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Wednesday, December 30, 2009

Fund managers tip Gold Investment as top for 2010

The Gold Investment rush of 2009 is likely to continue into the new year, according to the Association of Investment Companies (AIC).

Annabel Brodie-Smith, the organization's communications director, said that the ongoing economic recovery means that resources are expected to be the best performing sector over the next year.

"Interestingly this year's 'gold rush' is tipped to continue with over a quarter of managers predicting that gold will be the top-performing asset," she added.

Ms Brodie-Smith was commenting on a poll for AIC which revealed 28 percent of investment fund managers think gold will be top in 2010.

The study also found that five percent of fund managers think all asset classes will perform well over the year, while none backed bonds and residential property to perform best.

Gold has enjoyed a strong year in 2009, with prices hitting a high of $1226.10 an ounce in early December.

While prices have fallen back slightly, Barclays Capital precious metal analyst Suki Cooper told the Telegraph recently that Gold Investment should be viewed over the long term.

"It wouldn't surprise me if we had a little correction in the gold price but our position remains stay long," she told the newspaper. "In terms of technical trends the prospects for gold look strong."

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Goldbug, 30 Dec '09

Get Exposure to Rising Gold

The CPM consultancy's outlook for Gold Prices in 2010

WHAT'S THE OUTLOOK
for Gold Prices going into 2010...?

Here Carlos Sanchez, associate director of research at New York's CPM Group speaks to Hard Assets Investor...

HAI: You guys are very much involved in metals – gold, precious metals – and gold has been on a tear. We had one of your colleagues here several months ago, Jeff Christian, at the time when gold was probably more or less around $900 an ounce. He was not that bullish at the time, looking at fundamentals such as actual physical demand, mine output, etc. Yet we have broken through; we've seen gold vault up above the $1100 figure. How high do you think it could go?

Sanchez: Well back then, we didn't expect prices to perhaps rally as high as it did so quickly. We had expected prices to move higher, but over the course of later this year and into the first quarter of next year.

Gold Investment demand has been the main driver behind prices over the past couple of years, and more so over the past several months. I think investors continue to be concerned over financial markets, economic conditions and political conditions as well. So I think with weak economic growth, with high unemployment, with what's going on in Afghanistan, Iran, etc., you have increased concern. And investors continue to rush to safe-haven assets such as gold.

HAI: Are investors coming up with new bullish-for-gold arguments, and bearish on the general economy, even though we're starting to see things improve?

Sanchez: Even despite the recent stabilization and the pickup in stock markets over the past several months, I think there's concern that stock markets remain vulnerable, not only in the US, but around the world. You also have increased concern over the economic conditions. There have been signs of stabilization, but they still remain vulnerable. Economic growth has not been as it was over the past several years

HAI: What about some of these extreme forecasts? I've heard people say, "We're going to $5,000. We're going to $10,000...$20,000..." Are those realistic?

Sanchez: I don't think they're realistic now. I think we'll have to wait to see what happens over the next several months. But I think $1,400, $1,500 is definitely a possibility, perhaps early next year. As far as $2,200, I think economic conditions will probably have to deteriorate from here going forward for us to see that price level.

HAI: Now if they don't deteriorate, if we continue to see the stock market improve and maybe even start to see some job creation at some point...don't forget, back in 2003, I remember very well the so-called jobless recovery turned into a recovery that actually created jobs. Can we have a scenario where gold continues to appreciate even though real economic conditions improve?

Sanchez: You know, if economic conditions do improve and you see a steady decline in unemployment, a stabilization in economic conditions and financial markets, you may see Gold Price gains capped. But at the same time, they will be supported. Because it will take several years for unemployment to move back to levels where it was prior to this recent financial calamity.

HAI: So from your perspective, there's no element of excess speculation or sort of a bubble environment right now when we talk about gold?

Sanchez: I think investors have helped push prices higher. They've been chasing prices higher, and that's helped sort of continue that cycle of rising prices. Perhaps once investors see that their price targets have been hit, there will be a pullback in prices. But at the same time, that pullback may not be as sharp as some expect. I think the pullback, as we've seen over the past several months, has been $30 to $40. But at the same time, the investors have been willing to Buy Gold at increasingly higher levels.

