The <b>Gold Price</b> Closed Above it's 50 Day Moving Average at $1250.90 |
- The <b>Gold Price</b> Closed Above it's 50 Day Moving Average at $1250.90
- Short Coeur Mining On Declining <b>Gold Prices</b> And <b>...</b> - Seeking Alpha
- Are These <b>Gold Price</b> Forecasts For Real? Will They Stick? [ETFS <b>...</b>
| The <b>Gold Price</b> Closed Above it's 50 Day Moving Average at $1250.90 Posted: 13 Jan 2014 04:28 PM PST Gold Price Close Today : 1250.90 Change : 4.20 or 0.34% Silver Price Close Today : 20.361 Gold Silver Ratio Today : 61.436 Silver Gold Ratio Today : 0.01628 Platinum Price Close Today : 1441.90 Palladium Price Close Today : 739.10 S&P 500 : 1,819.20 Dow In GOLD$ : $268.67 Dow in GOLD oz : 12.997 Dow in SILVER oz : 798.48 Dow Industrial : 16,257.94 US Dollar Index : 80.750 The GOLD PRICE gained $4.20 to $1,250.90. Today's close not only places the gold price above the $1,250 resistance, but also and more importantly throws gold's leg over the 50 DMA (1,247.54). Silver remained above 2000c and gained another 16 cents to close Comex at 2036.1c Something else I've been holding out on y'all, waiting to see it unfold. Gold has formed an upside down head and shoulders, but must stay above the shoulder line about $1,210. Today's close remains equivocal. The real goal is that last high at $1,267.50, but surmounting the 50 DMA is a mighty boost. The SILVER PRICE also closed above its 50 DMA (2017c) and has set its sights on resistance at 2100c. But first, there remain the December twin peaks at 2048c and 2044c. Silver might take those out tomorrow. All other indicators point skyward. Best and biggest news cometh from the gold stock indices. GDX and HUI broke out above resistance. XAU closed plumb on resistance. Today all closed above their 50 DMAs. Then there are the Dow in Gold and Dow in Silver. Oh, tumble, stumble, bumble! Dow in Gold dropped 1.3% to 12.99 oz (G$268.53 gold $s), inches away from the 50 DMA which is running along the bottom trading channel line. Break through 12.88 would be headline big news. Dow in silver plunged 2.18% to 797.54, virtually on top of its 797.25 50 DMA. Bottom channel line is only inches below. For both the DiG and DiS, all indicators point DOWN, the way we want. Silver and GOLD PRICES need only add one last confirmation by climbing past those December lows. This is the best outlook for silver and gold I've seen in a year. I reckon every dog has his day, or every day has its dogs, or all dogs have fleas, or something. Anyway, it began happening today. Correct me if I'm wrong, but I believe I've been warning y'all that the 31 December stock high marked a downtrend's beginning. Today starkly demonstrated that. Dow unloaded 179.11 or 1.09% to 16,257.94. S&P500 chiseled off 23.17 (1.26%) to 1,819.20. It gets worse. Both closed below their 20 day moving averages (16,312 and 1,824), and both fractured their uptrend lines. Next target, next possible support, comes at the 50 DMA, 16,048.87 and 1,801. Well, the last highs at 16,174.51 and 1,813.55 might offer some support, but not much. More pain: MACD flashed a sell signal three days past, and the Rate of Change has turned negative. All that points like a flashing neon sign to lower prices. Dollar index tumbled today, too, down 15 basis points or 0.19% to 80.60. Owch, that sneaked under the 50 dma (80.66) and 20 DMA. But here's a surprise, I have something good to say about the US dollar. Well, not really about the US dollar, I have nothing good to say about the World's Trashiest White Trash currency, but technically it broke out, rose, then has fallen back to the same downtrend line it broke on the way up. 20 and 50 DMAs happen to coincide about the same place. Other indicators aren't raging positive, but not really negative, either. Short of this is that I expect the dollar to continue the rally begun mid-December. After hitting and breaking its uptrend line and 50 DMA five days ago, the Euro has rallied back to its 20 DMA, beginning to fill the gap left behind when it fell so badly as the year began. Might fill a bit more of that gap, but gravity's pull is taking over. Closed +0.02% at $1.3673. Yen closed Friday above its 20 DMA and gapped up today, signaling some sort of rally. Whether it can beat the roadblock at the 50 DMA (97.93) remains to be seen. Yen is truly schizophrenic. Closed up 1.08% at 97.04 cents per Y100. On 13 January 1607 the Bank of Genoa failed after the Spanish government announced national bankruptcy. Odd, doesn't Spain have some solvency problems today, too? As the French say, the more this changes, the more it stays the same thing. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger © 2013, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose.  |
