gold price chart - News 2 Gold

gold price chart - News 2 Gold
Spot Chart | Analysts are misreading the Dow/Gold chart and what it ...
Why Bitcoin's Volatility is Unique Among Commodities - CoinDesk

Posted: 04 May 2014 04:02 PM PDT

In this article we look at gold from different angles: the money supply, the physical gold market and technical gold indicators. Ten long term charts point to a healty condition in the gold market amid the price drop of 2013. We have always advocated to look at gold in a holistic way; the following charts offer a wide perspective. The charts were created and presented by Frank Holmes (USFunds.com) during the recent World Money Show.
Monetary conditions

In the first month of 2014, the M2 money supply, which is a measure of money supply that includes cash, savings and checking deposits, grew faster than the previous two years. In 2012, M2 grew 7.6 percent and in 2013, money supply rose 4.7 percent; at an annualized rate, January's money supply growth "reached an annualized rate of increase of 8.75 percent," according to Bloomberg's Precious Metal Mining team. This may mean "the U.S. Federal Reserve is trying to resurrect inflation, thus increasing the appeal of gold, the supply of which can only increase about 1.5 percent to 2.5 percent annually," says Bloomberg.

The first two charts show the historic correlation between the money supply and the price of gold. The global money supply has clearly driven gold prices, although 2013 was the year in which a significant disconnect occurred. The odds favor an upward revision of the gold price, re-establishing the long term correlation.

As Jim Rickards argues in his book, the price of gold would be well above $3,000 if there was some sort of tie between gold and the money supply. Jim Rickards still expects that the central banks will be forced by market forces to re-establish a tie with gold at some point in the future.

Physical gold market

2013 was the year of a massive liquidation in physical metal backing gold ETF's. The following chart presents the exceptional outflow of gold out of primarily the GLD . The key question, in our opinion, is not the outlfow, but what happened with that gold. The most common answer is that it went East. Is this positive or negative for gold? We believe it's extremely positive, because the metal is now in strong hands which will keep it for several years or decades. The key point in all this is that much less physical gold will be available once the Western investment demand will pick up again, leading to a potential shortage in the gold market.

The East loves gold. The explosive demand for gold in China is supported by an increase in incomes, a trend that is significantly different compared to the West. This trends favors the affordability of the yellow metal among the biggest gold consumer in the world.

China's investment and jewelry demand has exploded in the last two years. The lower the price of gold went, the higher the demand for the metal. The following chart present an interesting insight: the average grams of gold consumed per inhabitant. Simple math learns that additional 0.1 gram of gold per capita results in an additional 130 tonnes gold demand (which is 5% of the current gold year supply).

Technical picture

From a technical point of view, gold is extremely oversold. Any historic measure shows that the current situation is extreme. One of those measures is the gold oscillator, measuring year-on-year change. A correction to the mean is long overdue.

The successful retest of the June 2013 bottom is a very powerful technical signal.

A short squeeze could be an important technical driver to drive short term gold prices. The chart shows how the gold price tends to rise with extreme short positions by COMEX speculators (non-commercials).

What is tremendously powerful for gold stock investors is this chart: in the last 3 decades, there were only 3 times that gold stocks only saw a consecutive 3-year loss.

Spot Chart | Analysts are misreading the Dow/Gold chart and what it ...

Posted: 05 May 2014 09:09 PM PDT

I wanted to take just a short bit of time between firing up the pit smoker and throwing some bovine flesh upon it to put up a quick chart of gold for the readers.

As I mentioned on Thursday, gold is totally at the mercy of events in Ukraine for the time being.

You can see on the chart that the metal has been range bound for some time now ( about one year ). Please keep this is mind when you read more breathless talk about gold being poised for a big move "any time now". How many of these "any time now's" have we read over the last year? Whether it is the GOFO talk or backwardation talk or "Russia is going to dump the Dollar" talk, or whatever.

Technically not a single one of these premises, or others not listed, have changed the technical posture of this market for a year. If and only if the price breaks out of this range, can we say with certainty that the market has become concerned with these things. For now, it could care less and thus neither should we.

The green rectangle defines the range which is near $1400 on the top side and just below $1200 on the bottom side for a range of some $200. Just last month ( March ) the price had rallied up to the top of the range only to meet with selling. That pushed it back down with it looking likely that it was headed down towards $1200 once more. However, events flared up in Ukraine and gold received some strong bids due to safe haven flows. Those bids came in near $1280.

The circumstances due to these geopolitical concerns have created a new and higher bottom at the $1280 level. However, gold has been unable to push past $1320 for any length of time. That has carved out a new range within the broader range. This is marked on the chart as "Tighter Trading Range".

