Saturday, March 22, 2014

weekly gold

The potential conflict in the Ukraine has stabilized as Russian President Putin has not advanced further on the Ukraine territories.  The debut by Fed Chairperson Janet Yellen had put tightening on the calendar which is also negative for Gold.  The European Union (EU) is considering modifying the 400 ton a year selling boundry on the Gold which may unleash more massive selling.  China may experience a increase in economic expansion.  The fundamentals in Gold point to negative action in the Gold market, yet one cannot ignore the technicals.  The April Gold chart has an extremely Gold formation suggesting we could see an advance on the Gold next week.  This is in contrast to most analysts right now.   The range may still hold between $1320.00 to $1393.00.  The net longs according to the CFTC COT report was 123,007 contracts as of March 11th.  According to the World Gold Council, in 2013 the Gold demand increased 21 % to 3,756 tons. Global demand for jewelry was up 17 % to 2,209 tons.  Demand in the technology sector was 405 tons.  The outflows from ETF's was 881 tons.  Chinese and Indian Gold bar purchases was up 38 %.  The need for Gold in India has outstrip its import duties. Smuggling has increased due to the approximate 11 % import tax.  India began imposing the import taxes in an attempt to control the deficit along with increased inflation and their devalued rupee.  The physical metal is still sought after due to the safe-haven aspects and as a hedge against inflation.  

 This week Yellen’s potential tightening in as little as six months may have been misspoken but cannot be taken back.  After all, this was a stimulus fed market and we have heard many times that tapering is not tightening.   Of course, the market can shrug this off.  The sentiment of this market seems to be no news is good news, but unexpected news can be startling.  Factory orders and car sales may increase, but the energy prices may help to determine how much the cost of production may be.  President Obama had released some of the Crude Oil reserves to begin the sanctions on Russia as they produce the energy products.   OPEC came back with a reduction in their production.  Then Iraq advanced their production, so that may be key in determining the success of the recovery.  The US may also boost their shale production to offset any energy coming from Russia.  The market had been supported by strong housing data and Russian President Putin calming the fears of the investors by clarifying his intent for the Ukraine.   The Housing Permits for February were 1.018 million while the previous reading was 0.937 million an increase of 7.7 %.  This is the bright spot for increased employment in the housing sector.  Vladimir Putin announced that he is not intent on splitting up the Ukraine.  The vote of Sunday was in favor of Crimea to secede and ask the Russian Federation for Membership.  Crimea had belonged to Russia back in the 1954 until Nikita Khrushchev had given the Black Sea region to the Ukraine.  Russian President Putin defends his right to send troops to the Ukraine on behalf of the Russian citizens residing there.  He actually stayed within the treaty limit of 25,000 troops.   Global leaders still regard Russia’s action as grabbing a country for benefits perhaps derived from the resources of the region.   World leaders are intent on watching Putin to be sure his “annexing’ stops at Crimea!   British Prime Minister David Cameron regarded this action as a breach of international law.  Sanctions may be imposed on Russia still yet regarding this action.  US sanctions have already stopped the Visa and MasterCard services at the Bank Rossiya in St. Petersburg.   Sanctions on parties in Putin’s inner circle have been targeted.  The sanctions have already had an impact on Russia as Fitch’s credit rating agency has cut the outlook to BBB negative along with Standard & Poors.  Loans have been called in and gold reserves have fallen to $493.2 billion as of March 14th.   The G-8 said that they will suspend the G-8 Summit in Sochi this year.    The Organization for Economic Cooperation and Development has spoken of revoking Russia’s entrance into the organization.  Asset blockades, financial and trade sanctions have all been suggested.  Putin may pay about $3 billion ++ costs to annex Crimea.  The problem seems to be a history of violating international boundaries for the Russian President.  Putin retorts that the US and NATO have come close to the Russian borders.  For the moment, the market is taking Putin’s words as peaceful!  If or when sanctions are imposed by other countries, will the environment remain peaceful or could another cold war escalate?  For now, Putin seems to be concentrating on the completion the annexing of Crimea.   Russia and the US had fought on the same side during WWI and WWII yet tensions still run very deep.    Russian troops seized the Crimean port of Sevastopol raising their flag.   Russia’s take-over of Crimea will perhaps consist of pension adjustments up to the Russian pensions, raises, infrastructure upgrades such as quite possibly a bridge and a tunnel.

