Gold Prices Resume Their Climb: Weekly Gold ETF Update

Posted: 09 Feb 2014 04:24 PM PST

Gold prices reclaimed most of the ground lost during last week's drop, caused by the latest $10 billion cut from the Federal Reserve's monthly bond ETF, gold, gold ETFs, NYSEARCA:GLD, NYSEARCA:IAU, NYSEARCA:SLV, NYSEARCA:AGQ, NYSEARCA:PPLT purchases. The end of China's Lunar New Year brought the nation's gold traders back to the market. China leads the world in demand for gold.

Although gold prices had been expected to suffer from the tapering of the of the Federal Reserve's bond-buying program, the spot price of gold has risen 5.16 percent since January 1. The quantitative easing program is credited with pushing gold prices to record highs during 2011. The weakening of the dollar which resulted from quantitative easing had enhanced gold's status as a "safe haven". As a result, the phase-out of QE has been seen as a threat to gold prices.

A review of the chart for gold's spot price demonstrates that when the price rose above $1,237 per ounce on January 3, it broke the neckline of December's bearish head-and-shoulders pattern on the chart. Nevertheless, the spot price must reach $1,322 per ounce before it reaches the neckline of the October 17 – November 11 head-and-shoulders pattern in order to break its curse. Meanwhile a bullish, inverse head-and-shoulders pattern has now formed since January 24, signaling the likelihood of a further advance.

The chart below depicts the trading activity in the SPDR Gold Trust ETF (NYSEARCA:GLD) during the past 180 days (Chart courtesy of Stockcharts.com).

GLD Chart February 7

As with the spot price of gold, an inverse head-and-shoulders pattern has now formed on the GLD chart, since January 24, signaling the likelihood of a further advance. GLD remains above its 50-day moving average (currently $119.28). If GLD can extend its advance after Friday's 0.77 percent rise, the next overhead resistance level for GLD will be the neckline of the head-and-shoulders pattern running from October 16 through November 8: $127.50.

GLD's Relative Strength Index rose to 57.38 from last week's 50.31. The MACD is holding directly above the signal line, suggesting that GLD could continue its advance during the immediate future.

The following is a summary of how precious metal spot prices and ETFs performed from the close on Friday, January 31 until the close on Friday, February 7:

Gold ETF Update:

Gold Spot Price: $1,267.00/oz, +1.81%

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Remarkably Interesting Insights From A Meeting With Mr. Gold | Gold ...

Posted: 11 Feb 2014 02:48 PM PST

Jim Sinclair, also known as "Mr. Gold" as he has made literally fortunes with gold in the 70ies, was in Texas recently. He talked about the prospects of the economy, the looming derivatives disaster, and gold's outlook. One of the attendees, Bill Holter writing for Miles Franklin, reported the key thoughts of Sinclair in a blog post. This article provides some remarkably interesting highlights, courtesy of Bill Holter.

The derivatives bomb:

Sinclair said that any and all "pre Lehman" derivatives are worthless and that "bail ins" are scary as hell and probably inevitable. Because "honor and integrity" are long gone, no one really knows what they have in their bank accounts. Your bank statements can say whatever they say but you won't really know what you have until after the dust of bankruptcies and bail-ins has settled.

On gold's prospects:

Sinclair spoke about gold's "triple bottom." It seems highly unlikely that the $1,180-$1,200 level will be broken or even tested again. He rightly pointed out that gold has been acting very differently recently and the "feel" has changed 180 degrees. He also does believe that the bullion banks have now become long rather than short and they will again as they did in 1979 make more money and faster than anyone else in the gold arena.

He said that even if another retest of support or even a break were to happen it will be meaningless in the big picture. Gold and silver have been manipulated "too low" in price (under the cost of production) and that the unintended consequence of creating excess demand (especially from Asia) has put them on very solid ground and in very strong hands.

On gold's pricing dynamics:

The "pricing" mechanism of gold and silver will change, COMEX will become a "cash settled" market and become irrelevant while the "physical settled" markets that are popping up in Asia will come forward and become the pricing mechanism. He also believes that 2014 will be a year of many many "events" which will cause changes and inflection points unlike any years in the past. He believes the Euro will rise (because the dollar will drop) and that ".56″ on the dollar index is the obvious target.

On silver's prospects:

What follows is what Sinclair told us but has not put in print to my knowledge. During the Q&A session he was asked about silver. Much to my surprise he is wildly bullish! In past sessions (and writings) whenever he was asked about silver he would say that "I am a gold guy," he was reluctant to and rarely spoke of silver. This has changed, he said and I quote, "Silver will lead and it will be gold on steroids." He followed up by mentioning that you will need to make a decision in the future about silver, while it will outperform gold by a huge margin there is a "monetary event" out there somewhere and that a decision will need to be made as to whether to hang on to your silver or to swap into gold. Don't worry, he was not talking "now," now he believes that silver will trade to $50 and possibly even $100 this year.

Is gold still expected to reach dizzying highs?

I stood in line to ask a question and naturally 2 of my questions were asked and answered while in line but Jim said something that I had not seen him definitively print before. He was asked about the German gold and he bluntly said, "It's gone. If I owe you $100 and you only pay me back $1.50, then you are either a deadbeat or you don't have it. The German gold is gone." Another question while standing in line was about his "crazy" (in his own words) speculation that gold could even go to $50,000 per ounce at some point. He mentioned that a Goldman Sachs analyst had also done a mathematical study and came up with the same number of $50,000 so he was no longer the "only crazy one out there" anymore.

So I got to thinking and put these 2 together as I have written on this in the past. To come up with a mathematical number for gold's price you must have 2 pieces of information. You must know exactly how much gold there is and how much money supply (and total debt) in order to do the math correctly. In other words you need a numerator and denominator to put into your calculator (because we can no longer do math in our heads anymore) to come up with an answer. The amount of total gold held is your numerator and that is divided by money supply/debt as your denominator…and presto you get a number.

On Germany's gold:

So this is what I asked, "Today is the very first time to my knowledge that you've said the German gold is gone, we have not had an audit since 1956 of the U.S. gold so that may also be gone. How can you or anyone else mathematically come up with a dollar price of gold if in fact we don't have any left? In order to come up with a true final number, we must have a real number as the numerator. If the numerator is zero then the price of gold in dollars is actually infinity?" Jim's answer to this was simply, "You cannot, this is why I always say that gold may go to prices that amaze even me."

On (the demise of) the petrodollar:

Another shocker was when a question was asked regarding the status of the petrodollar. The questioner mentioned that in the past, whenever the dollar came under attack the U.S. would respond in some measure to support it, "What might the U.S. do this time around?" was the question. Jim answered bluntly and with one single sentence: "Bomb Saudi Arabia." There was an audible gasp from the crowd as this would be horrific…but guess what; it's very true in my opinion. First off, was Saudi Arabia to accept anything other than dollars for their oil that would be THE event that put a nail in the dollar's coffin? I have written on this subject before that our "allies" Saudi Arabia and Israel have been thrown under the bus regarding Syria and Iran. His answer was very logical yet you could feel the shockwave through the room as he said it.

Gold Prices Resume Their Climb: Weekly Gold ETF Update

<b>Gold Prices</b> Resume Their Climb: Weekly Gold ETF Update

Gold ETF Update:

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