Gold Sharply Higher on Bargain Hunting, Short Covering, and Some Fresh Safe-Haven Demand

Gold prices are trading sharply higher and hit a two-week high in early U.S. dealings Tuesday. Heavy short covering, bargain hunting and even some fresh safe-haven demand are featured. The near-term technical posture in gold has also improved a bit Tuesday.

April Comex gold last traded up $18.00 at $1,596.00 an ounce. Spot gold was last quoted up $14.90 at $1,597.25.  May Comex silver last traded up $0.452 at $29.31 an ounce.

The stronger U.S. dollar index and U.S. Treasury prices Tuesday morning, along with weaker U.S. stock indexes, suggest investor risk appetite has pulled back a bit so far on the day. The solid jump in gold prices early Tuesday does hint that the “risk-off” day in the market place has attracted some fresh safe-haven investor demand for the yellow metal.

In overnight news, Spanish and Italian bond yields held steady following successful government debt auctions in both countries Tuesday. However, the Italian bond auction did see the government’s borrowing costs rise to a three-month high, reports said. The auctions came after the Fitch ratings agency last Friday downgraded Italy’s credit rating. Another Italian bond auction is slated for Wednesday.

The U.S. dollar hit a 3.5-year high against the Japanese yen overnight amid reports the Bank of Japan will continue on its aggressive monetary policy easing path. Asian stock markets were pressured again Tuesday following the recent spate of Chinese economic data that hints at slowing growth and rising inflationary pressures.

The U.S. dollar index is firmer Tuesday morning and hovering near a seven-month high scored last Friday. The U.S. dollar bulls have solid technical strength to suggest the dollar index can continue to trend higher in the near term. That continues to be a bearish underlying factor for gold and silver. Meantime, Nymex crude oil futures prices are near steady Tuesday. The crude oil bears still have the near-term technical advantage, and that’s also a negative for gold and silver prices.

U.S. economic data due for release Tuesday includes the Manpower quarterly U.S. employment survey, the NFIB small business optimism index, and the weekly Goldman Sachs and Johnson Redbook retail sales reports.

The London A.M. gold fixing is $1,582.50 versus the previous London P.M. fixing of $1,579.00.

Technically, April gold futures prices on Tuesday have seen a bullish upside “breakout” from the sideways trading range of the past two weeks. The bulls on Tuesday did gain some fresh upside near-term technical momentum even though the bears still have the overall near-term technical advantage. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,619.70. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the February low of $1,554.30. First resistance is seen at $1,600.00 and then at $1,610.00. First support is seen at $1,585.80 and then at the overnight low of $1,578.80.

May silver futures hit a fresh two-week high in early trading Tuesday. The bears have the overall near-term technical advantage, but the bulls are regaining a bit of upside momentum. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $29.495 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $27.925. First resistance is seen at $29.495 and then at $29.75. Next support is seen at $29.00 and then at the overnight low of $28.87.

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Gold tilts up, aims to extend rise to a third day

Gold futures tilted higher Wednesday,

 aiming to extend their rise to a third straight session, as investors weighed the metal’s safe-haven appeal against a backdrop of better-than-expected U.S. private-sector employment data and a drop in factory orders.

The market also garnered support ahead of Thursday’s decisions on monetary policy by the European Central Bank and Bank of England and Friday’s official U.S. nonfarm payrolls report.

Gold for delivery in April GCJ3 +0.23% traded at $1.578.60 an ounce on the Comex division of the New York Mercantile Exchange, up $3.70, or 0.2%. It stuck to a range between $1,566.40 and $1,584.30.

Prices tallied a modest gain of $2.60 over the past two trading sessions.

May silver SIK3 +0.98%  also rose 29 cents, or 1%, to $28.90 an ounce.

The massive quantitative-easing policies of the U.S. “look to be spreading around the world (think England, Japan), which should typically propel gold prices,” said Jason Rotman, president of Lido Isle Advisors in Newport Beach, Calif.

“However, with strong U.S. economic data recently hitting the wires, including [Wednesday’s] ADP jobs numbers, we also see a move away from safety (gold, bonds) and into risk-based assets such as equities,” he said. 

The Dow Jones Industrial Average DJIA +0.18%  closed at an all-time high on Tuesday. See: U.S. stock rally lifts Dow to record high.

Data from Automatic Data Processing Inc. Wednesday showed that U.S. private-sector jobs rose by 198,000 in February, more than economists expected. See: Private-sector jobs growth beats expectations.

 

Factory orders in January, meanwhile, fell 2%, though economists surveyed by MarketWatch expected orders to decline by 2.2%. See: U.S. factory orders drop 2.0% in January.

The Federal Reserve’s Beige Book, which was set for release at 2 p.m. Eastern — after the Comex session ends — is expected to show the economy limped along in early 2013. 

But for now, the gold market is looking forward to the Bank of England meeting, “and perhaps anticipating more stimulus, which would typically be bullish for gold prices,” said Rotman. 