These two levels are our new boundaries which are confining the price for the time being. If the market senses any lessening of tensions in Ukraine, chances are that $1280 will not hold on the bottom. If not, there is a band of congestion between $1260 - $1240 that will draw it like a magnet should it fail. There is little support between $1240 and $1200 meaning that if $1240 were to fail, $1200 will be tested.

On the upside, only a breach of $1320 would give the bulls the needed impetus to make a run to $1350.

If events in Ukraine fade from traders' minds, the focus will shift back to US economic data with participants looking for clues to the Fed's future actions on in US interest rate front. Any improvements on the jobs front will immediately fan the flames of higher interest rates next spring, which the market continues to waver back and forth on. Higher rates will pressure gold as it should support the US Dollar. Again, we do not know what the economic data will look like and thus that leaves the markets very susceptible to sudden and sharp price swings either way as price responds to changes in expectations or sentiment along those lines.

Lastly, here is the current Commitment of Traders data viewed in chart form as to the positioning of the large hedge funds in comparison to the price of the metal.

There was a rather large shift this week in the positioning of the hedgies as they were both liquidating stale longs and adding new shorts. The combination dropped their current net long position by some 8000 contracts or so. This is the reason for my concern if the $1280 level does not hold - there will be a significant amount of long liquidation among this category of traders if it does not.

In another interesting development, the small traders, the general public, were selling gold this past week as well. Is the bloom coming off the metal for this category? They are net long still but this is the least bullish they have been in five weeks. Sentiment could be changing in the speculative community and that will bear close monitoring.

Happy Easter.

Why Bitcoin's Volatility is Unique Among Commodities - CoinDesk

Posted: 29 Apr 2014 03:15 AM PDT

shutterstock_175709432

A single bitcoin broke the price of an ounce of gold five months ago. Now, it's worth less than half that – and, of the two, it's bitcoin's price that's bouncing around the most.

For people trying to evaluate bitcoin's potential against other commodities, its relative price volatility could be a worry or an opportunity, depending on your appetite for risk. So, how closely can we map bitcoin's volatility against other commodities?

Not very closely, argues Kirill Gourov, Director of Finance for Blocktech, a new company that creates open-source block chains for industries in need of disruption. He recently wrote a paper that explored whether there was an intrinsic value for bitcoin.

Gourov pointed out that it is difficult to find a direct correlation between bitcoin and other commodities:

"There may be a correlation between commodities and bitcoin because people consider both to be hedges for macro risk, but whereas oil might go up 5-10% because of some legislative issue in Europe, the price of a bitcoin might spike up 25%, then immediately drop by 30% because someone cashed out into the market."

Copper's recent price drop looks dramatic, for example, but it represented a 9% decrease in its value. That may be considerable, but it's hardly in line with some of bitcoin's more dramatic yo-yoing.

In five or 10 years, when the market is more developed, trends will be more prevalent and will force bitcoin to spike less, Krill suggested. But, today, the market is too easily manipulated.

Physical vs virtual

If bitcoin's age is one factor that stops it being correlated easily with other commodities, then are there others?

One of the issues separating bitcoin from other commodities is physicality, argues Antony Lewis, who works in business development at itBit.

Most other commodities are used and transformed into something else, which drives certain behaviours, pointed out Lewis, who used to trade interbank foreign exchange at Barclays:

"For example, people buy copper to use in construction, power, and electronics. People buy oil to use to transform into fuel which is burned. Once used, gone."

Conversely, he says, virtual currencies are bought either as a store of value or as a payment mechanism putting them in a different category to conventional commodities.

Correlations exist

Let's not write bitcoin off as entirely separate from the commodities market, though, said George Samman, Chief Operations Officer at BTC.SX, which offers derivatives services for bitcoin traders.

There are correlations today between bitcoin and at least one other commodity, Samman said, but they're only obvious if you turn them on their head. They are negative correlations, and we see them particularly between bitcoin and gold. When bitcoin goes up, gold falls, and vice versa, he suggested.

Samman pointed to longer-term pricing for evidence of this effect. For example, when bitcoin rose dramatically at the end of last year, gold can be seen to fall (see chart).

The linear chart shows bitcoin's price from around the time that it spiked, shortly after the financial crisis in Cyprus last year. However, the digital currency was showing slight gains on gold as far back as 2011, said Samman.

Bitcoin's price doesn't seem to cross that of gold because the chart isn't granular enough, but it did. That crossover happened for a period of hours, and we're plotting closing prices at two-day intervals here.

Gold's movement in relation to bitcoin might not seem that pronounced, he said, but don't be deceived. A $10 move in bitcoin wouldn't show clearly in a long-term chart because of its significant moves later on; furthermore, gold's high value makes it difficult to spot smaller price moves.