HAI: All right. So just quickly, would you say the new floor, what price level is that? $700, $800?

Sanchez:
On a short-term basis, I think that price level is $1,100. If prices do fall below that, I think you could see increased buying. There's potential for prices to fall perhaps $40 to $50 lower. But that would, I think, pick up investor attitudes, and there could be some increased buying there. But next year the floor may be $1,000 if not $900.

Wednesday, December 23, 2009

Gold Trends, Hot Commodities and the Major Indexes, Trade the Trend!

Monday, December 21st, 2009

December 20, 2009
Gold Trends:
Gold has been leading the market for almost a year. Last week gold and gold stocks were trading at support looking ready to bottom but as you will see in my charts below, both broke support on heavy volume.

With gold now under performing the stocks market, I get the feeling we could see the broad market top. Topping is a process and after this strong climb I figure it will be choppy (tough to trade). Much like the price action on the Dow and S&P500 the past month, but this time it will be on a larger scale.

From a technical stand point the major indexes are trading at a key resistance zone from Oct 2008. This has been an amazing year for trading but I think the time has come for a correction or another melt down depending on how you view the US economy. It does not really matter which happens as we can play both directions.

As far as the fundamentals go, well the US economy in my opinion is scary. All I know is that if the markets start to melt down everyone better make BIG money on the way down because a severe correction will cripple the county as millions more will become unemployed. I am concerned that current recession may turn into a depression.

‘If’ we get another stock market meltdown, literally every asset class will go down with it. The only difference I think will be the trend of gold. Everyone has started to buy gold or at least thought about buying some.

‘If’ a meltdown occurs I think gold will go down in price at first with everything else, but if we are headed for another market collapse EVERYONE will turn to gold as the safe haven, triggering a massive parabolic spike straight up which could last years.

Enough of this negative talk, Lets take a look at the short term gold trends.

Gold Trend – Daily & 60 Minute Chart

The trend of gold broke down from the red rising channel a couple weeks back as expected. We were taking profits at the $115 level.

The more recent price action shows two technical breakdowns on the daily chart and the small 60 minute overlaid chart. The daily breakdown crashed through our support trend line and the 60 minute chart shows the breakdown below the previous low. The price is currently trading at resistance and the odds now favor lower prices.

Gold Trends

Gold Trends

Silver Trend – Daily Chart

Silver is trading at support and has yet to break the previous low. I think we will see this happen in the next few days.

Trade Trends

Trade Trends

Crude Oil Trend – Daily Chart

Oil had a great setup last week with many readers profiting from the oversold bounce off support which I pointed out on the daily chart last week. When buying into an oversold setup like this I scale in over 2-3 days in case prices dip lower as the selling dissipates. Average price was $35.75 and sold at first target of $37 for a 3.5% profit. Many of us still hold a core position with a tight stop.

The 60 minute chart shows this play and how the price popped once the sellers were cleared out.

Trading Trends

Trading Trends

Natural Gas Trading Trend – Daily Chart

Trend lines provide excellent levels for support and resistance and this chart is a perfect example of that. Not much to say about this chart other than UNG is trading at resistance and volume is big. This tells me we could see lower prices from here or some sideways price action first.

Natural Gas Trends

Natural Gas Trends

Broad Market Index – Dow Jones ETF – Daily Chart

In short, the market is starting to correct as we thought. It still has more to go before testing support. But because this week is a holiday week, volume will be light and like volume favors higher prices. So we could see the highs tested or sideways action.

From looking at the monthly, weekly and daily charts of the major indices I think the market is about to have a sharp correction. If we get a breakdown then we are headed to the next support level which is about 9% down from the recent high in the DIA etf fund.

Major Index trends

Major Index trends

Gold Trend and Technical Conclusion:

The trend of gold has been very predictable over the recent months and this correction seems to be text book pullback. I see the short term trend of gold still down but the longer and more powerful underlying trend is up. Let’s wait for the price of gold and silver to sort itself out and wait for low risk entry points before jumping back in.

Crude oil is in pinball mode. It’s just bouncing around between support and resistance levels now. Not much we can do but wait for another setup.