| Short Coeur Mining On Declining <b>Gold Prices</b> And <b>...</b> - Seeking Alpha Posted: 11 Jan 2014 11:17 PM PST Coeur Mining, Inc. (CDE) is a large primary silver producer with growing gold production with assets in the United States, Mexico, Bolivia, Argentina and Australia. Coeur also owns strategic minority shareholdings in eight silver and gold development companies in North and South America. The Palmarejo mine in Mexico, San Bartolomé mine in Bolivia and Rochester mine in Nevada all produce silver and gold in doré form. Coeur's Kensington gold mine in Alaska produces gold concentrate and the Endeavor mine in Australia produces a concentrate that contains silver. The company refines its precious metals doré and concentrates using a geographically diverse group of third party smelters and refiners, including clients located in Mexico, Switzerland, Australia, Germany, China and the United States. Coeur markets its doré to credit-worthy bullion trading houses, market-makers and members of the London Bullion Market Association, industrial companies and sound financial institutions. The refined metals are sold to end-users for use in electronic circuitry, jewelry, silverware and the pharmaceutical and technology industries. I'm going to make the case for shorting CDE. I'm expecting the price of Coeur to drop 50% down to around $5 a share. I'll use three lenses through which to look at this company. First, the economy, second the gold mining industry, and third the Coeur Mining Inc. company itself. However, out of these three, the economy will be the biggest driver of the stock price decreasing; thus, I'll primarily focus on the economic impacts on the stock. Economy "The determination that the last expansion began in June 2009 is the most recent decision of the Business Cycle Dating Committee of the National Bureau of Economic Research" (source: here). During economic expansions, gold prices tend to go down as investors put money into stocks. Gold prices are not the only ones suffering during economic expansions-mining companies tend to do poorly as well. During the last 12 months, while the S&P 500 has gone up nearly 30%, the platinum and precious metals industry declined by over 23%. (click to enlarge image) Source: Wall Street Journal Why gold and Coeur Mining may go up Economy tanks (again). I realize that the majority view is that the worldwide economy is improving. The Economist, more than once, speculates that the recovery won't be as smooth. Thus, the price of gold will increase again as people panic. Yet, elsewhere The Economist predicts that the price of gold will drop in 2014 given the Fed tapering (see below). Source: The Economist Gold demand from Asia increases. As reported in the Wall Street Journal, during the first trading day in 2014, gold prices increased to a two-week high at $1,229.42 a troy ounce due to increased demand from China. China is now the largest gold consumer in the world and India the second. However, I'm not convinced that consumer demand out of China will be that significant. See, for example, the chart below from the World Gold Council. Year over year, consumer demand increased a meager 41.7 tons while ETFs have reduced their gold ownership by a massive 256.4 tons. As discussed below, the movement of gold out of ETFs will more than offset the increased consumer demand. Source: World Gold Council In addition, the 5-year average world-wide demand for gold is $44,987 million. This includes the 2008-2013 world economic panic years where everyone wanted gold. After all, it was viewed as a safe asset. The latest (2013Q3) demand for gold is $37,035 million. The current demand level makes sense: we are out of a recession, there is no need for an inflation or a currency hedge. I don't see the demand rising to the 2007 panic levels. Source: World Gold Council The Wall Street Journal reports that the Indian government is making it difficult for citizens to purchase gold by increasing taxes on the metal and making other stipulations. Thus, there will be lowered consumer demand from India because of higher gold price within the country. Okay, but what if consumers (regular people afraid of the world ending) buy gold coins? Won't they generate enough demand to increase the price of gold? The numbers show that there isn't enough of this consumer demand. In 2013, while ETFs dropped nearly 30 million troy ounces from their coffers, gold coin sales increased by a measly 0.125 million troy ounces from consumers. Source: Wall Street Journal Why gold and Coeur Mining may go down During 2013, gold prices experienced a 29% drop not seen since 1981. The question in my mind is, will the decline continue into 2014? I can think of several forces that may move the price in either direction. There is a range of analyst forecasts, with about an equal split in either direction. However, a more recent analyst poll suggests a bearish outlook on gold. "Seven out of eight analysts polled by Canada Real Time they see bigger downside risks to bullion in 2014." Here is my outlook. Kat and Oomen looked at the performance of commodities in relation to business cycles and actions of the Federal Reserve.