Gold has been moving back up since the beginning of the year, while bitcoin has been going down, Samman added, which is clearly visible on the graph. Since then, gold has trended downwards, while bitcoin has been "semi-stable" in the mid-$400 range, he said.

Samman admitted, though, that bitcoin has "bounced around" in that $400-$500 window, as would be natural for a young, relatively thinly-traded asset influenced by events such as the suspension of bitcoin trading in China by certain banks, and the perceptions around those events.

Fear assets

The link between bitcoin and gold makes sense. When the market flies from bitcoin, it has to go somewhere, and the argument goes that gold gets some of that action.

If you see negative correlations in this chart, then why do they exist? It's because Gordon Gecko was only half right. Greed isn't the only factor driving financial markets: the other is fear.

ItBit's Lewis calls gold a 'fear asset', and said that in time, it will make sense to compare bitcoin against the VIX.

Also known as the 'fear index', the VIX is the colloquial name for the Chicago Board Options Exchange Market Volatility Index. It is a weighted blend of 30-day options across the S&P 500 index, enabling people to use it as a broad measure of volatility over the coming month. In short, when markets get wild, the VIX goes up.

In the meantime, Samman is waiting for the time when he can more easily compare bitcoin's activities in a broader context, outside of commodities. He likes exploring intermarket dynamics, evaluating the performance of different asset classes such as equities, bonds, and commodities, in relation to one another.

What about the longer-term opportunities for bitcoin? While we read the market's entrails looking for relatively short-term correlations now, will bitcoin and other commodities draw closer over the years?

"Some people believe we are in a commodity supercycle which began around 1990, supercycles generally last 30 years, give or take, if thats the case we are likely to see another up leg in this cycle, and I think it will be caused by inflationary events," Samman said of long-term cycles in the commodity markets.

Built-in scarcity

In particular, the tendency towards quantitative easing – central banks creating more money – and the spectre of rising interest rates come to bear here. "This all bodes well for bitcoin to spike again as well," he argued.

Some also point to correlations between the price of bitcoin throughout its young life, and the longer-term price of gold, potentially supporting theories of long-term similarities.

"Whereas oil might go up 5-10% because of some legislative issue in Europe, the price of a bitcoin might spike up 25%"

Scarcity helps drive up the price of a commodity. Food prices rise when a drought chokes off supplies, for example, and bitcoin has its scarcity built in, Samman said, adding.

"The same can be said about bitcoin and its finite amount which is capped by mining algorithms that get harder and harder."

This scarcity is both a known and unknown quantity in bitcoin. Scarcity has a big impact on price action, which is caused by big disparities in supply and demand. Conventional commodities can be moved by external events that affect demand and supply, such as bad weather (wheat), or growing unrest in Ukraine (oil), for example.

With bitcoin, there is a base level of supply which is relatively known, because it is underpinned by the mining community, which produces them at a predefined rate of 3,600 coins per day.

However, bitcoin's algorithmically coded scarcity isn't the only part of the equation; just as with commodity markets, other factors come into play.

With institutional miners producing bitcoins, and with large funds holding significant percentages of the digital currency, it's hard to predict what that supply will look like in the future, and when people will begin letting more bitcoins out onto the market.

The same is true on the demand side. "Demand is the unknown here. We are hearing of many millions of dollars being lined up to buy bitcoin when the time is right," pointed out Lewis.

Looking for liquidity

If and when the volume of bitcoin trading increases substantially, we'll see bitcoin become more liquid. Liquidity dampens volatility, because there is more of an asset moving through the system.

This in turn makes it harder for people to move the market substantially with relatively small trades, or for events to move the market by spooking enough inexperienced investors into knee-jerk reactions.

One thing that will help here is the build-out of more established, reliable exchanges to provide a base level of reliability and choice to the market. The other is the building up of more sophisticated services on those exchanges, such as derivatives trading.

We're starting to see markets for bitcoin derivatives emerge, such as BTC.SX. More will come, said Gourov, although the market is too immature to support complex trades yet. He explained:

"The market is neither liquid nor mature enough to handle anything like a futures contract. I would imagine the fees would be so high on a contract that you might as well just purchase the underlying bitcoins right now."

However, he thinks that will change: "There are several companies creating products and platforms to facilitate this as I type."

Even when its price volatility smoothes out, though, the chances are that bitcoin will remain a distinctly different animal from many other assets, making it hard to see correlations with lots of commodities.

For now, the cryptocurrency is a young, idiosyncratic asset all its own. As the honey badger of money, it tends to be a solitary animal, unaccustomed to moving with a herd.

Graphs image via Shutterstock

commodities prices volatility

gold price chart - News 2 Gold

<b><b><b>gold price chart</b></b></b> - News 2 Gold

Physical vs virtual

Correlations exist

Fear assets

Built-in scarcity

Looking for liquidity

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