Natural gas is trading at resistance and if we get the proper price action in the next few days we could have a great short trade. Only time will tell.

The broad market trend is looking and feeling very toppy. A lot of money has been moving out of stocks the past 4 weeks and January could be a roller coaster. Last week I exited all my positions except XTR.TO (Energy and Financial dividend fund) which many of us took a position in late February and first week of March. I have set a tight stop and hoping to get the 4th dividend payout before it corrects.

I want to note that I am not going to be shorting the market until the bear trend is definitive. This could be 2-3 months down the road still. But after a great year of trading and the market and economy looking the way it does I am happy to be sitting in cash.

Tuesday, December 8, 2009

Tis the Season to Trade the Seasonal Charts, Dow, Gold, Silver, Oil and Gas

Dec 2nd, 2009
The market has had a fantastic week so far for stocks and precious metals. The financial and energy sector are underperforming which is a concern, but we continue to hold our positions and will wait until a reversal to lock in our gains.

Things seem to be lining up for stocks and precious metals to take a breather, which is in line with the Dow Jones Seasonal chart below.

Let’s take a look…

Dow Jones ETF
You can see from looking at the chart the repeated pattern of price rallies, leading to exhaustion and a test of support, followed by another repeat of the pattern. It looks as if the broad market is setup for a test of support which could happen within 2-4 days. Then as we near the holiday prices will start to drift higher. This pattern occurs more often than not as seen on the Dow Jones Seasonal chart below.

Broad Market Holiday Rally

Broad Market Holiday Rally

Dow Jones Seasonal Trends
This chart clearly shows weakness in the first half of December and continued strength moving forward. This has not really happened in the past two years which means we are overdue for continued strength. 

That being said, the previous two years were bear markets and we are now in a bull market. So the tendency is for buying to continue into year end.

Dow Jones Seasonal Trends

Dow Jones Seasonal Trends

GLD ETF Fund
Gold continues to push higher surprising many of us. It seems as though money is rushing into metals and buyers are not particularly concern about price. While this is great for short term traders and those of us in the trade, we must remember that the faster things go up, the quicker they correct.

Don’t get me wrong, I don’t think gold is going to crash, I just think we could get a 10% correction before moving much higher. Gold is also trading near the upper end of the trend channel and could have a 2-4 day consolidation with the broad market before pushing much higher.

GLD ETF Trading

GLD ETF Trading

SLV Exchange Traded Fund
Silver has been underperforming yellow gold but is still a solid investment. It is also trading near the upper end of the trend channel and could have a 2-4 day consolidation with the broad market.

Silver ETF Trade

Silver ETF Trade

USO & UNG Funds
Oil continues to flag from its breakout back in October. This is a bullish pattern. Last Friday we saw oil open much lower then rally back into the trend channel. This is called an outside day and many times this happens to stocks and commodities as it shakes out the weak traders before starting another rally higher. We will keep a close eye for any low risk entry point.

Natural Gas had a nice rally last week which I mentioned looks a lot like a short covering rally. The price action this week suggests it was and has now made a new low. Today on CNBC it was reported that a new source of natural gas has been discovered. This resource is 20 times larger than the biggest source in the US. Enough gas to last the US over 100 years. This added to the selling on both natural gas and oil today.

Energy ETF Newsletter

Energy ETF Newsletter

Trading Conclusion:
Precious metals continue to perform well and it’s important to note that PM stocks are now moving higher with gold. They have been lagging for some time but are on fire again. Great to see!

The Dow Jones index and several others look ready for a breather. The timing of these overbought charts bodes well for the seasonal December pause before the holiday rally. Time will tell.

Energy and financials are both underperforming the market and without their participation we will not see the indexes move much higher.

Continue to hold precious metals positions but be ready to lock in profits if we see the market reverse sharply. I am watching energy for a play but no setups at this time.

Gold: Technical correction before the final frontier

This post is a guest contribution by Dian Chu*, market analyst, trader and author of the Economic Forecasts and Opinions blog.

