This is a sample entry from Leslie Burton’s newsletter, The Weekly Gold Digger, published on Friday, November 14, 2014.
Today’s reversal in the Gold market may have been enticing to chartist’s but may not be able to continue!
The Gold rally today may have looked inviting to Gold bugs, but may be attributed to profit taking! The weakened US Dollar may have released pressure so that the Gold could pop. There were fund orders coming in with some size which may really move a market. Outflows from the SPDR Gold Shares dropped to 720.62 tons. The demand for Gold in Q3 2014 decreased by 4% year on year . The investment demand increased by 6% to 204.4 tons. Technology decreased to 97.9 tons. Central banks added 92.8 tons to their reserves. The Supply had been down 7%. The consumption globally was 534.2 tons. Chinese jewelry demand for Q3 2014 was down 39% year on year to 147 tons. Chinese imports from Hong Kong totaled about 61.7 metric tons last month. So far this year, the Chinese net imports from Hong Kong total 497 metric tons. China’s jewelry sales were up about 11.4% in September. Mainland China imported about 91.8 tons last month including scrap. The Shanghai Free Gold Exchange is operational. The Chinese Central Bank is considering boosting their Gold reserves. They have a small Gold reserve amount in comparison to the US 70% in Gold reserves. Shanghai imported about $15.98 billion of Gold so far this year.
Since Gold bullion was permitted in China (2004) the demand has risen from 10 tons to 397 tons last year according to the World Gold Council. They anticipate by 2017, that Gold demand may reach 500 tons. The World Gold Council believes according to one of their reports that the Chinese sentiment is that the US may devaluate their dollar driving up the price of Gold eventually. The Diwali Festival in India showed an increased demand of 60% to 182.9 tons. The All India Gems & Jewelry Trade Federation felt that the fourth quarter imports could increase 75%. It is thought that about 20,000 tons of Gold may be held in homes and temples within India. The demand in India decreased about 34% to 394.4 tons in the first 6 months of the year. In September about 95 metric tons of Gold were purchased. The fourth European Central Bank Gold Agreement as of September 27th limits the selling of any significant amount of Gold. There are about 21 central banks signing the agreement. As of 2013, about 30,500 tons of Gold were held by the central banks. This restriction may help any potential devaluation of Gold a bit, but their holdings only amount to about a fifth of the globally mined Gold. The central banks have been buyers of Gold increasing reserves. The central bank’s net purchases of 92.8 tons in the third quarter brought their total year to date holdings to 335 tons. Russia added about 37.2 metric tons of Gold in September. Russia mined 248.8 tons of Gold last year. Russia and the Ukraine increased their holdings in August while Mexico and the Czech Republic decreased their holdings according to the International Monetary Fund. US Jewelry purchases were about 26.1 metric tons second quarter which was 15% over the same quarter of last year. The jewelry demand in Russia increased to 18.6 tons. This year is expected to remain a year of consolidation for the Gold market, yet some expectations may warrant an increased demand for Gold. Gold supplies are estimated at about 163,000 tons above ground at present according to the World Gold Council.
The ICE Exchange announced that it may offer one kilo bars (32.15 troy ounces) of Gold contracts to boost both volume and potential deliveries. The start date may be February 2015. The CME Exchange may launch a Gold contract that may be deliverable in Hong Kong and the price may be fixed to the Hong Kong bullion. The Chicago Mercantile Exchange lowered the margin to an initial of $4,400 from the $5,940 for the 100 troy ounce Gold contract! The Swiss Gold Initiative referendum is to be voted on November 30th which could be the onset of a global path to financial stability. The Swiss have 2 years to repatriate its Gold if the referendum goes thru. They also have about 5 years to put together the 20% reserve requirement. The Swiss have printed money over the years much like the US and many other nations. This is vital as it may bring the national Gold back to Switzerland. It may require the Swiss National Bank to hold about 20% of the assets in Gold and contain the Gold sales. Since many currencies have been devalued over the years, this is the one key to bring back normalcy. The Swiss have printed about 400 billion SF’s over the last six years to devalue its currency and increase the export appeal. Bottom line, this would mean that the Swiss National Bank would be in the market to buy about 1,700 tons of Gold over the next few years. Switzerland already holds the 7th spot for the largest resource of Gold by country and the additional reserves would perhaps bring it right up to the US and/or Germany. If this were to occur, it may stimulate other countries to make changes toward normalcy as well.
