#Copper's breakout is for real!

#Copper's breakout is for real!: 

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Gold Price Set to Drop into Aggressive Accumulation Zone

Commodities / Gold and Silver 2011 Oct 09, 2011 - 09:30 AM

By: Clive_Maund

It now looks like we were a little too bullish in the last update, for the way gold has acted over the past week suggests that another sharp drop is imminent before the dust finally settles on this reactive phase, that it likely to take it to or some way below its recent panic lows.

On gold's 4-month chart it is now apparent that a bear Pennant has been forming since the panic bottom, with the weak upside volume portending an imminent breakdown and steep drop. A reader pointed out to me during last week that gold's panic lows occurred in thin trading on the Hong Kong market, and for this reason we do not have to factor in the tail of the hammer candlestick when deciding where to draw the boundaries of the Pennant. The measuring implications of this Pennant call for a drop at least to the vicinity of the intraday lows of the Reversal Hammer and possibly somewhat lower towards the $1520 area - at this point the decline should have completely run its course and we will be looking to buy aggressively. If we look carefully we can see that a small "bearish engulfing pattern" has formed in gold over the past 2 trading days, implying that breakdown from the Pennant and the expected steep drop that will follow is imminent. A reason why this next drop should end the decline is that gold is already deeply oversold as shown by its MACD indicator, and it will of course be even more so after this impending decline. Those interested in going long gold investments in the near future should "keep their powder dry" but stand ready to wade in big time if gold drops into the bright green "aggressive accumulation zone" shown on our chart.


Other reasons why the imminent sharp drop expected should mark the end of gold's reactive phase are to be seen on its 1-year chart. On this chart we can see that a decline to or below its recent panic lows will take it deep into strong support near to its rising 200-day moving average, the classic point for a major reaction in an ongoing bullmarket to end.


Still another reason for the reaction to terminate with this final drop are gold's now strongly bullish COT chart on which we can see that Commercial short and Large Spec long positions have dropped back to relatively low levels - the lowest for a long, long time.


There is certainly plenty of light at the end of the tunnel for gold over a longer time horizon, and not just that which arises from its own COT charts. The COT charts for the dollar are strongly bearish, with the Commercials going heavily short, and they are also going heavily long the euro. This implies that the current state of extreme crisis in the Eurozone should ease soon and the euro rally sharply, and the dollar fall heavily - which suggests that european leaders may scale back their bickering soon and cooperate sufficiently to ease the crisis with generous helpings of QE, which will of course be bullish for gold and silver. Our euro fx COT chart below shows the big long position in the that the Commercials have built up.


Although the big Commercial short position in the dollar is a harbinger of doom for the current strong dollar rally, it looks on its 3-month chart like it has a bit of life left in it yet. The long-legged doji candlestick that formed on Friday implies that it will turn higher again next week and maybe make new highs.


Bearish price action in both copper and oil on Friday suggests that they too will turn down this coming week.

By Clive Maund
CliveMaund.com

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© 2011 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

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Gold Price Set to Drop into Aggressive Accumulation Zone :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website

The MasterMetals Blog

Copper keeps bearish momentum

Copper keeps bearish momentum

CK_20110410115316.jpg (PNG Image, 940x652 pixels) - Scaled (88%)

The MasterMetals Blog

Gold and Financials

Gold and Financials
From Richard Russell:

The best comment on gold that I have seen comes from my old friend, Ian McAvity in his latest mailing of Deliberations : "The latest run on gold came from the early April breakout through the area around 1425, which becomes a logical support area for a corrective pullback. Gold first crossed $1400 in November and fought it for 21 weeks. The prior significant breakout was through the $1260 level, first touched in early December, 2009, and penetrated 22 weeks later with more follow-through, and finally resolved with conviction in September, 2010, 42 weeks after the first touch.

"Measuring swings with intra-day Comex extremes, this run gained $268 in 14 weeks from the late January low to the $1577 high this week. The prior two rallies (to $13451 & $1262) gained $275 in 19 weeks and $220 in 20 weeks. With recent runs and corrective phases running about 20 weeks in duration, it's possible this run could extend further. But the blowoff and turbulence in silver in the past two weeks, and the lousy relative behavior of the gold and silver shares prompts me to speculate an intermediate top may have been put in, and we may need another period of 20 weeks or so to correct, digest, cool off and set-up the next leg."