The Atlanta Fed Business Inflation Expectations for March was 1.8 % while the previous reading was 2.0 %.  The Initial Jobless Claims for the week of March 15th were up 5,000 to 320,000 while the previous reading had been 315,000.  The continuing claims were up 41,000 to 2.889 million.   The Bloomberg Consumer Comfort Index for March were -29.0 while the previous reading had been -27.6.  The Philadelphia Fed Survey General Business Conditions for March was 9.0 while the previous reading was -6.3.  The Existing Home Sales was -0.4 % to  4.600 million while the previous reading had been 4.62 million.  The Leading Indicators for February were 0.5 % while the previous reading was 0.3 %.  The Fed Balance Sheet of Total Assets for the week of March 19th was $40.7 billion while the previous reading was $9.6 billion.  The Reserve Bank Credit was $39.1 billion while the previous reading had been $11.2 billion.  The Money Supply for the week of March 10th was $23.7 billion while the previous reading was -$13.9 billion.  The MBA Purchase Applications Composite Index for the week of March 15th was -1.2 % while the previous reading was -2.1 %.  The Purchase Index was -1.0 % unchanged from  the previous reading.  The Refinance Index was -1.0 % while the previous reading was -3.0 %.  The Current Account was -$81.1 billion while the previous reading was -$94.8 billion.  The Federal Open Market Committee Announcement kept the Fed Funds Rate at 0 to 0.25 % unchanged.   The Feds plans to taper remains intact where April will have another $10 billion reduction on the monthly bond purchases known as quantitative easing.   The Fed also gave the country a tightening condition where perhaps 2015 could allow for an interest rate hike.  he ICSC-Goldman Store Sales for the week of March 15th was 0.7 % while the previous reading was 1.3 %.  The Redbook Sales was at 2.8 % while the previous reading was 2.5 %.  Housing Starts for February were 0.907 million while the previous reading was 0.880 million.  The Housing Permits for February were 1.018 million while the previous reading was 0.937 million.  The Consumer Price Index for February was 0.1 % unchanged.  The CPI excluding food and energy was 0.1  % unchanged.  Treasury International Capital Foreign Demand for Long-Term US Securities for January was $7.3 billion while the previous reading was -$45.9 billion.  The Empire State Manufacturing Survey of General Business Conditions Index for March was at 5.61 while the previous reading had been 4.48.  Industrial Production for February was 0.6 % while the previous reading was -0.3 %.  The Capacity Utilization Rate was 78.8 % while the previous reading was 78.5 %.  The Manufacturing portion was 0.8 % while the previous reading was -0.8 %.  The Housing Market Index for March was 47 while the previous reading was 46.  The last Nonfarm Payrolls for February was a whopping 175,000 while the previous reading was 113,000.  The Unemployment Rate was increased to 6.7 % while the previous reading was 6.6 %.  The Average Hourly Earnings were 0.4 % while the previous reading was 0.2 %.  The Average Workweek was 34.2 hours while the previous reading was 34.4 hours.  The Private Payrolls was 162,000 while the previous reading was 142,000.  Next week, we have data on the Gross Domestic Product, durable goods and housing due out! 

The Gold (April) contract is in sell mode if it stays below $1388.50.  It could retrace to $1320.00 or back up to $1388.50 depending on the Ukraine situation and the economy.   Anything can happen.  The options may give a trader the right to control a futures position at a specific price or to simply profit/loss on the premium itself.  It is suggested to consult your broker without delving into options if you are unfamiliar with them. 

  Gold Chart 


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