Stimulus is typically tied to inflation and gold is seen as a hedge against inflation. 

On the downside for gold prices Wednesday, the dollar edged higher against many of its rivals.  The ICE dollar index DXY +0.49% , which measures the greenback against a basket of six currencies, rose to 82.390 from 82.078 in late North American trading on Tuesday. Dollar strength weighs on dollar-denominated commodities such as gold since it makes them more expensive for holders of other currencies.

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George Soros's new stock picks.

The billionaire investor initiated a position of 4.1 million shares in Morgan Stanley MS -0.31% during the fourth quarter. Morgan Stanley has been struggling with profitability in recent quarters, and severely underperformed expectations at times. Fellow billionaire Dan Loeb's Third Point was also buying Morgan Stanley last quarter, reporting a position of 7.8 million shares after not owning any of the stock at the end of September (find more stocks Loeb was buying). Wall Street analysts insist that the investment bank is a good value, with their expectations implying a forward P/E of 9 and a five-year PEG ratio of 0.6.
 

Citrix Systems CTXS +0.52% , a $13 billion market cap business software and services company, was another of Soros's new stock picks. Lee Ainslie's Maverick Capital increased its own stake in Citrix in the fourth quarter of 2012, to a total of 3.8 million shares. Citrix experienced a 20% increase in revenue last quarter compared with the same period in the previous year, but slimmer margins resulted in net income only rising 5%. With the stock priced for growth at a trailing earnings multiple of 38, performance would have to improve in order for it to be a worthwhile growth stock.

Soros also liked Anadarko Petroleum APC -0.30% , buying up almost 760,000 shares of the oil and gas company. 62 filers in our database reported a position in Anadarko, which made it the most popular energy stock among hedge funds (see more energy stocks hedge funds loved). Anadarko's earnings multiples are in the teens- the trailing and forward P/Es are 17 and 15 respectively- but that represents a premium to the major oil companies and the company's revenue has actually been down. It might be worth looking at on the basis of its popularity but we aren't particularly excited about the stock.
 

The 13F disclosed a new position of about 950,000 shares in Plains Exploration & Production PXP -0.29% . The oil and gas company is an acquisition target as Freeport-McMoRan Copper & Gold FCX -0.88% plans to buy it and a related company. Many investors like to invest in merger arbitrage investments because the returns are uncorrelated with the stock market, though there are of course risks (read more about merger arbitrage strategies). Plains itself had expanded from natural gas to offshore oil assets earlier in 2012.

Ford F +0.63% rounded out the five largest new positions that Soros reported owning at 3.1 million shares. Ford's revenue edged up in the fourth quarter of 2012 versus a year earlier, and many value investors have been bullish on autos for several months. The market in general is quite pessimistic about Ford, as it trades at 9 times trailing earnings. The sell-side generally expects improvements on the bottom line with the result being that the five-year PEG ratio is a bit below 1. Appaloosa Management, managed by billionaire David Tepper, had over 11 million shares of Ford in its own portfolio at the beginning of January

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Gold & Silver Daily Update

 A weaker USD and higher physical demand from China and India
elevated gold prices overnight. The metal opened at
1590.50/1591.50, before quickly moving to an intraday low of
1584.25/1585.25 on profit taking in early morning. Prices
retained most of the overnight gains despite a stronger USD
later in the day, reaching an intraday high of 1592.25/1593.25
before closing at 1588.00/1589.00.

Silver moved in tandem with gold. Prices opened at
28.95/29.00 before dropping to an intraday low of 28.88/28.93
in mid morning. Similar to the movement in gold, silver edged
up throughout the rest of the day, reaching a peak of
29.11/29.16 shortly before closing at 28.98/29.03.
.
Technical Commentary
Gold closed higher today at 1589, consolidating after last week’s
losses. Support sits at last week’s low at 1555, with resistance at
1609, the high from last Wednesday. RSI is now bouncing back
from oversold levels in the 19.3 area which will allow for further
price weakness.

Silver also closed higher at 29.03. Resistance is at the previous
low of 29.24, and support is from the trendline at the bottom of
the bearish channel, currently at 28.06. RSI bounced off of a
new 9 month low of 25.81 and is still trading in bearish territory.
The gold silver ratio is trading lower at 54.85. The risk is still for
a move higher to 56.07, the 2013 high..