Retail Sales came in strong today to continue the upward path, but it was Friday, and profit taking may have overcome the buying tendencies. The data may be priced into the market at this point where expectations are simply met. The global slowdown is relevant, but the US optimism seems to prevail. The Retail Sales for October came in at 0.3% while the previous reading was -0.3%. Consumer Sentiment for Nov (p), 2014 was at 89.4 while the previous reading was 86.9. We are entering into that high spending season that retailers rely on to make their year. The holiday rally just may remain fairly oblivious to the global struggles. Germany has expanded their economy by 0.1% while France increased 0.3%. The Japanese Prime Minister Abe may delay their sales tax increases. The G-20 leaders meet in Brisbane, Australia tomorrow to discuss global growth and tensions that persist. Monday, Japan reports their GDP. The Shanghai/Hong Kong exchange opens to trading. The United Kingdom reported their unemployment at 6%. Wages increased 1%. The Bank of England kept its key interest rate at 0.5% as of last week. The contagion fears that haunted us back toward the beginning of this passage are back and though the US may be on the mend, global weakness translates to a hindrance to the US recovery. Bond traders may be pondering the first interest-rate increase from the Federal Reserve, but analysts may be looking around September or June of 2015. Analysts may be viewing the increase of the Fed Funds rate for 2015 between 0.57% to 0.92%. They may be looking for a range between 1.51% to 2.17% for 2016. The NFIB (National Federation of Independent Businesses) Small Business Optimism Index was at 96.1 with business owners projecting increased capital spending and higher sales in the near term. Their outlook for expansion was impeded by views of Washington’s politics and the effect on the small businesses. There really is not a clear direction in the report in the sense that employment is not reduced yet hiring is not expansive. Small business is a boost for the US economy and the sector needs an economic agenda to promote the smaller businesses such as lower taxes and freedom to grow. Back in the 80’s, President Reagan lowered taxes to generate further growth. The Fed’s Labor Market Conditions Index is derived of 19 indicators to track changes in employment trends, hiring and firing, wage growth, unemployment rate and a variety of other components to present a wider view of the employment changes. This is the ninth month where the employment report exceeded 200,000 newly created jobs. It was not a stellar report as analysts were looking for higher numbers but it points to recovery stabilizing at a moderate pace. Of course, only about 40% of those jobs may pay over the average hourly US wage of $24.57. About 42,000 jobs were created from the restaurant/bar sector. About 27,000 new jobs were generated for retail sales. Courier services may have hired about 13,000 workers and there were an additional 15,000 temporary jobs.
European Central Bank President Mario Draghi is pondering his quantitative easing plans and asset purchases. He believes that he must perhaps access more resources to stimulate the type of growth necessary. The instruments may include leveraging instruments and working with investors to enhance the progress. The low inflation has been a major concern so he will focus on ideas to spur inflation. The ECB is projecting inflation of about 0.6% this year and 1.1% in 2015. He may boost the institutions balance sheet up to around 3 trillion euros. Across the board, world leaders are stepping up to stabilize and accelerate growth prospects. The Bank of Japan increased their monetary expansion target to 80 trillion yen which pressured the ECB to take action as well. They also sought to boost higher inflation. Japan is hoping to detain the tax hike to control public debt. The Japanese pension fund (Government Pension Investment Fund) also raised its holdings from 1.2 trillion. The BOJ voted to increase their portfolio with added purchases of Japanese government bonds, exchange-traded funds and real-estate investment trusts. The action has boosted the US Dollar while pressuring the other currencies.
It was publicized that Russian President Putin arrived at the Australian summit with his fleet of warships in tow. Russia also may furnish Iran with more Nuclear Reactors. The Iranian negotiations do not look as though a deal will be finalized by November 24th. Russian executive from Rosatom and the head of Iran’s Atomic Energy Organization signed off on a deal to boost Iran’s uranium enrichment and nuclear reactors to feed the atomic power demand. There has been talk of storing some of the Iranian enriched uranium in Russia. There are concerns regarding the safety and supervision of the expansion. Talks are set for November 18th in Vienna. The European Union and the US are still involved with tightening sanctions on Russia concerning the conflict in the Ukraine. German Chancellor Angela Merkel states that further economic sanctions are not planned. She seems to have a closer relationship with the Russian President whereby she may conduct talks between Putin and the Ukraine leader. While Putin seems to desire control over the regions of the Ukraine, he denies any involvement. The military vehicles and tanks have few or no markings advertising a nation among the rebels, yet the rebels seem to belong in Russia when it is necessary to identify the deceased militia. Russia and the Ukraine have finally reached an agreement to finalize their gas deals. The truce of September 5th is still broken and now may escalate the conflict again after the elections. Russian President Putin seems more defiant regarding the US in light of the economic pressure generated by the sanctions. The Ukraine rebel leaders were sworn in via their elections but there seems to be further isolation and less hope of a peaceful resolve. The conflict seems to be escalating post-election as the Ukrainian forces say that Russia sent about 32 unmarked tanks and many troops across the border. NATO has addressed the Russian President with these concerns, yet Putin denies the accusations. Some leaders feel that Putin in attempting a “frozen conflict” to maintain control in the Ukraine. The break in the Crude Oil prices was a boost to productivity globally. OPEC typically likes the average to remain around $100.00 per barrel, but allowed the consolidation to gravitate to around $80.00 and perhaps even $70.00 per barrel. OPEC is to meet in Vienna on November 27th to discuss their output policy. OPEC more recently discussed oil demand decreasing to 28.2 million barrels a day by year’s end of 2017. This week OPEC already claimed that October’s production was cut by 230,000 barrels of oil per day to 30.25 million barrels a day.