Typically, gold returns -13.7% per year during the end of an expansion. In the same study, these returns were assessed in terms of monetary conditions. According to the above definition, we are in an awaiting regime. During awaiting regimes, gold returns -8.04% annually. A stronger world economy in 2014 will reduce the price of gold because there is less need for a safe haven asset. Another reason: a stronger US economy leading to the Federal Reserve reducing stimulus measures as it did in December 2013. I'm not the only one betting on a better macroeconomic outlook-The Conference Board and The Economist do the same. Furthermore, outflows out of gold-backed ETFs have increased according to the World Gold Council. This is a sign that investors are reducing confidence in gold; but the catch is, there are a lot more of potential outflows. ETF gold holdings have not returned anywhere near their pre-2007 crisis levels. Considering history, gold is overpriced. For example, let's compare the price of gold to the consumer price index. There is some positive correlation, but there are also wide swings. The current levels are considerably higher than would be predicted for the current consumer price index of 234. Using CPI as a predictor yields a current gold spot price of $929. This is considerably lower than the current $1,200 some level. Source: Author's Calculations Similar to the PE ratio, we can consider the price of gold as a multiple of the CPI. The historical gold price/CPI ratio since 1975 has been 3.4. Today's multiple is 5.36. The gold price predicted using this measure is $790. Source: Author's Calculations All things considered, I'm leaning toward the prices of gold dropping. I think the bears have a stronger argument this time, at least in the early parts of 2014. Industry In terms of the industry life cycle stage (growth, maturity, decline), the gold mining industry is in the mature stage. According to IBISWorld, because this is a mature industry there is a "rationalization of low margin products & brands". This means that the industry winner is usually the largest player in the market. The largest player in the market has scale of economies and thus has minimized costs. As we will see later, Coeur has above average mining costs and thus struggles to produce a healthy profit. Source: IBISWorld Success in the gold mining industry requires cost control and a stable macroeconomic environment. Thus, the gold mining industry is particularly prone to risk and volatility for several reasons. First, there is a high level of capital intensity. Production requires large scale operations involving electric shovels and conveyors. Second, there is high revenue volatility due to volatility in the price of gold. Gold, like any other commodity, is driven by supply and demand. Throughout the years, supply (output of gold produced) has been fairly constant. What changes is the demand. Thus, the main driver of gold volatility is demand. But what is driving the demand up and down? It's the global investment markets. During recessions, people want safe haven assets like gold. During economic expansions, people want to own company stock. Coeur Mining, Inc. Coeur Mining, Inc. is the largest US-based primary silver producer and a growing gold producer. In April 2013, the company announced the completion of its acquisition of Orko Silver Corp. In December 2013, Coeur completed an acquisition of Global Royalty Corp. In addition, it owns strategic minority shareholdings in eight silver and gold development companies in North and South America. Source: Coeur Why is the property information important? Because the business is fairly established, Coeur can predict its cash operating costs per ounce of gold. This is a key metric in the industry. Cash operating costs per ounce of gold for 2013 are expected to be $950-$1,000. How do these costs compare to the industry average? Below is a list of the Big 10 gold mining companies and their cash costs per ounce of gold. Source: Wikipedia Using the table, the average 2012 cash cost of a Big 10 gold miner comes to $707. Major gold miners are able to achieve lower costs due to economies of scale. The smaller gold mines have higher cash operating costs. Coeur is a small player in the gold mining industry. Thus, it is going to be extremely pinched when the gold prices fall. In the worst case scenario, it could go out of business. Compared to its competitors, Coeur is a weak player. The current ratio is 1.7 compared to the competitor average of 3.91. This indicates low cash on hand and may be a sign of cash flow problems. Coeur's profit margin is 13.1% while the industry average is 29.04%. Having comparatively low profit margins makes decreasing gold prices especially hurtful to the bottomline. A Return on Equity of 18.41 is average for the industry, while Coeur produces a meager 5.34 ROE. This is a signal that the equity employed is poorly utilized. Overall, it is a risky company with weak financials. Source: Mint Global Another reason I choose to short Coeur is because of its high beta, which is at 1.49. Beta measures how volatile