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Stocks(Trade Levels)

27/02/2013

 

JPMorgan Chase& Co.  (Public, NYSE:JPM) 

Sell @48.50; Stop above@50, Target @46.50

Ford Motor Company  (Public, NYSE:F) 

Buy@ Market Price. Stop below@11.95, Target@13.20

First Solar, Inc.  (Public, NASDAQ:FSLR)

Buy@ 24.50. Stop below@22.25, Target@30.60

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Gold Rallies Sharply on Bernanke's Dovish Stance, Bargain Hunting, Short Covering, Safe-Haven Demand

Gold futures prices ended the U.S. day session with sharp gains Tuesday and pushed well above the key $1,600.00 level. The yellow metal was boosted in part by Federal Reserve Chairman Ben Bernanke assuaging market place fears that the U.S. central bank could exit its very easy-money ways sooner rather than later. Safe-haven buying was also seen in gold Tuesday, amid fresh concerns about the sovereign debt crisis in the European Union. Short covering and bargain hunting were also featured in both gold and silver, following last week’s strong selling pressure. April Comex gold last traded up $29.80 at $1,616.40 an ounce. Spot gold was last quoted up $23.10 at $1,617.25.  May Comex silver last traded up $0.383 at $29.43 an ounce.

After seeing modest early price gains, gold futures prices took a dip at mid-morning Tuesday when some stronger-than-expected U.S. economic data was released. U.S. home sales rose sharply in January, while the consumer confidence index rose in February. The latest Richmond Fed business survey also showed an upbeat reading. Bernanke’s prepared text for delivery to the U.S. Senate was also released at the same time the U.S. economic data came out. It took gold traders and investors a bit to digest Bernanke’s remarks, but the gold market did start to rally sharply in the aftermath of his comments. While Bernanke's remarks were pretty much what the market place expected, they were nonetheless dovish on U.S. monetary policy, and what the precious metals market bulls wanted to hear from the Fed chief. He said the benefits of a very accommodative monetary policy outweigh the potential risks of such, helping calm worries the U.S. central bank could end its quantitative easing of monetary policy sooner rather than later. In questioning from senators, Bernanke also hinted the Fed may not have to sell off all its asset purchases over a period of time and may just keep them until they expire. That was a bit of bullish surprise for the raw commodity and stock markets, as there was some worry that the Fed selling off those assets, even over time, could put some downside pressure on many markets.

The European Union and its sovereign debt problems are back on the front burner of the market place after a few months’ hiatus. Italian elections that just concluded and failed to show a clear winner indicated voters ostensibly rebuked present government austerity measures meant to repair Italy’s damaged economic and financial structure. It also suggests political instability in Italy in the coming months. The Italian vote left the market place wondering when the next shoe will fall in the EU debt crisis that remains a serious matter in the world market place. Flight-to-safety buying of U.S. Treasuries, German bunds, gold and the U.S. dollar all quickly came back into vogue. Risk assets such as world stock markets and many commodity markets, and the Euro currency, were pressured on the Italian vote news. Other than the safe-haven German bunds, European bond yields were on the rise as fears of an EU debt contagion are again surfacing. There are Italian government debt auctions Tuesday and Wednesday that will be very closely scrutinized by the market place.

The U.S. government’s likely inability to agree on a taxing and spending plan by the March 1 sequestration deadline has added to a nervous and uncertain atmosphere in the world market place this week.

In Asia, the Japanese stock market fell as the yen rallied on safe-haven investor demand due to the resurfacing of the EU debt crisis. The yen had been on a steady decline for the past four months, but made an abrupt about-face on Monday afternoon.

The U.S. dollar index was higher again Tuesday and hit a fresh six-month high. The U.S. dollar bulls have gained upside technical momentum recently to suggest the dollar index has put in a market bottom and can continue to trend higher in the near term. Meantime, Nymex crude oil futures prices were lower Tuesday and hit a fresh two-month low. The crude oil bears have gained fresh downside near-term technical momentum recently. These two key “outside markets” were in a bearish posture for the precious metals Tuesday, but traders and investors chose to buy the recent dip in gold prices anyway.

The London P.M. gold fixing is $1,590.50 versus the previous London P.M. fixing of $1,586.25.
Technically, April gold futures prices closed nearer the session high Tuesday. Recent serious chart damage is starting to be repaired but the bulls have more heavy lifting to do in the near term to suggest a price uptrend can be sustained. Gold prices are still in a six-week-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,650.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the February low of $1,554.40. First resistance is seen at Tuesday’s high of $1,619.70 and then at the January low of $1,627.90. First support is seen at $1,600.00 and then at $1,590.00. Wyckoff’s Market Rating: 4.0

May silver futures prices closed near the session high Tuesday and saw more short covering and bargain hunting following recent strong selling pressure. Serious near-term technical damage has been inflicted in silver recently. May silver bears have the near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $30.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the February low of $28.315. First resistance is seen at Tuesday’s high of $29.495 and then at $29.67. Next support is seen at $29.00 and then at this week’s low of $28.60. Wyckoff's Market Rating: 3.5.

May N.Y. copper closed up 235 points at 358.45 cents Tuesday. Prices closed nearer the session high on short covering after hitting a fresh three-month low early on. Serious near-term chart damage was inflicted last week. Copper bears have the overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 365.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 350.00 cents. First resistance is seen at 360.00 cents and then at 362.50 cents. First support is seen at 355.00 cents and then at Tuesday’s low of 353.35 cents. Wyckoff's Market Rating: 4.0.

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