Today, Retail Sales for October came in at 0.3% while the previous reading was -0.3%. The Retail Sales excluding automobiles came in at 0.3% while the previous reading was -0.2%. The Retail Sales excluding automobiles and gasoline was at 0.6% while the previous reading was -0.1%. Import Prices for October were at -1.3% while the previous reading was -0.5%. The Export Prices were at -1.0% while the previous reading was -0.2%. Consumer Sentiment for Nov (p), 2014 was at 89.4 while the previous reading was 86.9. Business Inventories for September were at 0.3% while the previous reading was 0.2%. Initial Jobless Claims is due out for the week of November 8th was at 290,000 while the previous reading was 278,000. Continuing Claims with one week lag time increased 36,000 to 2.392 million. JOLTS or the Labor Department’s Job Openings and Labor Turnover Survey for September was at 4.735 million while the previous reading was 4.835 million. The Treasury Budget for October was -$121.7 billion while the previous reading was $105.8 billion. The Bloomberg Consumer Comfort Index for the week of November 9th was 38.2 while the previous reading was 38.1. The Fed Balance Sheet of Total Assets for the week of November 12th was $2.3 billion while the previous reading was -$0.2 billion. The Reserve Bank Credit was $2.4 billion while the previous reading was $5.8 billion. The Money Supply for the week of November 3rd was -$65.7 billion while the previous reading was $33.6 billion.
The Wholesale Trade Inventories for September was at 0.3% while the previous reading was 0.7%. The MBA Purchase Applications Composite for the week of November 7th was -0.9% while the previous reading was -2.6%. The Purchase Index was 1.0% while the previous reading was 3.0%. The Refinance Index was -11.0% while the previous reading was -6.0%. The Atlanta Fed Business Inflation Expectations for November was 2.0% while the previous reading was 1.9%. NFIB Small Business Optimism Index for October was at 96.1 while the previous reading was 95.3. For further information on this index: http://www.nfib.com/?gclid=CJTR1fGT8cECFRAF7AodsS4AEg. The ICSC-Goldman Store Sales for the week of November 8th was 1.5% while the previous reading was -1.6%. Redbook Store Sales was 3.8% while the previous reading was 3.9%. TD Ameritrade IMX for October was at 5.22 while the previous reading was 5.79. Last week, the Non-Farm Payrolls for October came in at 214,000 while the previous reading was 248,000. The Unemployment Rate is 5.8% while the previous reading was 5.9%. The Average Hourly Earnings was 0.1% while the previous reading was 0.0%. The Average Work Week was at 34.6 hours while the previous reading was 34.6 hours. The Private Payrolls was at 209,000 while the previous reading was 236,000. The last GDP for Q3a:2014 Real GDP came in at 3.5% while the previous reading was 4.6%. The GDP Price Index was at 1.3% while the previous reading was 2.1%.
The safe-haven properties of the Gold are perfect for those times of conflict in the world and it certainly has a run when the conditions seem their worst, but that does not seem to be the case now.
The Gold (December) contract is in a buy mode if it stays above $1130.40. A key consolidation area may be $1200.00 to $1125.00 for the moment. $1172.40 may be the comfort level. The range may be $1200.00 to $1125.00 for now. Some Analysts seem to be fairly bearish toward the Gold now with projections down to $1050.00 or even $750.00. While today, was a boost for the Gold, it may be a profit taking rally. The only real fundamental catalyst’s may be the Switzerland referendum or a deepened escalation of conflict.
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