a stock is relative to a benchmark such as the S&P500. A beta of greater than 1 means the stock is volatile; any news at all, and the stock swings wildly. As a company, Coeur has underperformed the analyst consensus in FY2012 and is on track to underperform this year as well. Furthermore, the consensus of nine analyst forecasts for the next two years (2014 and 2015) is that Coeur will continue to lose money and produce a negative Earnings Per Share. (click to enlarge) Source: Wall Street Journal When to short and when to cover A recent Wall Street Journal article explains that the reason gold prices have increased on January 2 and 3 is because of expectations of index rebalancing by large funds. You would have to wait until the large ETFs bought enough gold to properly rebalance their portfolio. The Journal reports, "The Dow Jones UBS Commodity Index and the S&P GSCI are giving gold more weight this year, and the funds will need to increase their holdings of the precious metal to match the commodity indexes' moves." The rebalancing should be done by the second week of January, so my suggestion is to place a short order Sunday night/Monday morning on January 20. At this point, I believe that gold will slide, greatly bringing down the value of CDE. The gold freefall is expected to continue until mid-2014. That may be a time to buy to cover the short sale. Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. |
| Are These <b>Gold Price</b> Forecasts For Real? Will They Stick? [ETFS <b>...</b> Posted: 10 Jan 2014 07:20 AM PST By Stuart Burns Whether prices will stick is something we at the MetalMiner offices are always thinking about; but sticking landings has also been on our minds with Sochi 2014 just around the bend. (click to enlarge) Source: bobcloyd.com But forget Winter Olympic sports for the moment – let's get back to the sport of price movement. Following a calamitous 2013 in which the gold price dropped by a third, then staged a bit of a recovery in the final weeks of the year, the price has started 2014 in bullish style. From a low of $1,190/oz in December, open interest has increased marginally as the gold price has moved towards its current $1,240/oz level, accompanied by new longs entering the market. Support has been from physical buying, particularly in Asia. As Standard Bank points out in a recent note to investors, since the start of 2014, the Shanghai Gold Exchange (SGE) premium has jumped higher, reaching $18/oz recently. Source: Financial Times The buying frenzy in China especially comes on the back of the seasonal demand pick-up ahead of the country's New Year, which starts on Jan. 31. The rise in the premium follows a period of lackluster demand, where the premium traded well below $10/oz for most of November and December. That said, the SGE premium is still well below the $30/oz and higher seen about six months ago. Is this the start of a resurgence in the gold price? Probably not, and here's why. A mass exodus from ETF holdings accompanied the collapse in price since 2012, a trend that has continued in spite of an uptick in price recently with another 2.78 million ounces leaving ETFs since the start of December. ETF holdings now stand at 1,814 metric tons, down from the high of 2,720 tons back in December 2012. The FT states these outflows were mopped up by investors in Asia, particularly China, who took advantage of falling prices to buy the precious metal. Over the past year, shipments into China have surged to about 1,000 tons and the country has overtaken India as the world's biggest buyer of bullion. What the Analysts are Saying Chinese demand for physical gold rose sharply in December, with purchases intensifying towards year-end, driving the physical premiums up, but most analysts expect the price to fall back once the impetus of the New Year holiday demand is satisfied. Most analysts and chartists appear unusually aligned for once. Both are predicting a retrenchment to around $1,180/oz during the first quarter, but there are a few exceptions, explained maybe more by timing than a divergence of views. Barclays is quoted by Reuters as putting a price of $1,310/oz on gold for 2014, and following their accurate 2013 prediction – $1,425 against an actual of $1,412 – you have to give them some credence. Pointing to slower-than-expected tapering, weaker equity markets and a softer dollar, Barclays says such factors could help to revive gold in the short term, but admits the metal faces headwinds all the same. The Wild Card With demand higher from China, in part due to falling prices in spite of the New Year holidays, the 800-pound gorilla is India. Demand there has been choked off by government import restrictions, a move that is unlikely to be reversed this side of the elections, probably in May. At these much lower price levels, gold is much in demand in India, but with supply very limited (apart from rampant smuggling, of course) physical premiums have been driven almost solely by Chinese demand. As with so many metals, Asian demand remains the largest price driver. |
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