Below, a chart covering two years of gold action illustrates gold's repeated periods of correction, a period of consolidation lasting roughly 14 to 20 weeks, and then an upside breakout to new highs. The current situation may be a repeat of this same action that has occurred repeatedly over the last two years.

Russell advice -- Be patient with your gold, and sit tight.

Lowry's statistics remain bullish. My PTI remains bullish. The Dow and the Transports recently bettered their April highs, which (from a Dow Theory standpoint) is bullish. But I remain nervous regarding this market. One reason is seen through the chart below.

This is the ETF for the Financials, and it has formed a bearish descending triangle. It's hard to envision this market as being healthy with the financials in such poor shape.

I didn't fully trust the ETF above so I looked for confirmation, and I found it. Below we see the NYSE Financial Index, which contains ALL the financial stocks on the NYSE -- banks, S&Ls, small loan companies -- and this chart looks no better. It's hard to see the market climbing without the financials. The financials have been one of the big success stories since the 2009 lows. The Financials now appear to be under distribution. Best, we keep an eye on them.

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Commodities VaRy extreme right now

Commodities VaRy extreme right now

Posted by Tracy Alloway on May 06 11:14.

Hark — the standard deviation devils sing (again).

As Reuters columnist John Kemp pointed out yesterday, recent swings in the commodities complex have produced some impressive probabilities figures. The kind you can wheel out in dinner party conversation. For instance, front-month Brent crude futures sank almost $12 per barrel (or over 9 per cent) on Thursday, leading the market down from over $120 at the start of the day to under $110.

That's a price change of more than four standard deviations — which is a statistical way of saying it's something that should be seen on average only once in every 63 years, assuming a normal bell-curve distribution. Kemp also points out that at times on Thursday the move also approached five standard deviations — something which should only occur once every 7,000 years.

Now, who wants to bet that algorithmic trading models, or banks' risk management ones, don't extend to this kind of (rare-ish) movement? After all, these models tend to be based on recent history and banks rarely feel the need to take into account extreme events which have never happened. Such was most famously the case, of course, in credit risk management ahead of the subprime crisis.

It's certainly the thinking behind graphics like the below — from Reuters on Thursday:

That's Value-at-Risk (VaR) for major US banks. In words it would mean, for example, that there's a one in 20 chance that Goldman Sachs' daily commodities trading net revenues would fall below expected daily trading net revenues by an amount at least as large as the reported VaR — or about $37bn in the first quarter. Note that VaR predictions, however, tend to be a poor predictor of actual losses. And banks have the ability to ignore them somewhat, as Goldman Sachs did during the subprime crisis.

Here's Kenneth Posner in his book, Stalking the Black Swan:

The company shorted the ABX index just like the hedge fund in Chapeter 4, earning more than $1 billion in profits during 2007. During this period, senior executives were monitoring the value-at-risk … associated with the firm's mortgage position, as well as grilling the mortgage traders on the rationale for their bets. On separate occasions, the executives forced the traders to downsize their positions, even though the trades were profitable, in order to keep the VaR in check. At other times they allowed the VaR to rise to an all-time high.

Given Goldman Sachs called for Brent to return to $105 a barrel just three weeks ago — much to the amusement of some other banks (likeBarclays Capital) — we're guessing there won't be too much Goldman hand-wringing over size able commodities VaR. If the bank followed its own published advice, it should be well-positioned (once again).

Barclays, incidentally, is one of the few European banks that does not break out its quarterly commodities VaR.

Related links:
Fat tail of the day, oil edition - Felix Salmon
Commodities sell-off 2011: is this it? – FT Alphaville
Glencore has bigger risk appetite than Wall St – FT

This entry was posted by Tracy Alloway on Friday, May 6th, 2011 at 11:14 and is filed under Capital markets. Tagged with black swan,commodities, fat tails, goldman sachs, hedging, modelling, standard deviations, Var.

http://ftalphaville.ft.com/blog/2011/05/06/561671/commodities-vary-extreme-right-now/

As usual, Gold’s rally dismissed by equity bulls

Gold’s message dismissed by equity bulls- of course they're not in!!!