Gold fell for the first time during last week, off 4% on Friday to $1,162.40 an ounce, the biggest drop since Dec. 1, 2008 after the new U.S. jobs data showed unexpected strength. The Dollar rallied against rival currencies while traders reversed the “Sell Dollar/Buy Gold” strategy. (Fig. 1)

The Dollar’s decline has been a key factor in the record rising gold price this year by boosting the metal’s appeal as an alternative investment along with other commodities and high-yielding currencies.

Though gold briefly touched a low of $1,136.80 during the Thanksgiving week on fears of a possible debt default in Dubai, the precious metal had otherwise continued its vertical ascend into uncharted territory advancing in 21 of the past 23 sessions.

dian1


While gold has some underlying support from central banks and investment funds, there are some indications suggesting gold is moving mostly on momentum, and that a deeper correction may be due.

India Leading the Gold Rush

Gold’s rally in the past couple weeks was largely on speculation that India’s central bank may buy more gold from the IMF adding to the 200 ton purchase it made last month.

This second purchase by India would be the fourth central bank sale this quarter of IMF bullion. The three prior sales were Sri Lanka’s $375 million purchase of 10 metric tons; India’s initial $6.7 billion purchase 200 metric tons, and Mauritius bought 2 tons for $71.7 million.

The three sales so far leave about 190 tons up for grabs from the 403.3 tons the IMF announced Sept. 18 it would divest to shore up its finances.

China, The New King of Gold

Private Chinese gold buying, for both jewelry and investment, will overtake Indian demand this year, predicts metals consultancy Gold Fields Mineral Services (GFMS). China is now the world’s No.1 gold mining nation. The People’s Bank is widely thought to have grown its gold reserves by buying domestic production direct.

In addition, China has cut the import tax on jewelry and allowed select commercial banks to sell gold bars, and gold is now traded freely on the Shanghai Gold Exchange.

Russia & Vietnam Not Far Behind

On Nov. 23, Russia’s central bank announced it had bought 15.6 metric tons of gold in October and has said it aims to increase gold’s share in its reserves this year to keep its investments diverse. The Russian central bank had been steadily building its gold stocks this year, which has been up 17% since Jan. 1 to 606.5 tons.

The Vietnamese central bank has also granted quotas to import 10 tons of gold for use by its banking system and gold traders.

Low Interest Rate with Worthless Paper

Some analysts attribute the most recent rally to the reversal of a decades-long selling of gold by developed economy central banks to net buying by emerging market authorities.

Gold accounts for 9% of reserves held by central banks (valued at market prices). Therefore, it is logical for central banks stocking up on gold as it does bring the much needed diversity due to gold’s low correlation with key currencies and its strong inverse correlation with the US Dollar.

However, diversifying reserves primarily via gold rather than other currencies partly suggests the expectation of interest rates around the world to stay low for a long time. Moreover, it reflects central bankers’ growing distrust of all paper currencies, not just the Dollar.

Surging Derivative Trading

Some of the world’s most successful traders, including John Paulson, David Einhorn, and Paul Tudor Jones, have positions in gold or gold related investments. Pension funds allocate about 5% as protection against the weakening Dollar. Hedge funds and traders are piling into gold futures markets around the world, lured by the record-high prices in the precious metal.

Based on the Commitment of Trader (COT) report as of November 24 by the U.S. Commodity Futures Trading Commission (CFTC), the number of long positions in gold was around 370,000, up about 5,000 from just a week ago, mostly from non-commercial short-term speculative investors.

dian2
It is also interesting to note CFTC Nov. 2009 monthly report shows that while commercial participants held net short positions; non-commercial and other participants, who accounted for 51.4% of open interest, held net long positions,. Some traders already indicated there has been some good upside buying in March and April in the $1,300s and even $1,400s.

Overall, NYMEX Gold futures open interest increased 4.8% in November with longs outnumbering the shorts by 71% to 12%. This would have been the highest number of long speculators in the history of the New York gold market since 1975, except for last year when the gold hit $1,030. (Fig. 2)

High number of speculative positions is the driving force of the commodities rally in general, but that also makes gold vulnerable to further corrections as well as high volatility.

