocket or saved in the bank. Over those same years inflation has massively eroded the value of cash – it now takes nearly $1000 to purchase what you got for $100 forty years ago.
- Gold= Money – in many past civilizations gold has been used as money. However, gold is totally suitable for this purpose as it is rare, standardized in purity and weight , divisible, and indestructible. The reserve currency of the world the US dollar was taken off the gold standard by President Nixon in 1971 (note that the time since is the same forty year period mentioned above with regard erosion of the value of money) and consequently since 1971 the world’s currencies have been what are known as fiat currencies i.e. paper currencies not based on a relative value to gold. Prior to 1971 the US dollars convertibility into gold had kept the worlds currencies on a sound footing due to the fact that all currencies were convertible into US dollars and therefore convertible into gold.
Throughout history countries and empires have attempted to create a monetary system that is not based on gold and yet all of these fiat monetary systems eventually failed and the paper currency in use went out of existence. There is no reason to believe that this will not be the eventual fate of today’s fiat paper currencies. Therefore it is highly probable that at some point in the not too distant future the world will return to some sort of gold standard i.e. return to normal. If this occurs it is likely that holders of gold would see a significant appreciation of the value of their gold.
- Gold’s stellar performance as an investment over the past decade. At the turn of the new millennium gold was priced at approx USD $400. Since then it has risen steadily and the average annual return over the past 12 years has been approximately 15%. Gold’s current price is ranging between USD1750-USD1800 and the expectation from many of the large financial institutions is for gold to rise to above USD 2000 during or even prior to 2013.
Central banks are playing a huge role in this outperformance, according to the World Gold Council central bank purchasing of gold has soared, with the 157.5 metric tons of gold bought by central banks in the second quarter 2012 being an increase of 62.9% from the 1st quarter 2012 and a 137.9% increase on second quarter 2011. And when you consider that prior to this last decade central banks were net sellers of gold they have certainly realised which way the wind is blowing. With central banks, and in particular the Chinese central bank who has become the largest importer of gold, likely to continue this hoarding of gold there is no reason to suspect that this upward trend will not continue for a number of years to come eventually rising above USD5000.
- Insurance – in times of financial crises assets that are held electronically or on paper can quickly have their value eroded or even disappear in the worst types of crises. Gold being acknowledged as a safe haven makes it an asset to jump into when you are wanting to take your funds out of the financial system and seek the protection of something that is real and everlasting ie Gold.
We have been asked by a number of you to see if we can locate a physical precious metals product, to enable you to add physical gold or silver to your portfolio, alongside the gold and silver CFD account we currently provide.
It is with great pleasure that I am able to announce that through one of our counterparties we have been able to do this.
Prior to offering this facility to our clients we wanted to do some due diligence to ensure it was competitive and answered a lot of the questions posed to us when asked to locate such a product. Precise details are set out in the account terms and conditions available to you on enquiry.
Please find responses to some of your questions below:
Q: Can I take delivery of the gold or silver if I want to?
A: Yes, we can purchase gold and silver for delivery through this account.
Q: What is the min transaction size?
Q: How competitive is the pricing?
A: Through what is publicly available we have determined that the buy/sell spreads are tighter than mints throughout Australasia, but not as tight as the CFD product.
Q: Is my gold/silver stored outside the banking system?
A: Yes, the bullion is stored at non-bank vaults, and can be bought and stored in a non US location.
Q: Is the bullion held against my own name?
A: You have a direct beneficial interest in the gold. For purchases over US$1m, the gold is held directly in your name, under this amount it is held on your behalf by our counterparty at their account at the vault.
Q: Is my holding pooled with others?
A: No, the holding is allocated, not pooled.
Q: Are there any ongoing fees and what do they include?
A: Yes, there is a 0.95% annual fee charged monthly. This covers Storage, Transport, Insurance and a quarterly audit fee.
These were some of the key questions you asked. This link profiles the product in more detail - Click Here .
If you wish to open a Portfolio account with us to buy and sell precious metals, or would like a copy of the account terms, please contact us on 0800 874 266.
We thank you for your ongoing business, and will keep looking for new product to provide to our advisory clients.