By Jamie Chisholm, Global Markets Commentator
Published: April 4 2011 05:40 | Last updated: April 6 2011 13:57

Wednesday 12.35 BST. Pretty much every major asset class is going up as traders seem to be having a final splurge before the age of ultra-loose monetary policy comes to an end.
Underlying optimism about the global economy is emboldening bulls, while signals flashing inflation warnings are being dismissed.
The FTSE All-World equity index is up 0.4 per cent to a fresh cyclical high, after Asian exchanges – Japan aside – shrugged off China’s out-of-hours monetary tightening.
US stock futures are up 0.7 per cent, and the FTSE Eurofirst 300 is higher by 0.5 per cent, helped by stronger than expected German factory orders in February.
Gold is up 0.6 per cent to $1,458 an ounce having hit a record of $1,461, while silver is at a fresh 31-year high of $39.62.
The sharp rise of late for bullion is supposedly being predicated on fears of building inflation pressures – US 5-year breakeven rates, a gauge of inflation expectations, are above 2.4 per cent, the highest since July 2008. And it is true that many commodities are challenging record levels.
Brent crude on Tuesday breached $122 a barrel for the first time since August 2008 as the conflict in Libya combined with worries about production out of Nigeria and Gabon to increase concerns about supply disruption at a time of increasing demand.

Factors To Watch

With oil at 30-month highs, US energy inventory data published at 15.30 will be eagerly scanned by traders.

And corn hit a record of $7.7075 a bushel on Tuesday, up 15 per cent in four days, adding to fears that higher food prices could exacerbate civil unrest in poorer countries. US-traded corn is currently down 0.7 per cent at $7.6150.
However, core bond yields are little changed on the session, suggesting the market is being somewhat selective in its immediate rationale for pushing various asset prices higher.
Indeed, it is possibly a misjudgement to assume that bullion’s rise reflects inflation concerns. Other factors cited by analysts and commentators over recent days for the strength in precious metals have included: worries over the eurozone; geopolitical problems; Japan’s nuclear woes; and even the possible US government shutdown.
But none of these issues seem to be having any lasting impact on other risky assets, so it would be strange if their influence was being applied to bullion alone.
Meanwhile, any traders who shorted industrial metals after Tuesday’s China rate rise will be smarting. A weaker dollar on Wednesday and hopes that Beijing may be coming to end of its tightening cycle has pushed the complex higher, with copper up 1.6 per cent to $4.33 a pound. Speculators remain wedded to the “reflation trade” even as commercial heavyweights warn that demand is slowing.



read the rest here: FT.com / FT's rolling global market overview - Gold’s message dismissed by equity bulls
Related articles:

Inflation fears lift precious metals to records - Apr-06

Commodities daily: Copper’s staff shortage - Apr-06

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Silver, it's turned positive in relation to gold

Silver, it's turned positive in relation to gold.
from Richard Russell:
March 29, 2011 -- Silver, it's turned positive in relation to gold. The chart below tells the story. Back in October 2009 one ounce of gold would buy over 80 ounces of silver. From that point on the ratio of gold to silver changed in favor of silver.

As of today, one ounce of gold will buy only 38.3 ounces of silver. Students of the precious metals are wondering how low the ratio might go. There was a long period when one ounce of gold would buy only 16 ounces of silver. The obvious professional play since late-2009 was to sell gold short and buy silver.

http://stockcharts.com/c-sc/sc?s=GLD%3ASLV&p=W&b=5&g=0&i=t52554751559&r=3769



Below is a chart of the ratio going back 19 years. You can see that the ratio has broken below the 1998 low. The conclusion -- stick with silver, but don't sell your gold.

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Silver: China Imports 245T In Feb, Qatar SWF “Interested” In Buying

China Imports 245 Tonnes of Silver in February and Qatar SWF "Interested" in Buying Silver

GoldCore

Date: March 21, 2011

Gold and silver rose on the open in Asia and have continued those gains so far in European trading with the Libyan military conflict leading to a safe haven bid and falls in the dollar and yen. The all time and multiyear nominal dollar highs set on March 7th ($1,444.95/oz and $36.75/oz) look set to be challenged as gold is less than 1% from its record high and silver less than 2% from its nominal recent high.