Diminishing Physical Demand

Regardless of the gold fever this year, according to the third quarter 2009 Gold Demand Trends Report from the World Gold Council, demand reached 800.3 tons, representing a drop of 34% year-over-year. The report also found that average gold prices for the quarter were 10% higher than in the same quarter last year.

Diminishing physical demand coupled with higher price suggests it has been mostly speculators that are driving up the price. In addition to central banks using gold to rid Dollar dependency, fund managers and speculators also have been driving up the price of gold, partly seeking protection from potential inflation in a low interest rate environment.

Fear Factor

Gold is a commodity that perception plays a more significant role than other market factors. Almost all other commodities such as crude oil, natural gas, copper, prices often fluctuate on indications of inventory, supply, and demand; whereas gold moves primarily with investor’s fear or perception of inflation, U.S. Dollar and the economy.

But just as fast as the market perception can drive prices straight up, it could tank an asset class in a matter of minutes. As discussed here, investment/speculator demand is clearly a major factor in the current gold price rally, a decline could potentially take the gold price down quite significantly on indications such as rising interest rate, or the U. S. Dollar starts to strengthen.

If history is any indication, after gold rose sharply in 1979-1980 to $850, it was followed by a drop to near $500 in less than 2 months. It is conceivable that gold could take a similar loss in a short time.

Short-term Outlook

The general expectation is that the Federal Reserve will not act in favor of the Dollar until later next year. Gold and Dollar correlation is still highly negative, but one should expect a fair amount of volatility given the uncertainty of global economic direction intensified by the Dubai crisis. In that sense, gold could certainly challenge the $1,225 levels again, with $1080, $1050 and $1025 each represents significant support level.

Technically Overbought

Friday’s pullback has moved gold’s MACD to the downside and the 14-day Relative Strength Index (RSI) back in the neutral territory (Fig. 1), which could spur more selling if Dollar retains its strength.

Though gold’s longest rally (nine days) since 1982 ended last Wednesday, the precious metal is racking up a near 35% gain on the year, and moved up almost 17% this month alone, heading for the sharpest annual increase in two decades.

So, at this level, gold has also run into profit-taking, as well as year-end fund manager’s portfolio repositioning. Closes below the 20-day moving average crossing would likely confirm that a short-term top has been posted.

Long Term Bullish Intact

Sporadic green shoots of economic data could obscure the harsh reality, and lead to gold weakness in the short term. Nevertheless, there’s enough momentum around for gold to make new highs as long as the Dollar stays weak spurring further safe haven demand on concerns about a double dip recession.

Therefore, the potential exists for a large rise in the longer term. However, if this rally extends into uncharted water on momentum without a healthy enough correction, upside targets will be hard to project with the eventual correction equally difficult to predict, just as they say, “The higher you climb, the harder you fall.”

*Dian Chu, Market analyst, trader and financial writer for Seeking Alpha, Zero Hedge, Daily Marksts, iStockAnalyst & StraightStocks. My articles also appear in Reuters, USA Today and BusinessWeek, etc. Professional credentials include M.B.A., C.P.M. and Chartered Economist with extensive professional experience in market segment forecasting and strategies. Previous employers include Enron, Time Warner & Clear Channel. I’m currently working in the U.S. for the energy sector.

Source: Dian Chu, Economic Forecasts and Opinions, December 6, 2009.

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Paksu : Be cool with this situation, the overbought gold will return in bull pipe with 2-4 days.

GLD ETF Trading

Saturday, December 5, 2009

Emas catat harga rekod tertinggi - Kosmo 3 Dis. 2009


GAMBAR fail menunjukkan jongkong emas di sebuah bank di Switzerland baru-baru ini.


LONDON - Harga emas mencapai paras rekod melepasi AS$1,217 untuk setiap auns (31.1035 gram) atau RM132 segram semalam berikutan kebimbangan pelabur yang mencari tempat selamat setelah nilai dolar semakin lemah.

Harga emas di Pasaran Bulion London melepasi paras halangan AS$1,200 (AS$1=RM3.38) buat kali pertama kelmarin.

Selepas mencapai harga rekod baru, emas jatuh sedikit untuk didagangkan pada harga AS$1,207.82 menjelang tengah hari. - AFP