Market Update: Happy New Normal, The Golden Bull Bear is Here

Ranging across the marketplace, gold spent the week defying common wisdom and forcing the hands of crystal ball gazers all over the world. On Friday gold closed at $1,648, with silver walking alongside, closing down at $29.32. These swings proved too much for paper gold, creating an illusion that the yellow metal was collapsing. Technical sell-offs caused many to scratch their heads as gold stayed above $1,600. The jobs report, a stronger dollar, and an announcement by the Fed that QE3 may end sooner than expected were used as explanation for the bearish bull. Something to watch, however, is the Indian government seeking to balance its trade deficit by raising taxes on imported gold. India is the world’s biggest buyer of gold. If these consumers are priced out of gold, what could we expect from silver? Only time will tell.

Precious metals on the move

London Fixed PM price at week’s end, and change over previous Friday:

  • Gold: $1,648.00, down 0.6%
  • Silver: $29.32, down 2.8%
  • Platinum: $1,557.00, up 2.0%
  • Palladium: $689.00, down 2.1%

In the news

The pressure on gold is causing it to behave like a spring coil; the closer it presses on $1,600, the more likely a rapid breakout to $1,800
“From a symmetry perspective… there may need to be further consolidation to the right of the 2012 lows, equivalent to that on the left of the low.  That would carry an extended consolidation through the first quarter of 2013 before price finally might rise to address the 1,800 level with enough strength to penetrate.” — Louise Yamada, Louise Yamada Technical Research Advisors (link)

What goes up, must come down, but why is gold stumbling around the ring like a prize fighter remembering the fundamentals?
“Forecasts still see upside for gold. Most analysts attribute this to the expectation of underlying support from official sector buying and physical demand, coupled with potential geopolitical risks and, most importantly, the continuation of ‘conventional or unconventional easing of monetary policy,’ according to HSBC.” (link)

India Finance Minister believes gold is the solution to the country’s trade deficit tax on gold,but can he create a cultural shift?
“We may be left with no choice but to make it a little more expensive to import gold. The matter is under the government’s consideration.” — Finance Minister Palaniappan Chidambaram of India (link)

Spotlight on Silver

Silver is the “financial solar plexus”, connecting the world of economics and finance
“Although modern market-based finance still largely depends on faith, confidence and human perception, it seems that the silver market’s price discovery mechanism is being increasingly usurped by obsessive technical analysis and computer driven trading that largely amounts to picking up nickels in front of a steam roller.” — Dr. Jeff Lewis, Silver Seeker (link)

The week ahead

  • Central bank meetings from the Bank of England and the European Central Bank
  • Eurozone wobbles into 2013 with declining manufacturing output and Merkel warning of tough times ahead
  • Japan running with its own quantitative easing
  • Central African Republic rebels halt their march to the capital, calling for better distribution of the country’s vast mineral wealth
ecb, Featured, federal reserve, gold, india, qe3, quantitative easing, silver