Safe haven demand continues especially in Asia and macroeconomic and geopolitical risk remains elevated. The tragedy in Japan and possibility of an ecological catastrophe has clouded the economic picture and created even more uncertainty which will lead to continuing physical demand.

In Japan, many ATMs have not been working for days now and this is leading to safe haven demand for gold. Should efforts to sort out the ATM problem not be resolved this week it could out pressure on the already strained Japanese financial system.

Iran and Other Central Banks Secretly Increasing Gold Reserves

News that Iran and other nations with large dollar currency reserves have greatly increased their gold reserves (see News) will not come as a surprise to our readers. It stands to reason that they would given the degree of exposure which most creditor nations have to the U.S. dollar. It also stands to reason as some of them do not have cordial relations with Washington and may be reluctant to fund the U.S. continuing imprudent fiscal policies.

Gold was not the only precious metal being bought with the FT reporting that the sovereign wealth fund of Qatar, the Qatar Investment Authority is reportedly interested in acquiring both and gold and silver.

The QIA has assets estimated to exceed $65 billion and this one sovereign wealth fund alone could easily corner the very small physical silver market which is worth some $36 billion at today's prices (1 billion ounces of above ground, investment grade refined silver bullion multiply by $36 per ounce).

China Imports 245 Tonnes of Silver in February and Qatar SWF "Interested" in Buying Silver
Central banks and sovereign wealth funds with massive exposure to the dollar, such as the Russians and Chinese, are not going to shout from the roof tops their intentions to diversify into gold and silver bullion as this would lead to a surge in bullion prices and an even greater depreciation of their dollar holdings.

China imported 245.6 metric tons of silver in February. The figure is close to the 260.6 metric tons imported in February 2010 and suggests that the Chinese are more than willing to buy silver at over $30 per ounce. It also suggests that the record Chinese imports of 3,475,394 kilos seen in 2010 (a massive four fold increase from 2009) may be again attained in 2011.

This demand is likely from the private sector rather than official but it is quite possible that there has been official buying in recent months. This may have come from the Chinese State Administration of Foreign Exchange (SAFE) which manages nearly $3 trillion of currency reserves. The Chinese has experienced the collapse of a paper currency and hyperinflation as recently as 1949 and therefore appreciate the value of gold (and silver) as currencies which cannot be debased.

NEWS

(Financial Times) -- Iran bought gold to cut dollar exposure

Iran has bought large amounts of gold in the international market, according to a senior Bank of England official, in a sign of how growing political pressure has driven Tehran to reduce its exposure to the US dollar.

Andrew Bailey, head of banking at the Bank of England, told an American official that the central bank had observed "significant moves by Iran to purchase gold", according to a US diplomatic cable obtained by WikiLeaks and seen by the Financial Times.
Mr Bailey said the gold buying "was an attempt by Iran to protect its reserves from risk of seizure".
Market observers believe Tehran has been one of the biggest buyers of bullion over the past decade after China, Russia and India, and is among the 20 largest holders of gold reserves.
They estimate it holds more than 300 tonnes of gold, up from 168.4 tonnes in 1996, the date of the most recent International Monetary Fund data.
The cable, dated June 2006, is the first official confirmation of Tehran's buying.
Last year central banks became net buyers of bullion after 22 years of large sales, helping drive gold prices to all-time nominal highs. Trades by central banks are often kept secret.
Bankers said other Middle Eastern countries had also been quietly adding to gold holdings to diversify away from the dollar amid political tensions and volatility in currency markets.
"The totality of central bank reserves is not what is reported to the IMF," said Philip Klapwijk, executive chairman of GFMS, a precious metals consultancy. "There's probably another 10 per cent on top of that."
Cables obtained by WikiLeaks cite Jordan's prime minister as saying the central bank was "instructed to increase its holdings" of gold, and a Qatar Investment Authority official as saying the QIA was interested in buying gold and silver.
"There is no question some Middle Eastern countries are very interested in buying gold," said George Milling-Stanley, head of government affairs at the mining industry-backed World Gold Council.
In the past two months, the political unrest in the Middle East has helped propel gold to a record price of $1,444.40 a troy ounce.
The Bank of England declined to comment on the cables, but did not dispute their contents. The central banks of Iran and Jordan and the QIA did not respond to requests for comment.QIA did not respond to requests for comment.